Local Taxes question , Remote Work . Please help!

[RK4]

I need some insights on my local taxes. Please direct me to the right sub if this is not the one.

Any suggestion is greatly appreciated.

Thank you all in advance.

I worked remote (worked from home) during January 2017 to December 2020. My paystubs deducted the local income tax for the City (and my W2's for 2017, 2018, 2019, 2020 all have local income tax jurisdiction as PHILADELPHIA). The City has higher local tax bracket than the place where I live and worked (remote).

Office location : Philadelphia

Home Address : non resident of Philadelphia, different county - 25 miles away from the City.

I recently found out through my colleagues that due to COVID situation non residents of Philadelphia are eligible to apply refund for the local income tax (Wage Tax Refund) that were deducted for year 2020 because offices asked their employees to work remote. This is when I figured that I was eligible for the past years also (because I worked remote and not in the City. I raised the issue with my employer when I saw higher local taxes in the beginning of 2017 but was told this is how it is with Philadelphia and I found this now this is not true. I am eligible for Wage Tax refunds for past years as well).

Long story short I applied local tax refund with the City and it was DENIED. Reason for denial is employer doesn't have account with city (and city probably never received my taxes).

After following up with my employer & payroll (ADP) it was found that employer never created an account with the city (which is required) and the payroll company was missing these details, so it deducted the local taxes but it never reached the City (it might be sitting in employer's account).

It looks there is more headache from the employer side to correct this. They asked me me to handle this is from my end if I can. I just don't want to make it more complex and problem for myself.

It will be of great help if you can answer the following to get this done and with less hassle:

• my understanding is I have to file my local taxes for all these years in the place where I worked + lived (not the City).

Questions:

1. What happens to the W2's from 2017 to 2020 , they still show the local taxes for the City. Is this going to be any problem in future ?
2. Do I need get my W2 corrected as well? I don't know if they can really do it from 2017.
3. Do I have to file anything with the city so that they don't come back to me in future because W2 still has the City as Local Jurisdiction?

The above questions make me nervous. Please let me know if there is anything that you think might help my situation.

Thank you.

[ErnieS0 · Accepted solution]

You don’t have to pay Philadelphia wage tax on days worked outside the City of Philadelphia. If you were remote the whole time then your employer should have withheld Earned Income Tax from your resident municipality rather than wage tax from the City of Philadelphia.

Regardless of what happened, EIT returns should probably have been filed from 2017-2020. Most jurisdictions have mandatory filing and would give you a credit for Philadelphia wage tax on the EIT return.

File EIT returns for those years.

It would be helpful to get corrected W-2s for a number of reasons:

1. EIT returns require a copy of the W-2 and original W-2 will incorrectly show Philadelphia wage tax withheld. It may delay processing if you don’t put that on your EIT return (and you should not, since it was never paid).
2. The local Philadelphia wage may be higher than your EIT wage so if there is not a local EIT wage, Berkheimer or whomever may give you an issue if you use a different amount than was on the W-2 for Philly.

You should not have to file anything with Philadelphia. Your employer did not have an account with the City so Philly never received any withholding. If anything comes back in the future, you can send an explanation with a copy of your EIT returns.

Finally, you should get your Philly withholding back from your employer or ADP.

[RK4]

Thank you very much for your reply.