Philadelphia City Wage Tax 2020 -- claim NJ credit and/or Phila refund?

[peter-gabriel]

I live in NJ and work in Philadelphia. I usually claim a credit on my NJ return for the Philadelphia city wage taxes I paid. In 2020, I worked from home for 9 months of the year due to COVID. The City of Philadelphia is allowing individuals to request a refund of city wage tax paid under these circumstances. Can I both claim the NJ tax credit for the city wage taxes paid AND request a refund from the city? Or is that double-dipping?

[ErnieS0 · Accepted solution]

Yes. You are double dipping if you claim a credit for taxes that will be refunded to you on a Non-Resident Covid – Ez Refund Petition.

You can only claim a credit on your New Jersey return for taxes you pay. Any refunded tax does not count as “paid” (it was withheld, but refunded).

You can claim a credit on your NJ return for the three months your worked in the city and paid wage tax. Adjust your earning and amount of tax paid in the other state tax screen in the New Jersey section.

File a Non-Resident Covid – Ez Refund Petition with the Philadelphia Department of Revenue. Remember, you will not receive a refund unless your employee signs the form. Philadelphia says, “A petition for refund of ‘erroneously withheld wage tax from an employee must be made by the employer for and on behalf of the employee.’”

Refer to instructions on the form.

[peter-gabriel]

Thanks @ErnieS0! Would it be okay to claim the credit from NJ and NOT request the refund from Philadelphia? Or should those 9 months of taxes really go to NJ rather than the city? My concern about the latter approach is that it is a large sum of money, and I will probably be charged interest by NJ for under-withholding, even though that is not my fault. Not to mention the practical aspects of paying the large NJ bill while waiting for the Phildelphia refund to be processed.

Thanks again - I really appreciate your help!

[ErnieS0]

Yes. If you do not file a Wage Refund petition. If you don’t, you can claim credit on the NJ return for all your Philadelphia wage tax. The City of Brotherly Love will be happy.

The nine months of taxes are not really going to New Jersey. The tax still went to Philly. NJ is just giving you credit for tax paid twice on the same income.

You are correct. Without the offset of the Philly wage tax you will owe a lot to NJ and will probably have penalty and interest.

In general, it also takes a long time for the Philadelphia Department of Revenue to refund wage tax payments.

[dgooty]

Hi ErnieSO, 

I think I know the answer to this question, but along these same lines:  If I decide to apply for the Phila. wage tax refund in say June of 2021 for 2020 taxes withheld (after I file my 2020 NJ taxes), when I amend my 2020 NJ return could I still be subject to the same penalty and interest for not having paid enough in the 2020 year?