2020-1227. She is exempt from filing a Pennsylvania return. Only nonresidents of Philadelphia performing services outside the City should complete the 3 Do I still have to pay the tax in the city where my employer is if I work from home where only school district tax is required? Under the general rules, Jill would need to file a nonresident return with the Pennsylvania tax office for the income earned from Pennsylvania. Employers are not required to withhold city tax on such income. You must withhold 3.8712% of earnings for employees who live in Philadelphia regardless of where they work. It is Just like federal income taxes, your employer will withhold money to cover this state income tax. Only nonresidents of Philadelphia performing services outside the City should complete the 3 1. That means a New Jersey resident who works in Philadelphia and pays city wage taxes may claim a credit for the taxes paid to Philadelphia. The City of Philadelphia Revenue Department announced (on its website here) administrative extensions to the due dates for 2020 real estate taxes (originally due March 31, 2020) and 2019 business taxes (originally due April 15, 2020). The Philadelphia Revenue Department has ruled that the taxpayer’s use of his/her home is not for the convenience of the University when office space and clerical support is available on campus. Pennsylvania also levies local income taxes in more than 2,500 municipalities. Employers are not required to withhold city tax on such income. A taxpayer living in a state with a reciprocal agreement would not have to worry about filing a nonresident tax return for any work performed in a nonresident state. Philadelphia does allow residents employees working in a Pennsylvania local earned income tax (EIT) jurisdiction to take a credit. Please note that the New Jersey/Pennsylvania Reciprocal Agreement does not apply to the income or wage tax imposed and collected by the City of Philadelphia or any other municipality in Pennsylvania. To illustrate, suppose you live near Rittenhouse Square and make $100,000 per year; you will owe Philadelphia $3,890 of wage tax. My employer withholds Philadelphia city wage tax, which I claim as a credit for my New Jersey taxes. Mar 09, 2016 I live in New Jersey and work in Philadelphia. Referred to as 'sin taxes', the rates are $1.60 per pack, $.08 per gallon (beer), and $7.23 per gallon (spirits). If an employer is located in one of the “convenience of the employer” states, and the law determines the employee works from their home out of convenience rather than necessity, the employer’s state can tax the remote worker for income earned on days worked in the remote worker’s state. Philadelphia Wage Tax. Wage Tax Obligations for Non-Resident Employees If a non-resident employee is working from home outside of the city solely because of the COVID-19 pandemic, the wages paid for this work from home are not subject to city wage tax. That means a person can work in Illinois but pay income tax in their home state if they live in Kentucky, Michigan, Wisconsin, or Iowa. Make an appointment today with one of our experts to find out how working remotely could affect your state tax returns. Under a reciprocal agreement two states agree to exempt taxation on work that may have been performed in the other. On the other hand, if a Philadelphia employer requires a non-resident to perform duties outside the city, he or she is exempt from the Wage Tax for the days spent fulfilling that work. To solve for this problem, he proposes a work-from-home tax on 5% of wages. Is your employer withholding for his location city? The wage tax rate for residents of Philadelphia was not increased and remains at 3.8712% … Sometimes, the terms “telecommuting” or “telework” and “working remotely” are used interchangeably—however, telecommuting means that an employee may work from home but also may perform some work on-site with the company some of the time. Why do you ask? Related Questions. My city calls it the itinerant employee refund form. TurboTaxMinhT is correct, you are not subject to that city's income tax. Physical presence rules usually indicate a minimum amount of time an individual must be present in a state to be considered a resident. Sometimes, a remote employee’s Form W-2 lists more than one state—their state of residence and another state where they work. Philadelphia, colloquially Philly, is the largest city in the U.S. state of Pennsylvania and the sixth-most populous U.S. city, with a 2019 estimated population of 1,584,064. Generally, taxpayers are nonresidents of a state if they do not have a physical presence or domicile within a state. To seek a refund from the City of Philadelphia, file an annual Wage Tax Refund Petition. Non-residents make up about 40% of Philadelphia’s wage tax payers, the largest portion of the city’s tax revenue. If you have paid by mistake while working from home, the City will not refund your taxes until the tax year ends. Jessica Thomas JD, LLM is a tax research analyst at The Tax Institute. Your employee will most likely have to pay both nonresident and resident state income tax. **Say "Thanks" by clicking the thumb icon in a post. According to a 2018 annual report from the Bureau of Labor Statistics, 23.7% of employed persons who worked on an average day worked from their home or from a location other than their workplace for some amount of time. Note – work from home is not exempt from Philadelphia wage tax withholding. For remote workers living in “no-income tax” states, the tax impact of working remotely for an employer outside of those states could have a fairly drastic impact. Those same non-resident workers are exempt from the tax when their employer requires them to … Sections. Example: Jill, who is a resident of New Jersey, is a remote employee for a company based and operating in Pennsylvania. I work remotely at home. Everyone living or working in Philadelphia knows the significant wage tax burden that comes along with the privilege. If a non-resident of Philadelphia works for an employer within the city limits, 3.4654% Wage Tax (effective July 1, 2017) will be due. Employees working remotely could face issues with their taxes, including double state tax on wages depending on their state of residence and location of their employer. But don’t expect big savings — for someone with a $50,000 salary, the reductions planned for fiscal year 2020 would mean about $5 less in wage taxes. Some states look to domicile and won’t consider physical presence—but each state has its own rules for residency so taxpayers must review the rules for their specific state to determine how they will be taxed when working remotely. If a non-resident employee is working from home outside of the city solely because of the COVID-19 pandemic, the wages paid for this work from home are not subject to city wage tax. Under the general rules, an individual is considered an independent contractor if the payer has the right to control only the result of the work and the individual has the authority as to how the work will be executed. Philadelphia: The city’s Department of Revenue issued revised wage tax policy guidance [PDF 134 KB] for non-resident employees and reiterated that non-resident employees who work for Philadelphia-based employers are not subject to wage tax during the time they are required to work outside of Philadelphia, including working from home. This deduction is claimed on your personal income tax return. Work performed at home for the convenience of the employee is also not eligible for exemption from local withholding. Can anyone cite ORC or similar to back this up, as the company accountant disagrees with me, and I have taxes being taken out for the city the company is based in. Generally, individuals who work for a company in Pennsylvania will find that the company deducts the Wage Tax from their pay since this is required by law. Even the nurses who came to New York to treat coronavirus patients will be subject to New York income tax if they worked in the state … For example, if you live in Virginia but are working remotely from a family home in New York this summer, you may have to pay income tax to both states. The only way to escape this tax would be to work just outside the city lines in a co-working office. According to Philadelphia’s Revenue Department website, if you’re a city resident who works in say, Wilmington, Delaware, and you’ve paid that city’s local tax, you can ask for that money back as a credit against your Philadelphia wage tax. For example, many states with reciprocal agreements allow an exemption from tax only for compensation or wages, while other sources of income like self-employed income or gain from sale of property would be subject to tax in both the resident and nonresident state. You should ask your employer to stop withholding. However,  Pennsylvania and New Jersey have a reciprocity agreement. All Philadelphia residents owe the City Wage Tax, regardless of where they work. Thousands of workers for city-based businesses who live in the suburbs and have been working from home during the COVID-19 pandemic are entitled to a city wage tax refund in spring of … Auto-suggest helps you quickly narrow down your search results by suggesting possible matches as you type. 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