The City Wage Tax is a tax on salaries, wages, commissions, and other compensation. The tax applies to payments that a person receives from a Philadelphia employer in return for work in Philadelphia. All Philadelphia residents owe the City Wage Tax, regardless of where they work. Non-residents who work in Philadelphia must also pay the City Wage Tax. The City Wage Tax for Philadelphia residents is 3.8712% and 3.5019% for non-residents.

But what happens when suburban employees that typically work at a Philadelphia business are now working remotely because of the coronavirus pandemic? Do they need to pay the City Wage Tax?

The answer is “No”. A non-resident employee required by a Philadelphia employer to work outside of Philadelphia (including working from home) is not required to pay City Wage Tax for those days spent fulfilling that requirement.  However, if a non-resident employee works from home for their convenience even with an employer’s authorization, that employee is not exempt.

Philadelphia recently issued new streamlined ways to request City Wage Tax refunds that were withheld during the period their employer required to work from home (outside of Philadelphia).

Non-resident employees who had City Wage Tax withheld during the time they were required to perform their duties from home in 2020, may file for a refund with an online Wage Tax refund petition in 2021. Employees will need to provide a copy of their W-2 form and a letter from their employer stating they were required to work from home. The letter, which must be on company letterhead and signed, is submitted along with the refund petition.

Because so many non-resident employees were required to work from home, Philadelphia is allowing employers to submit an Employer-requested 2020 Wage Tax refund form on behalf of a group of their non-resident employees.

Starting in February, employers will be able to upload the completed form on the City of Philadelphia eFile/ePay website  Refund checks will be mailed directly to employees.

Employers and employees need to coordinate this effort so they are not filing the same City Wage Tax refund request.

The online forms will be available starting in February from the City of Philadelphia Department of Revenue.

For additional information go here.

For all COVID-19 related tax and business information, visit this special section of our website.