In a letter to Rittman, Ohio, residents, city officials announced that they overtaxed municipal income tax for the past 15 years, and refunds will not be given for all the years of human error because doing so would “bankrupt” the city.
In particular, Rittman has been collecting municipal income taxes for the past 15 years at a rate of 1.5 percent when the correct, permitted rate was 1 percent.
“Our research has revealed that the cause of the incorrect income tax rate was simple human error that occurred years ago,” the letter said.
According to the city, it was shocking to find the error and that it had gone on for so long. The letter states that the city reported the error to the Ohio Auditor of State and to the firm that conducts the annual city audit.
The city stated it contacted the Regional Income Tax Agency, or RITA, and city municipal taxpayers can expect the correct rate of one percent for the tax year 2022, according to their claims.
According to RITA, the extra 0.5 percent in tax collected by the city of Rittman in 2022 alone equated to over $850,000.
Rittman city officials said there is a one-year statute of limitations for recouping the payment of an unlawful income tax under Ohio law. They said that to get this kind of refund, taxpayers must meet “significant procedural requirements.”
According to officials, even in the absence of legislation, refunding 15 years’ worth of taxes “would bankrupt the City.”
Municipal income tax rates above 1 percent are subject to voter approval in Ohio. Voters in Rittman authorized an additional 0.5 percent tax in 1977, which city officials intended to expire at the end of 2007, to approve a 1.5 percent tax rate for 30 years. However, the city updated it’s codified rules after voters approved modifications to the city’s tax code in 1996. Accidentally leaving out December 31, 2007, as the end date of the additional 0.5 percent income tax resulted in the city continuing to collect at the 1.5 percent rate. City officials reportedly found the error last year.
According to Rittman’s authorities, money from the city’s taxes has gone toward paying for services, including police, fire/EMS, public health, parks, and recreation. Officials warned that they might have to make certain cuts due to the 0.5 percent decrease in income tax collection. City officials are promoting the reinstatement of the rate to 1.5 percent for “community-wide” discussion.
“While you may rest assured that the safety of the people who live, work and visit here will remain our top priority, you should be aware that we may have to consider cutbacks in the services identified. This is a simple fiscal reality,” the letter said.
Residents’ city tax returns for this year will automatically calculate the Rittman income tax at 1 percent, not 1.5 percent. However, residents can apply for a refund by submitting a Short Form 10A that RITA is creating for Rittman taxpayers if they have already paid their municipal income taxes for 2022 at the 1.5 percent rate or had the tax withheld by their employer.
According to the letter, Rittman city officials are doing everything possible to prevent this from happening again.
“In addition to passing new legislation to correct the tax rate, we will work with our auditor, finance department and law department to identify best practices and improved internal controls to help guard against this ever happening again,” the letter said.
Rittman resident Paul Gordon said he thinks the city handled the situation as best as possible.
“I think the city has been doing a fine job. I applaud them for 1. Finding the mistake 2. Being open and honest about it and 3. At least offering a refund for this year. If you think this is crazy you should see where your federal tax dollars go. It would blow your mind,” Gordon said.
Other residents, however, say the city should have caught this error years ago.
“I get that it was a mistake but 15 years is way too long for that mistake to be overlooked. They should pay all that back to the people who paid that. It’s not their fault that the city overlooked the mistake,” resident Gary Maynard told The Ohio Star.
“What makes me so mad is if we made that mistake we would have to pay that back,” resident Angel Ball-Sollars said.
“The people responsible should be held accountable but the town where we live would go bankrupt if they refunded everyone. To me, that’s not worth it. I just want people who did this to be held accountable,” Rebecca Hollabaugh said.
According to city officials, they have planned a community meeting for January 30th to answer residents’ questions and concerns regarding refunds.
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Hannah Poling is a lead reporter at The Ohio Star and The Star News Network. Follow Hannah on Twitter @HannahPoling1. Email tips to [email protected]
Photo “Bobbie Beshara” by Bobbie Beshara for Mayor. Background Photo “Wayne County Courthouse” by David Grant. CC BY-NC 2.0.