I'm thinking about moving to Philadelphia from Texas while keeping the same job that is fully remote company wide and has always been remote. I've been confused about the city wage tax and state income tax. I would prefer not to switch my address with my company, change address etc. just in case I don't enjoy living in Philadelphia and come back within a year. How should I go about filing taxes?
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If you move to PA and live and work in PA, you will be subject to paying state and possibly local taxes in PA. You will need to have your employer withhold PA tax from your paychecks. If you do not stay in PA after that year of trying it out and move back to TX, then you can stop having PA tax withheld and go back to living and working in TX with no state income tax there. But you do not get to physically move to PA and avoid paying PA tax.
thank you, I was trying to avoid changing addresses but seems like the best thing to do
A Texas employer might not be able to withhold Pennsylvania tax. If not, you will have to make quarterly estimated tax payments to Pennsylvania.
The address you tell your company has nothing to do with your legal requirement to pay state income tax.
Start by reading the PA tax site on residency and domicile.
https://www.revenue.pa.gov/TaxTypes/PIT/Pages/Determining-Residency.aspx
Your domicile is your permanent abode. You can only have one domicile at a time. Part of changing your domicile (permanent abode) is your intention. It is possible that you could intend to move to PA permanently, and thus change your domicile, but then change your mind and change your domicile again to move back to Texas. It is also possible to move to PA for a trial period, where you do not intend to change your domicile, at least at first. However, if you physically live in PA more than 184 days, you will be a statutory resident of PA even if you have not changed your domicile.
Now, the general rule is that if you are temporarily living and working in Philadelphia, you will owe Philadelphia city and state tax on all your income earned while living or working in Philadelphia. This would be reported on a non-resident tax return. If you change your permanent residence to Philadelphia, or if you are living in Philadelphia more than 184 days of the year, then you are either a permanent resident or a statutory resident, and you report and pay Philadelphia income tax on all your world-wide income for the year, even if the income was earned or paid in some other state. If you change your permanent address in the middle of the year, you are a part-year resident starting on the date you change your permanent residence.
So let's suppose you move to Philadelphia with the intention that it is a trial period, and you do not give up your Texas domicile (you keep your home, keep your lease, keep your voter registration, etc.). You will be required to file a PA city and state non-resident tax return to report and pay income tax on all your income earned while physically living and working in Philadelphia, even if you did not change your permanent address and even if you don't tell the company to withhold PA tax. If the state finds you physically living in PA, they will tax you, and you may owe penalties and interest if you don't file and get caught later.
Then at some future time, you move back to Texas. Since you never changed your permanent residence/domicile, you stop paying PA tax since you are not working in PA.
Or, at some future time you decide to make PA your permanent home, and you take steps to abandon your domicile in Texas (by selling your home or renting it, breaking your lease, changing your voter and car registration, etc.). From the date your intention changes, you are now a resident of PA and file a resident tax return.
Another consideration in changing your address with your employer is that they will mail your W-2, and possibly information about benefits or other correspondence, to the address they have on file for you. Since you are working remotely, it might be particularly important to make sure you receive any mail from the company. If you move and do not give your employer your new address you might miss important mail.
The city wage tax (Earnings Tax) "is a tax on salaries, wages, commissions, and other compensation paid to a person who works or lives in Philadelphia." Doing remote work, while in Philly, would count, even if your stay in Philly was only temporary.
Reference: https://www.phila.gov/services/payments-assistance-taxes/taxes/income-taxes/
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