The Covid-19 Pandemic has brought many changes to our lives, requiring masks when leaving the house, frequent hand washing, and (for many people) work from home. For suburbanites who work in the City of Philadelphia, there is an unexpected twist from Governor Wolf’s stay at home order – in the form of a tax refund.
The City of Philadelphia reached a settlement of litigation brought by professional athletes for Philadelphia teams who were required to pay Philadelphia city wage tax on all of their wages even while traveling to other cities. The settlement provided that any employee who worked outside Philadelphia at the demand of an employer for an extended period was not required to pay wage tax on wages attributable to work outside the City.
I've been working from home during the pandemic and my office is located in Philadelphia. Does my situation fall under this settlement language?
Yes. If you commuted into the city before Governor Wolf’s stay-at-home order and paid Philadelphia city wage tax, you are not liable to pay it while working from home at this time.
How do I change my city wage tax status in Philadelphia?
Workers can change their tax status and be exempt from the City of Philadelphia’s City Wage Tax of 3.4481% until June 30, 2020 and 3.5019% beginning July 1, 2020. The responsibility for proper tax reporting falls on the individual employee. You must speak to your employer about changing your tax status. If you did not or cannot change your tax status, you can file for a refund beginning January 2, 2021. 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.
I paid Philadelphia wage tax while working from home. What should I do?
If you have paid by mistake while working from home, the City will not refund your taxes until the tax year ends.
It is critical that you check you paystub to see if your employer has changed your tax status, because if you live in a municipality or school district that collects earned income tax, you will owe Philadelphia city wage tax to that municipality and/or school district for the time worked outside of the city.
In a normal year where you don’t work from home, you should be filing annual Earned Income Tax returns with your County Tax Collector each April showing that you work in Philadelphia. In 2021 you will file two returns, one for the City showing the time you worked in Philadelphia and one with your County showing the time you were required to work from home.
How long will I be exempt from Philadelphia wage tax?
You will continue to be exempt from Philadelphia city Wage Tax and responsible for it for as long as your employer decides to have you work from home even if the Governor no longer mandates telework. The work from home decision must be made by your employer as a condition of employment.
Due to the significant savings, it is important that you contact your employer to check your tax status if possible and begin saving now. You also want to check at tax time in 2021 to make sure you only pay the City of Philadelphia for those days attributable to the time you were working in Philadelphia and calculate the number of days you were teleworking and file the returns accordingly.