Rittman residents overtaxed for 15 years
RITTMAN − “Simple human error.” That’s the explanation the city is giving for collecting too much income tax for the last 15 years.
In a letter dated Jan. 19, Rittman officials acknowledged charging municipal income tax at 1.5% rather than the authorized 1% rate.
That adds up to an extra $7.2 million paid into city coffers by employed residents of Rittman and those who work in the city but live outside of it.
And only a fraction of it — the 2022 tax year overpayment — will be refunded.
“I was pretty mad,” said city resident Todd Ryneer after getting the letter. “If they messed up for 15 years, they should help us out.”
The 57-year-old Ryneer and other payers of Rittman’s income tax are not likely to see help.
Citing a one-year statute of limitations, the city will not correct income tax receipts prior to 2022, the letter states.
“Practically, refunding 15 years’ worth of these taxes would bankrupt the city,” the letter reads.
How did the Rittman income tax snafu happen?
According to the letter and a fact sheet the city provided residents, the 1.5% income tax, which funds city services such as police, fire, parks and public health, had been on the books for 45 years — since 1977 when voters approved an additional 0.5% for 30 years.
The 0.5% amount was supposed to come off for the 2008 tax year, which the city realized in the third quarter of last year while researching its ordinances.
“In 1996, voters approved changes to the city’s tax code, which led to an update of the city’s codified ordinances,” the letter states. “When the new ordinances were published, the end date of the additional 0.5% income tax, Dec. 31, 2007, was inadvertently omitted.”
That mistake kept the 1.5% tax rate in play beyond 2007, as city administrators followed the incorrectly updated ordinance.
In total, nearly $21.6 million in income taxes were collected from 2008 to 2021, according to the city’s financial audit records. A third of that — $7.2 million — stems from the overcharge.
A Frequently Asked Questions document on Rittman’s website explains that not all voter-approved tax ordinances have expiration dates, so from 2008 through 2022, city administrators and taxing authorities assumed 1.5% was the correct rate.
“Our research has revealed that the cause of the incorrect income tax rate was simple human error that occurred years ago,” the city explained in the letter to residents. “We are taking steps to correct this situation immediately.”
How was the Rittman income tax overcharge discovered?
City Manager Bobbie Beshara said the city was considering another 0.5% income tax levy, bumping the de facto 1.5% rate to 2% at the time the error was discovered last year.
“The city of Rittman has asked the voters to approve an increase to 2% on many occasions since the 1.5% was passed in 1977, it has failed each time,” she wrote in an email. “The reality is that the cost of maintaining and improving city services continues to increase.”
Independent checks did not catch this issue between 1999 and 2021, according to city financial audits provided by the state.
Each financial report lists the municipal income tax rate at 1.5% and made no mention of an expiration date.
“The error would not be something our auditors or the independent public accountants we contract with would have caught, since the city ordinance incorrectly set the tax rate,” wrote Marc Kovac, a spokesperson for the Ohio Auditor’s Office.
The state confirmed the number of collections with the Regional Income Tax Agency and used the 1.5% income tax rate, he wrote in an email.
“I would refer you back to the city for further clarification on how/why the incorrect rate remained in their codified ordinance for so long,” Kovac wrote.
How can Rittman taxpayers get a refund for 2022?
When the error was discovered, Beshara said, the city contacted the state auditor and the independent audit firm and made the problem public.
The tax agency was notified to set the tax rate to 1% for 2022. Residents can file their 2022 tax returns as normal, Beshara explained, and it will be calculated at 1%.
Anyone who already paid their 2022 municipal income tax at the 1.5% rate can request a refund by filing Form 10A available online or at Rittman City Hall. Both residents and nonresidents can do this.
“It is my understanding that both the municipal tax form and 10A allow to select a refund or a credit against future taxes owed,” Beshara wrote.
This is only effective for the 2022 tax year.
The previous 14 years will likely see no refund, according to the city.
“The city is not required to refund any amounts already collected, and Ohio law clearly establishes a one-year statute of limitations on taxpayer claims for the repayment of unauthorized taxes,” according to the letter to residents. “We’re following that law.”
What’s next for Rittman?
With a 1% income tax rate going forward and a loss of approximately $750,000 annually, the city faces possible cuts in services.
“The city’s finances have been tight and will now be even tighter,” the letter to residents states. “We will need to study how to make our budget work without the additional 0.5% income tax.”
Rittman City Council considered two pieces of legislation at its Jan. 23 meeting to make permanent the additional 0.5% income tax.
This would appear on the May ballot for voters to decide.
If approved, it would go into effect Jan. 1, 2024.
To prevent such an oversight from happening again, the city said in the letter, it will work with the auditor, finance and law departments to make sure best practices are being followed and internal controls are in place.
Council will hold a special meeting at 7 p.m. on Monday, Jan. 30, in the Recreation Center, 200 Saurer St. Anyone with questions or concerns is encouraged to attend.