This blog post is part of a series addressing the City Wage Tax. The series covers the questions we receive most frequently at the Philadelphia Department of Revenue about this tax. In our last post, we discussed the types of income that are not subject to the Wage Tax.

In our third and final post of the series we will focus on Wage Tax refunds.

There are various reasons why you may be entitled to a Wage Tax refund. We’ll explain each different type of refund request.

Pennsylvania tax forgiveness

Taxpayers who file and are approved for Pennsylvania Tax Forgiveness may be entitled to receive a refund of employer-withheld City Wage Tax. This refund policy provides tax relief to low-income individuals and families. Eligibility for the program is based on your income and family size.

If you meet the eligibility requirements, you will need to complete and submit an Income-based Wage Tax refund petition. You must include your PA Schedule SP 40 with the Philadelphia refund petition.

Non-residents who work outside of Philadelphia

If you are a non-resident employee of a Philadelphia employer who is sometimes required to work outside Philadelphia, you are eligible to claim a Wage Tax refund based on the work you performed outside the City. Eligible taxpayers must provide documentation: a record of the days that their employer required them to work outside of Philadelphia. Taxpayers should choose to track hours or days, but not both. Taxpayers will also need to submit a signed letter from their employer on company letterhead to verify any time worked outside Philadelphia.

The City’s “requirement of employment” standard applies to non-residents whose employer requires them to perform work outside of Philadelphia for a period of time. In accordance with this policy, you would be eligible for a Wage Tax refund for the work you do outside of Philadelphia. However, telecommuters who work from home at their own convenience do not qualify for Wage Tax refunds.

Deductible, unreimbursed business expenses

If you live in Philadelphia, your employer should automatically be deducting the Wage Tax from your paycheck regardless of where you work.

However, as a Philadelphia resident, you may request a Wage Tax refund based on deductible, unreimbursed business expenses. Philadelphia allows a deduction for expenses directly connected with and incurred in the actual performance of an employee’s services.

For example, if you incur unreimbursed business travel and lodging expenses in connection with your employment, these expenses can be deducted from your compensation.

Resident employees may also be entitled to claim a refund of Wage/Earnings Tax for income taxes paid to local jurisdictions outside of Pennsylvania.

There are separate forms for each type of Wage Tax refund.

In response to the COVID-19 health emergency

• Our refund unit is working on a backlog of refund requests, due to limited staffing in response to the COVID health emergency. All refund requests, with the exception of Wage Tax are being processed in order of the date received.  We expect the normal 6-8 week processing time to be longer this year. Wage Tax refund requests for 2020 can be submitted with accompanying W-2 forms starting in 2021.

The Philadelphia Department of Revenue has provided more information about its Wage Tax policy for non-resident employees during the COVID-19 pandemic. For more information about the current policy, you can read the guidance.