PHILADELPHIA (KYW Newsradio) — Now that many Philadelphia employers have re-opened their offices, commuters can expect to begin paying the non-resident wage tax again, even if they are still working from their home outside of the city.
The Philadelphia Department of Revenue sent guidance to employers after all COVID-19 restrictions were lifted earlier this month, explaining that they should begin withholding non-residents’ wage tax again, even if employees are voluntarily working from home.
Deputy Commissioner Rebecca Lopez Kriss said it’s a provision of state law, known as the “convenience of the employer” rule: If a company orders its staff to work from home — as many did during the pandemic — then non-residents don’t owe the wage tax. But if the order is lifted, the wage tax kicks back in.
“If you are working from home at your convenience or it’s optional that you come in, then you are subject to the wage tax,” she said.
“We’ve advised companies that they should develop a strong policy about mandating work from home or not and again. It’s completely up to the employer and it’s going to depend on their policies if they want their employees to be subject to the wage tax or not.”
The loss of non-residents’ taxes — which are about 40% of wage tax revenue — was a major cause of last year’s budget cuts and fears that they would be permanently lost if people continued to work from home. It was one factor in the formation of a working group to create a tax reform plan, just announced by the mayor and City Council. That group will be charged with revamping the city’s tax structure to support equitable economic recovery.