Filing taxes can be a complex process, particularly when it comes to accurately completing your W-2 form. One area that often raises questions is the “Locality Name” field, which pertains to local tax obligations. This section of the W-2 is vital for proper reporting and withholding of local taxes.
Local W-2 Box Usage
The “Locality Name” box on the W-2 form applies to employees subject to local income taxes, capturing the name of the taxing jurisdiction requiring withholding. Local taxes vary across regions and may include city, county, or school district taxes. For instance, Philadelphia imposes a local Wage Tax that employers must withhold for residents and for nonresidents who work in the city. 1City of Philadelphia. Wage Tax (Employers)
The locality name should match the jurisdiction for which local tax was withheld; in many states this is the work location, but some systems also use the employee’s residence. For example, an employee working in Cincinnati but living in a nearby suburb might have different tax obligations than someone working and living in the same city.
Due to space constraints, some locality names may be abbreviated. Employers should follow standard abbreviations recognized by local tax authorities to avoid confusion. In states without local income taxes, the locality name box may remain blank. However, in states like Ohio and Pennsylvania, where local taxes are common, this box is a key part of the W-2 form.
Identifying the Right Jurisdiction
Correctly identifying the taxing jurisdiction for W-2 reporting requires understanding the local tax laws that govern where the employee works and/or lives. Under Pennsylvania’s Act 32 framework, employers compare the employee’s resident Earned Income Tax rate with the work-location nonresident rate, withhold the higher amount, and remit to the workplace tax collector. 2PA Department of Community & Economic Development. FAQ: Act 32, Earned Income Tax Collection Reform
Ohio law includes a “20‑day” occasional-entrant rule that limits when employers must withhold municipal income tax if an employee performs services in another Ohio city for 20 or fewer days in the calendar year, subject to specified exceptions. 3Ohio Laws. Section 718.011 Occasional Entrant Exemption
Employers can use official tools to identify jurisdictions and rates. For example, Ohio’s Department of Taxation provides The Finder, which lists municipal income tax rates by address. 4Ohio Department of Taxation. The Finder – Municipal Income Tax
Situations Where No Locality Name Appears
The locality name box on a W-2 may be blank if the employee’s workplace is in an area without local income taxes. This aligns with the tax regulations of those jurisdictions.
Remote work creates another scenario where a locality name might be unnecessary. Employees working from areas without local tax requirements may not need this field completed. However, if an employee resides in a non-taxing locality but works for a company in a taxing jurisdiction, the situation may differ. Employers must evaluate whether the remote location requires local tax reporting, considering any reciprocal agreements between regions.
For businesses operating in multiple locations, some with local taxes and others without, tracking each employee’s work location is essential. Only employees in taxable jurisdictions should have a locality name on their W-2. Employers must stay updated on changes in local tax laws, as new taxes or modifications to existing ones can affect whether a locality name is needed.
Reporting Multiple Localities
When employees work in multiple jurisdictions with different tax obligations, reporting each locality on the W-2 is essential. This often applies to employees who divide their time between offices in different cities, each with its own tax requirements. Employers must accurately reflect these obligations by listing each locality separately.
The W-2 allows state and local information for up to two localities per form; if more are needed, the employer must issue an additional W-2 for the same employee. 5Internal Revenue Service. General Instructions for Forms W‑2 and W‑3 (2025)
Ensuring Accurate Local Tax Withholding
Accurate local tax withholding is a cornerstone of payroll management and compliance. Employers must regularly update payroll systems to reflect current tax rates and regulations for each locality where their employees work. This includes maintaining accurate records of employee work locations and hours to ensure proper withholding.
Implementing advanced payroll software can help automate calculations and adjustments for multiple localities, reducing errors. Such systems can account for varying work patterns and tax rates. Regular audits of payroll processes further ensure compliance with local tax laws, minimizing the risk of disputes or penalties from taxing authorities. Proactive management of local tax withholding protects both employers and employees from potential legal or financial complications.