If you live or work in Philadelphia but your employer doesn’t withhold City Wage tax, you could be required to file and pay Earnings Tax. Earnings Tax applies to salaries, wages, commissions, and other compensation you receive as an employee.
You must pay the Earnings Tax if you are a:
- Philadelphia resident with taxable income who doesn’t have the City Wage Tax withheld from your paycheck.
- A non-resident who works in Philadelphia and doesn’t have the City Wage Tax withheld from your paycheck.
The most common situation for filing and paying the Earnings Tax is when a Philadelphia resident works for an out-of-state employer.
City Wage Tax vs. Earnings Tax
Most employers will automatically withhold City Wage Tax for Philadelphia resident employees and non-residents who work in the City. But it’s important to check with your employer to make sure the correct amount is being withheld. If you don’t see Wage Tax withheld on your paystub, you could be responsible to pay the tax.
Employers located outside of Pennsylvania, who do not have a physical location in Philadelphia or aren’t subject to the Business Income and Receipts Tax, are not required to withhold Philadelphia’s Wage Tax. When Wage Tax is not withheld, you must register for an Earnings Tax account and file and pay the Earnings Tax yourself.
If you are self-employed and do business in Philadelphia, you are required to pay the following business taxes instead of the Earnings Tax:
Filing and Paying Earnings Tax
As of July 1, 2020, the Earnings Tax rate for Philadelphia residents is 3.8712% and 3.5019% for non-residents. These rates can change from year to year, so it’s important that you check our website for each year you owe the tax. If you file using a paper return, be sure to use the correct return for the year you are filing. Better yet, file electronically to avoid this mistake.
The Earnings Tax must be filed and paid quarterly, along with an annual reconciliation (information return) at the end of each calendar year.
For 2020, the quarterly Earnings Tax return and payment due dates are:
- Q1: April 30, 2020
- Q2: July 31, 2020
- Q3: November 2, 2020
- Q4: February 1, 2021
The annual information return for 2020 is due April 15, 2021. If you don’t pay on time, interest and penalties will be added to the amount you owe. You can register for a new Earnings Tax account online and file and pay the tax using the City’s e-file/e-pay website.