April 14, 2020

Wage Tax policy guidance for non-resident employees

Non-resident employees who work for Philadelphia-based employers are not subject to Philadelphia Wage Tax during the time they are required to work outside of Philadelphia.

The Philadelphia Department of Revenue has not changed its Wage Tax policy during the COVID-19 pandemic. Schedules to withhold and remit the tax to the City remain the same. We are publishing this guidance at a time when employees have been forced to perform their duties from home, many for the first time.

This is the policy:

The City of Philadelphia uses a “requirement of employment” standard that applies to all non-residents whose base of operation is the employer’s location within Philadelphia. Under this standard, a nonresident employee is not subject to the Wage Tax when the employer requires him or her to perform a job outside of Philadelphia including working from home.

A non-resident who works from home for the sake of convenience is not exempt from the Wage Tax – even with his or her employer’s authorization. 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.

Non-resident employees who had Wage Tax withheld during the time they were required to perform their duties from home in 2020, can file for a refund with a Wage Tax reconciliation form in 2021. Employees file for a refunds after the end of the tax year and will need to provide a copy of their W-2 form.

The City requires an employer to withhold and remit Wage Tax for all its Philadelphia residents, regardless of where they perform their duties.

Source: Philadelphia Department of Revenue