A: No. Note – work from home is not exempt from Philadelphia wage tax withholding. Most have a special form for that kind of refund. If Jack instead worked for a company located in a state without the convenience or necessity test, he may not be required to file any income tax returns with any state. You should ask your employer to stop withholding. Philadelphia does allow residents employees working in a Pennsylvania local earned income tax (EIT) jurisdiction to take a credit. The completed petition form must include the following: 1. Wage Tax Obligations for Non-Resident Employees. Regina lives in Miami, Florida also works for Company XYZ in Los Angeles. Under a reciprocal agreement two states agree to exempt taxation on work that may have been performed in the other. If you are asking if you need to file a city tax return, for that city, the answer is no. Nonresident employees are eligible for a wage tax refund based on work performed outside of Philadelphia. Tabitha also lives in Los Angeles and works from home four days per week and goes into the office for one day per week. It concluded that employees of Philadelphia-based employers who are required to work outside the city (such as due to COVID-19) are exempt from the city’s wage tax for days spent fulfilling that work. For remote workers, the question becomes which state will tax the individual. But it all depends on where you are relocating. Jessica specializes in estates and trusts, gifts, retirement, and state and local tax issues. Despite the appeal, some employees may still worry about where they may owe tax and file returns when deciding on whether to accept remote position. But it … 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. No-income tax states include: Example: Jack, who is a resident of Florida, is an employee of ABC company based and operating out of New York. Jessica Thomas JD, LLM is a tax research analyst at The Tax Institute. Login to TUportal and on the Staff Tools tab select the Update Work Location link in Personal Information channel to make a change to your PA Act 32 Work Location Distribution. As an employee, you may be able to claim certain home office expenses (work-space-in-the-home expenses, office supplies, and certain phone expenses). If the payer has legal right to control how the services or work is performed, then the individual is an employee. In order to qualify for the deduction, the taxpayer had to satisfy certain requirements. Referred to as 'sin taxes', the rates are $1.60 per pack, $.08 per gallon (beer), and $7.23 per gallon (spirits). Physical presence rules usually indicate a minimum amount of time an individual must be present in a state to be considered a resident. Regina works from her home in Florida home five days per week. At its height, the Philadelphia Wage Tax reached 4.96% in 1985. The only way to escape this tax would be to work just outside the city lines in a co-working office. To solve for this problem, he proposes a work-from-home tax on 5% of wages. • Expense Reimbursements Only individuals who qualify as an Armed Forces reservist, qualified performing artist, fee-basis state or local government official, and employees with impairment-related work expenses are eligible to still claim any unreimbursed employee expenses on their return. Auto-suggest helps you quickly narrow down your search results by suggesting possible matches as you type. If you live in Philadelphia and work outside Pennsylvania, you might be eligible for a break on your wage tax bill. The table below lists the local income tax rates in some of the state's biggest cities. Prior to the pandemic, city … What should I do? Even More Taxes. Non-residents who work in Philadelphia must also pay the Wage Tax. Philadelphia's City Wage Tax, which impacts anyone who works or lives in the city, will be reduced slightly beginning July 1 – part of a long-term effort to reduce its rate. TurboTaxMinhT is correct, you are not subject to that city's income tax. Philadelphia does allow residents employees working in a Pennsylvania local earned income tax (EIT) jurisdiction to take a credit. Mar 09, 2016 I live in New Jersey and work in Philadelphia. An individual employee’s local Earned Income Tax (EIT) Rate is determined by comparing the employee’s “Total Resident EIT Rate” (for the municipality in which the employee lives) to the “Work Location Non-Resident EIT Rate” (for the municipality in which the employee works). 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. Usually, nonresidents of a state are only taxed on income that was earned within the nonresident state. I work remotely at home. While working remotely has its perks--including eliminating commuting time--these unique arrangements can also have downsides. Keeping Ohio’s municipal income tax law in the shifting COVID-19 work-from-home environment would bring a “draconian change” for city budgets across the … Can I get reimbursed for the Philadelphia tax for those days on a past tax return? 2020-1227. But don’t expect big savings — for someone with a $50,000 salary, the reductions planned for fiscal year 2020 would mean about $5 … If you're working from home to reduce your exposure to coronavirus, don't expect to write off the cost on your 2020 taxes. 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. 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. Generally, teleworkers won’t face double tax issues unless they live and work on the border of two states and cross state lines. More Answers Below. You should contact that city for forms. The current city wage tax rate is 3.4481%. Residents of Philadelphia pay a flat city income tax of 3.93% on earned income, in addition to the Pennsylvania income tax and the Federal income tax.. Nonresidents who work in Philadelphia pay a local income tax of 3.50%, which is 0.43% lower than the local income tax paid by residents. I live in a rural area so no municipal taxes are collected where I live. 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 new wage tax rate for non-residents of Philadelphia, who are subject to the Philadelphia city wage tax, is 3.5019% (.035019). Other states may grant an income tax credit to residents who work elsewhere. The tax applies to payments that a person receives from an employer in return for work or services. Why do you ask? It is best practice to check if a state has a reciprocal agreement with any neighboring state and what sort of income is exempt. The City Wage Tax, also called the Earnings Tax, is a tax on salaries, wages, commissions and other compensation paid to an employee who is employed by or renders services to an employer. A: No. Residents of Philadelphia pay a flat city income tax of 3.93% on earned income, in addition to the Pennsylvania income tax and the Federal income tax.Nonresidents who work in Philadelphia pay a local income tax of 3.50%, which is 0.43% lower than the local income tax paid by residents. Teleworkers are usually located within the same geographic location as the company. Even More Taxes. The refund forms are available online from the City of Philadelphia Department of Revenue and are usually made available on the first business day of the year. 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).Additionally, the City confirmed that nonresident employees who are forced to work from home due to the coronavirus crisis and … Only nonresidents of Philadelphia performing services outside the City should complete the 3 One negative aspect is that remote workers can face state tax issues when they work in a different state than where their employer is located. It is not an application form used to claim a refund for Philadelphia wage taxes. It is not an application form used to claim a refund for Philadelphia wage taxes. Working at home is not exempt from the City wage tax when office space and clerical support is available at the University. 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. On the other hand, if a Philadelphia employer requires a non-resident to perform duties outside the city, he or she is exempt … Since 1854, the city has had the same geographic boundaries as Philadelphia County, the most-populous county in Pennsylvania and the urban core of the eighth-largest U.S. metropolitan statistical area, with … In an effort to prevent double taxation, some states have reciprocal agreements with neighboring or bordering states. To seek a refund from the City of Philadelphia, file an annual Wage Tax Refund Petition. Wage Tax – even with his or her employer’s authorization. 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. Example: Phillip lives in New York and would most likely be subject to New York taxes as a New York resident on his income for any work performed while working in Maine for some of the year. This deduction is claimed on your personal income tax return. Only nonresidents of Philadelphia performing services outside the City should complete the 3 The City Wage Tax is a tax on salaries, wages, commissions, and other compensation. 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. Work performed at home for the convenience of the employee is also not eligible for exemption from local withholding. The distinction between the two classifications is based on the facts and circumstances of each taxpayer’s situation, however, the IRS looks at two important factors when distinguishing the two: control and relationship. (I am also remote,  and no local city tax to pay). You would only file to get a refund of improper withholding, I am in almost this exact scenario currently-   I 100% work from home and was hired to do so- I'm NOT home related to COVID. The tax rate, currently 3.8809 percent for Philadelphia residents and 3.4567 percent for nonresidents who work in the city, gets reduced a little bit every year. I live and work in the city so my understanding of "refunds" is secondhand, but my colleagues who live in the suburbs keep meticulous track of the number of days they work from home instead of coming into the office, and my company posts a notice every year reminding people of the deadline to submit wage tax refund forms. I work remotely at home. Philadelphia updates Wage Tax guidance for employees ordered to work from home outside of the city for the employer's convenience. A resident is never exempt from the Wage Tax, and is subject to the tax on his or her entire, worldwide income. You'll need to file a non-resident city return to get a refund. Non-residents make up about 40% of Philadelphia’s wage tax payers, the largest portion of the city’s tax revenue. Philadelphia-area residents who are now working from their dining-room tables or home offices are likely eligible to stop paying the tax or apply for refunds later. The wage tax rate for residents of Philadelphia was not increased and remains at 3.8712% … Regina is a remote employee for the company. Now you can receive timely news on the issues and topics that are relevant to today’s tax professionals. The tax rate, currently 3.8809 percent for Philadelphia residents and 3.4567 percent for nonresidents who work in the city, gets reduced a little bit every year. However,  Pennsylvania and New Jersey have a reciprocity agreement. If you have paid by mistake while working from home, the City will not refund your taxes until the tax year ends. Employees who are required to work at various times outside of Philadelphia within a calendar year and who are nonresidents of Philadelphia, may file for a wage tax refund claim directly with the City of Philadelphia. As long as companies are requiring employees to work from home, they are exempt from the 3.4481% nonresident tax. Other interesting taxes a resident may come across include state taxes on cigarettes, beer, and spirits. On May 4, 2020, the Philadelphia Department of Revenue updated its guidance for withholding the Wage Tax from nonresident employees who are working in the city temporarily due to COVID-19; the previous guidance was published on March 26,2020. You do not have to pay tax in the city where your employer is located. Premier investment & rental property taxes. Employers would be responsible for the extra cost if they don't provide workers with permanent desks. TTI assumes no liability or responsibility for any errors or omissions in the content of the Site. 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. Example: Jill, who is a resident of New Jersey, is a remote employee for a company based and operating in Pennsylvania. This generally means that the state the employee lives in can tax their income as a resident (if the state has personal income taxes). For more information for taxpayers who cross borders for their business, check out this Insights article on artists, musicians, and makers. 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 … 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. Guidance for Supervisors . 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. Federal income tax. Prior to the Tax Cuts and Jobs Act of 2017, salaried workers could claim home office expenses via the miscellaneous itemized deduction. 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. Prior to the implementation of the Tax Cuts and Jobs Act, taxpayers were eligible to claim a deduction for business use of their home. Q: Do I still need to request a refund for Wage Taxes from the Payroll Management office You can claim a refund for the tax already withheld. Employers are not required to withhold city tax on such income. 1. View 2 Upvoters. To illustrate, suppose you live near Rittenhouse Square and make $100,000 per year; you will owe Philadelphia $3,890 of wage tax. 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. 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. For example, Philadelphia charges a local wage tax on both residents and non-residents. 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. (People who live in the city, no matter where they work, must always pay the 3.8712% resident wage tax.) Philadelphia City Wage Tax Refund Petition . The New York State Department of Taxation and Finance finds that Jack works out of his home office out of convenience, not out of necessity. She is exempt from filing a Pennsylvania return. 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. This is true whether your employer is in Philadelphia or not. 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. 1. My employer withholds Philadelphia city wage tax, which I claim as a credit for my New Jersey taxes. Scranton's wage tax rate for residents is 3.4%, of which 2.4% goes to the city and 1% to the Scranton School District. Everyone living or working in Philadelphia knows the significant wage tax burden that comes along with the privilege. "Maybe you worked in New York, but now you work from home in Connecticut for five months," Walczak said. Privacy Policy Under the reciprocal agreement, any compensation earned by a New Jersey resident employed in Pennsylvania would not be subject to tax in Pennsylvania. Philadelphia Wage Tax. It is I work at home two days a week. Example: Company XYZ is based in Los Angeles, California. 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). Philadelphia levies a 3.4481% wage tax on people who work but don't live in the city. Site Map, whether that individual is an employee or independent contractor, Make an appointment today with one of our experts, Insights article on artists, musicians, and makers. I assume you live and work in Ohio. I paid Philadelphia wage tax while working from home. Q: Do I still need to request a refund for Wage Taxes from the Payroll Management office 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. While working remotely has its perks--including eliminating commuting time--these unique arrangements can also have downsides. If there’s no reciprocal agreement between your employee’s home and work state, it’s not the end of the world. To seek a refund from the City of Philadelphia, file an annual Wage Tax Refund Petition. 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 more than … However, TTI makes no warranties or representations as to the Site’s accuracy. In an April 14 guidance release, the Philadelphia Department of Revenue reiterated the city’s current “requirement of employment” standard for determining wage taxes… If they are residents of a state, they are taxed on all sources of income no matter where derived. Can I be reimbursed for the Philadelphia city wage tax I paid for the two days I work from home and not in the city? The city wage tax rate in Philadelphia is a flat 3.93% for residents and 3.50% for nonresidents who work in the city. The wage tax is not refunded for vacation, sick or weekends spent outside of the city. Copyright © HRB Digital LLC. Under Pennsylvania’s “convenience of the employer” rules, Jill is found to earn income from Pennsylvania sources even though she performs all her work in New Jersey from home. Note – work from home is not exempt from Philadelphia wage tax withholding. Generally, states either use the domicile or physical presence factors to determine which state employees pay taxes . Since the mid-1990s, rates have slowly dropped. Sections. If you work from home, your tax home is at your address. Under the general rules, Jill would need to file a nonresident return with the Pennsylvania tax office for the income earned from Pennsylvania. Sometimes, a remote employee’s Form W-2 lists more than one state—their state of residence and another state where they work. Some states, such as New York, Delaware, Pennsylvania, and Nebraska, apply a “convenience versus necessary” test (or “convenience of employer” test) to determine if an employee is required to work from home, or if it is merely “convenient” for the employee to do so. The ability to work from home can make some jobs seem quite appealing. These employees could work either on a permanent or on a temporary basis. As a result, Jack will be required to file a New York nonresident return, since the income earned will be sourced to New York. 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. If you live in Philadelphia and work outside Pennsylvania, you might be eligible for a break on your wage tax bill. All Rights Reserved. **Say "Thanks" by clicking the thumb icon in a post. The tax applies to payments that a person receives from an employer in return for work or services. Just like federal income taxes, your employer will withhold money to cover this state income tax. Note that each state implementing this test has its own rules for what qualifies as convenient or necessary. "Maybe you worked in New York, but now you work from home … Do I pay taxes in the US if I'm not a resident and work remotely as independent contractor from abroad? The only way to escape this tax would be to work just outside the city lines in a co-working office. All Philadelphia residents owe the City Wage Tax, regardless of where they work. Pennsylvania also levies local income taxes in more than 2,500 municipalities. Domicile is generally defined as the place where an individual decides to establish their home or permanent place of residence. Employers are not required to withhold city tax on such income. Phillip could then qualify for a credit on his New York return for taxes paid to Maine on income taxed in both states. For example, the city of Philadelphia imposes a wage tax on all resident and non-resident individuals working in the city. Tabitha is telecommuting. Therefore, Jill would only need to file a tax return in New Jersey as a resident. Remote workers generally perform work in the state where they reside rather than where the company may be located. Your employee will most likely have to pay both nonresident and resident state income tax. If your employees work in Philadelphia but reside elsewhere, you must withhold the non-resident rate of 3.4481%. The city wage tax rate in Philadelphia is a flat 3.93% for residents and 3.50% for nonresidents who work in the city. 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. The City Wage Tax is a tax on salaries, wages, commissions, and other compensation. It is always a best practice to check each individual state’s filing requirements. Of course we all know about this. Everyone living or working in Philadelphia knows the significant wage tax burden that comes along with the privilege. Jill only has compensation from the employer in Pennsylvania and it’s reported to her on Form W-2. 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. The wage tax is not refunded for vacation, sick or weekends spent outside of the city. “Remote work” or “working remotely” are used to describe employees who are not located in the same geographic location as the company. 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. Generally, taxpayers are nonresidents of a state if they do not have a physical presence or domicile within a state. You normally only have to file a return in the city you live in. Nonresident employees are eligible for a wage tax refund based on work performed outside of Philadelphia. What the changes are 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. And of Pennsylvania’s 500 school districts, 472 of them levy a local income tax. With the implementation of TCJA, unreimbursed employee business expenses (including employees eligible for the home office business deduction) are no longer deductible. 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. Would I then go back and resubmit to New Jersey, or does it come out a wash? You must withhold 3.8712% of earnings for employees who live in Philadelphia regardless of where they work. Since the mid-1990s, rates have slowly dropped. 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