Effective July 1, 2016, the Philadelphia wage tax rates are reduced with the rate for Philadelphia residents decreased from 3.9102% to 3.9004%, and the rate for nonresidents decreased from 3.4828% to 3.4741%. (Philadelphia Revenue Department website.)

Details on the Philadelphia wage tax

The City of Philadelphia 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. Covered wages follow those that apply for Pennsylvania income tax purposes with certain exceptions noted in the Philadelphia regulations.

Of significant note, Philadelphia resident income tax withholding is required by any employer doing business in Pennsylvania, whether or not business is conducted within Philadelphia. This requirement makes Philadelphia unique from other Pennsylvania locals that require resident income tax withholding only from employers doing business within their municipalities.

With limited exception, nonresidents who perform services in Philadelphia are also subject to the wage tax.

Some Philadelphia employers asked to resubmit their annual withholding reconciliation form

As we previously reported, the Department asked employers and payroll service providers that used a previous paper version of the Annual Reconciliation 2015 Employer Wage Tax to resubmit the return using the correct version. (Email response to inquiry.) The annual reconciliation form was revised in September 2015 to include 16 data lines as compared to the prior version with just 15 lines.

Due date for Forms W-2

The Philadelphia 2016 tax due date chart reflects that the 2016 annual reconciliation and Forms W-2 will be due February 28, 2017. This differs from the new federal, and the Pennsylvania Department of Revenue, requirement that Forms W-2 be filed by January 31.

We have asked the Philadelphia Revenue Department to clarify that the deadline will remain at February 28.

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