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Ohio double taxation case set for mediation

A civil case that claims illegal double taxation, argued by lawyers from Community Legal Aid before the Ohio Supreme Court, is going to mediation.

According to a docket entry, all parties in the case filed on behalf of two northern Ohio residents have agreed to have the issues resolved through an impartial mediator.

Among the defendants are Ohio Tax Commissioner Jeff McClain and state Treasurer Robert Sprague.

But Legal Aid’s Rachel Nader, who is the organization’s advocacy director, said she is encouraged by this “step in the right direction.”

“We’re thrilled to take this next step in resolving this issue,” Nader said. “Our clients just want to be made whole. This is a great chance to make that happen.”

Legal aid attorneys Dana A. Goldstein and Clinton Householder are representing James Palm of Akron and Sara Pearson of Ravenna.

Palm and Pearson claimed they were “double-taxed” by the state of Ohio after failing to turn in W2 forms with their tax filing forms. When Ohioans do not file a W2, the state system automatically enters a 0 on the line tax paid, Legal Aid attorneys say, even though some state tax may have been withheld in paychecks.

According to the lawsuit, Palm did not file tax returns for the years 2016 through 2018. Last year, Palm tried to become compliant, but he no longer possesses the W-2 information furnished by his employers. In 2017, Palm worked for a company that withheld his wages to pay state tax, but that company went out of business.

Palm still tried to become filing compliant and through some help, he obtained wage and income statements from the IRS for tax years 2016-18. However, those statements did not list the amounts withheld by his employer for Ohio taxes. Palm then tried to contact the Ohio Department of Taxation to determine the withholding amounts but was told the office does not keep such information, the lawsuit states. He was instructed by the department of taxation to report zero dollars had been withheld by his employer.

Instead, Palm filed tax returns for those three years and listed “unknown” for the amount withheld by his employer. However, the taxation department processed Palm’s returns and gave him zero credit for each year the amount he paid to the state.

The state sent Palm tax bills of $49.12 for 2016 and $349.18 for 2018.

The lawsuit also stated Pearson did not file tax returns for the years 2017, 2018 and 2019 in a timely fashion because of domestic problems and she was not able to obtain W-2 documents. It later was learned the woman’s former spouse had burned all of her belongings, including W-2 data for 2017 and 2018.

Also, tax information for 2019 was diverted to another mailing address and she was unable to retrieve the W-2 for that year, the suit states.

Again, Pearson believed her employers during these years had withheld her state taxes from her paychecks. In 2020, she tried to become filing compliant and also stated “unknown” as her filing liability for tax years 2017-19. In processing the returns, the suit states Ohio tax officials failed to credit her with paying the tax. Because there was no tax bill, Pearson believes she is owed a refund.

Legal aid attorneys want Ohio officials to institute a long-term solution to this systemic problem which Legal Aid attorneys say disproportionately impacts the low-income homes in the state.

“Of course, we want our clients to get the money they’re owed, but we want this to stop happening and keep any future taxpayers from being harmed,” Goldstein, lead attorney on the case, said. “We don’t just want to fix this problem for our clients. We want to keep it from happening again.”

By nature of how the mediation process works, Legal Aid attorneys say all discussions will be confidential and closed to the public.

Brittany Halpin, spokeswoman for state treasurer Sprague, said because the case still is pending in the court, the office will not have a comment.

An email was sent to the Ohio Department of Taxation for comment, but no response was sent.

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