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It’s been a crazy three years for taxes in Philadelphia.
Well, that’s not exactly how Revenue Commissioner Frank Breslin put it. Instead, he described the situation with a word he admits to being overused: “unprecedented.”
The pandemic has created several questions and gray areas around Philadelphia’s income tax and payroll tax, which accounts for the bulk of the city’s revenue, about 45%.
Meanwhile, the Ministry of Revenue launched in November the Philadelphia Tax Center Online. While electronic filing and payment was available on the department’s old website, “it just wasn’t the customer experience that most taxpayers are used to when using online services,” said said Breslin.
Some of the new features include the ability to upload documents, request a payment plan, request interest and penalty waivers, or respond online to a letter mailed from the department. Wild, indeed.
By Thursday, the city said, about 48,000 people had created a username and password at the new center; 42,000 had filed tax returns; and 24,000 had made payments without opening an account.
When people were forced to work remotely in 2020 – then the state of emergency extended until the end of the year – many commuters sought a break from the city’s payroll tax , which is imposed on people who work in the city, regardless of where you live.
The pandemic has significantly reduced this. In fiscal year 2021, which ended in June 2021, the city reported a $124.4 million decline in revenue from payroll and profit taxes, compared to fiscal 2020.
Philly paid out 4 times the usual amount in payroll tax refunds last April, per Breslin. Making the reimbursement process smoother has therefore become a priority. The new online center is expected to cut processing time by two-thirds.
Important, because this year’s payroll tax refunds are expected to be similar in volume and value, Breslin said. About 12,000 people have already used the system to apply.
The good news – for city coffers, anyway – is that employers seem to be holding back more this time around. And people are only eligible for a refund if they are *required* to work outside of Philadelphia, not if they simply choose to work remotely.
There are actually fewer jobs in Philadelphia than before the pandemic — more than 7% fewer, according to a recent Pew study — contributing to the decline in tax revenue from wages.
Part of the decline in jobs in Philadelphia is due to people moving from a local position to working remotely with a company based elsewhere. For these Philadelphians, that could mean no more payroll taxes on their wages. But they are still on the hook.
The city requires Philadelphia residents who work for a non-Philadelphia company to pay income tax. As the Department of Revenue works 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 income tax inquiries and, anecdotally, more activity than usual in income tax filings.
In Philadelphia, four tax returns are due on tax day, which is April 18 of this year:
- income tax and business receipts
- net profit tax
- school income tax
- income tax
These are among the eight that can be serviced on the city’s new tax center, right now. The others, including property and use and occupancy taxes, will be online in November.
If you plan to use the site for one of those who are online, be aware that it may take a few days for the registration to be complete.
To use the new online tax center, people who have paid taxes in Philadelphia in previous years must verify their identity with a form of two-step authentication, which means waiting for a letter in the email.
It’s perhaps a little ironic, as the ministry moves towards a brighter future online.
“There was some confusion and some frustration,” Breslin said. The city’s old system lacked reliable information about taxpayer emails and phone numbers, he said.
There is an advantage for those new to paying taxes in Philadelphia – no mailed letter is required.
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 spread the word.