I work in the city and live in the suburbs. On last year's W-2, the wages reported for medicare, state and local were all the same. This year, local wages was significantly low (only 1 biweekly income) and hence the local taxes was low as well. I notice that the locality name also has changed on the current W-2. However, my address on both W-2s is the same. In addition, only my wife received the local income tax return form (new service this year!).

It seems like I need to file local income tax return with the locality I live in. But I am not sure what wages (local or all) to report and why this discrepancy occurred on the W-2.

Does anyone have any insight into this? Help much appreciated!

Some cities tax those who work in their city, while others only tax those who LIVE in their city.

You need to figure out which is the case for you. A phone call to City Hall should get you an answer.