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May 7, 2020
2020-1227

Philadelphia updates Wage Tax guidance for employees ordered to work from home outside of the city for the employer's convenience

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. (See EY Tax Alert 2020-0751).

In the updated guidelines, the Department states that an employer may continue to withhold the Wage Tax from 100% of a nonresident employee's wages; however, this is a business decision, not a requirement. Nonresident employees who had Wage Tax withheld during the time they were required to perform their duties from home (outside of the city) in 2020 can request a refund through Department by completing a Wage Tax refund petition in 2021.

The Departmentalso clarified that employers are required to withhold and remit Wage Tax for all of their employees who are Philadelphia residents, regardless of where they perform their duties.

Nonresident Wage Tax policy (no change from what was announced on March 26, 2020)

The City of Philadelphia uses a "requirement of employment" standard that applies to all nonresidents whose base of operation is the employer's location within Philadelphia. Under this standard, a non-resident employee is exempt from the Wage Tax when the employer requires him or her to perform a job outside of Philadelphia, including working from home.

Nonresidents who work from home for their own convenience (rather than the need of the employer) are not exempt from the Wage Tax, even with their employer's authorization. On the other hand, if Philadelphia employers require nonresidents to perform duties outside the city, they are exempt from the Wage Tax for the days spent fulfilling that work.

For more information about the City of Philadelphia Wage Tax, go here.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)
   • Kristie Lowery (kristie.lowery@ey.com)
   • Peter Berard (peter.berard@ey.com)

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