Looking at your three sentences, the most likely scenario would be that the speaker has a job in the within the city limits of Toronto, so the speaker would want to say:
I am working in Toronto.
However, we can use the preposition at when talking about the company or business where we work:
I work at IBM. My friend Greg works at Google. My father-in-law works at General Motors.
Remember, Toronto is a proper noun, and it could conceivably take on other meanings besides the name of a large city in Ontario. "Toronto" could also be the name of a business (or perhaps the shortened name of a business, such as "Toronto Moving Company"). If there were, in fact, a business named Toronto Moving Company, and you were talking to three long-distance truckers, then it might sound perfectly normal for one of those truckers to say:
George works at Moon Star and Dan works at Hunt. I am working at Toronto.
My next example might be a bit more far-fetched, but let's pretend the computer science department at McGill University was taking part in a robotics competition. They've decided to name their five robots after cities in Canada: Vancouver, Toronto, Montreal, Edmonton, and Winnipeg (those last three are sometimes called Monte, Eddie, and Winnie for short). During the competition, two of the robots begin malfunctioning. One of the students approaches the lead engineer and says:
Can you work on Eddie? He's not getting his instructions.
And the lead engineer might reply:
I am working on Toronto. See if you can get Kate to work on Eddie.
Without any way of knowing what information those three sentences are trying to convey, the tool has (correctly, in my opinion) said that they are all valid sentences. However, assuming you are trying to tell us the city where you work, the one you would want to use is the one with in:
I am working in Toronto.
This is why we often press people at ELL to be sure to provide sufficient context. Asking, "Which one of these is correct?" might get a long answer explaining why all of your options might be correct. Asking something more along the lines of, "Which one of these is the best way to tell someone that I am working at a company located in Toronto?" is more likely to give you the answer you are looking for.
