If you live in Philadelphia and work outside Pennsylvania, you might be eligible for a break on your wage tax bill.
According to Philadelphia’s Revenue Department website, if you’re a city resident who works in say, Wilmington, Delaware, and you’ve paid that city’s local tax, you can ask for that money back as a credit against your Philadelphia wage tax.
And if you’re one of that small subset, you can thank a 2015 U.S. Supreme Court ruling on a similar tax scheme in Maryland. The high court found that it’s unconstitutional to have commuters pay the same taxes in two states on the same income, what’s known as “double taxation.”
As PlanPhilly has reported, legal scholars have argued Philadelphia’s wage tax on residents’ out-of-state income also violates the Constitution’s commerce clause and puts undue burdens on interstate business.
It appears the city agrees, but only when it comes to other city or county taxes.
Montgomery County-based tax attorney Stewart Weintraub said the refund would apply to more people if Philadelphia’s interpretation of the Supreme Court ruling went one step further and allowed a similar credit for the taxes paid to local government, as well as the state where the resident employee is working.
That would give Philadelphians who work in New York, for example, a pretty significant refund since that state has among the highest income taxes in the country.
“We have some clients that have appeals pending to the Tax Review Board in which we’ve asserted that the city under this U.S. Supreme Court decision is also obligated for the taxes paid to other states,” Weintraub said.
Mike Dunn, a city spokesman, said Pennsylvania already allows residents to offset taxes paid to other states. The ruling also would not apply to the six states, including New Jersey, where Pennsylvania has reciprocity agreements that require commuters to pay state income taxes only in their home state.
In the meantime, Philadelphia CPA Rosalind Sutch worries eligible city residents could be leaving money on the table.
“What taxpayers don’t realize is that they’re due these refunds, and they have to file a refund petition in order to ask for that refund,” Sutch said. “So no one is going to send them that refund check.”
Dunn said in 2016, of the 20 people who sought wage tax refunds, nine applications were approved for a total of $93,560. To date in 2017, 12 applications have been submitted; so far, six have been granted for a combined $31,479.
For information on filling out a refund petition, visit the Philadelphia Revenue Department’s website.