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It’s been a wild three years for taxes in Philadelphia.
Well, that’s not exactly how Revenue Commissioner Frank Breslin phrased it. Instead, he described the situation with a word he admits is overused: “unprecedented.”
The pandemic created several questions and gray areas around Philly’s earnings tax and wage tax, which makes up the bulk of the city’s revenue, about 45%.
Meanwhile, the Department of Revenue in November launched the online Philadelphia Tax Center. While e-filing and payment was available on the department’s old website, “It just wasn’t the customer experience most taxpayers are used to when they do online services,” Breslin said.
Some of the new features include the ability to upload documents, apply for a payment plan, request interest and penalty waivers, or respond online to a mailed letter from the department. Wild, indeed.
As of Thursday, according to the city, about 48,000 people had created a username and password in the new center; 42,000 had filed tax returns; and 24,000 had made payments without setting up an account.
Wage tax woes, earnings tax buzz
When people were forced to work remotely in 2020 — and then the state of emergency stretched to the end of the year — many suburbanites looked for a break from the city wage tax, which is assessed on people who work in the city, no matter where you live.
The pandemic has cut into this significantly. In fiscal year 2021, which ended in June 2021, the city reported a $124.4 million decrease in revenue from wage and earnings taxes, compared to FY 2020.
Philly paid out 4x the usual amount in wage tax refunds last April, per Breslin. So making the refund process smoother became a priority. The new online center supposedly cuts processing time by two-thirds.
Important, because this year’s wage tax refund payouts are expected to be similar in volume and dollar value, Breslin said. About 12,000 people have already used the system to request them.
The good news — for the city’s coffers, anyway — is that employers appear to be withholding more this time around. And people are only eligible for a refund if they are *required* to work outside Philadelphia, not if they simply choose to work remotely.
There are fewer jobs actually in Philadelphia than before the pandemic — over 7% fewer, according to a recent Pew study — contributing to the dip in wage tax revenue.
Some of the drop in Philly jobs is people who switched from a local position to remote work with a company based elsewhere. For those Philadelphians, that might mean no more wage taxes coming out of their paycheck. But they’re still on the hook.
The city requires Philly residents who work for a non-Philadelphia company to pay an earnings tax. While the Revenue Department has been making an effort to educate taxpayers with blog posts and other methods, Breslin said, “That first time… it’s always a bit of a shock.”
He said the department has seen an increase in inquiries about the earnings tax, and, anecdotally, more activity than usual in earnings tax filings.
To use the new site, you’ll need a letter (new filers won’t have that delay)
In Philadelphia, four tax filings are due on tax day, which is April 18 this year:
- business income and receipts tax
- net profits tax
- school income tax
- earnings tax
Those are among eight that can be serviced on the city’s new tax center, as of now. The others, including the real estate and use and occupancy taxes, will be online in October.
If you’re thinking of using the site for one of those that are live, be aware it may take a few days to get fully enrolled.
To use the new online tax center, people who have paid taxes in Philadelphia in prior years have to verify their identity with a form of two-step authentication-which means waiting for a letter in the mail.
It’s perhaps a little bit ironic, as the department moves toward a better online future.
“There has been some confusion and some frustration,” Breslin said. The city’s old system didn’t have reliably updated email and phone information for taxpayers, he explained.
There’s an upside for those who are new to paying taxes in Philly — no mailed letter needed.
Existing taxpayers can continue to file using the old system this year, Breslin added. But next year they will have to move to the new site. His department is working hard to get the word out.