How working from home could affect your tax bill

Thursday, January 28, 2021
PHILADELPHIA (WPVI) -- Millions of Americans have been working from home during the pandemic and that could impact your 2020 tax bill. Working remotely has its perks and its challenges, so many challenges. And now to add insult to injury, another challenge of working pandemic-style could come in the form of your 2020 taxes.

"The challenges for my family I would say have been balancing childcare, housework, meal prep," said Jamie Lettis, who has been working from home since the beginning of the pandemic.
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Now a new challenge for those working from home: more complicated taxes and possibly double taxes; meaning a tax bill from not just one state, but two.

"This is not the year to do your taxes on your own, you should definitely consult with a tax practitioner because each state has different rules and regulations as it pertains to this," said Kia Buckner of Horsey, Buckner and Heffler, LLP.

If you work remotely from within the tri-state area and your company is in neighboring Pennsylvania, New Jersey, or Delaware you won't face a double tax thanks to reciprocity agreements and credits in place.

But if you have been living outside Pennsylvania, New Jersey, or Delaware you could get hit twice due to so-called convenience rules. Six states have them, including Pennsylvania and Delaware.



"They don't really care if you are working remotely, they will still assess you that state tax for their state based on the base of operations if your corporate headquarters are there," said Buckner.
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And states without convenience rules will pay the price.

"New Jersey has been very flexible as far as allowing credits for their residents who do pay out of state tax," explained Chuck Minnich of Foundation Capital Management, Inc. "However, it is going to cost them, and right now the estimate of lost revenue on the New Jersey side is about $1.2 billion."

And what about the city wage tax if your company is in Philadelphia?

According to the City of Philadelphia, if the employee opts to work from home at her or his own discretion during the pandemic, even if it is because the employee does not feel safe to return to the physical location or because the employee has childcare issues, then the employee is required to pay the city wage tax.

However, according to the City, if your employer requires you to work from home and you live outside the city, you do not have to pay wage tax.
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If that is the case, what do you do? First ask your employer if they have pulled your wage tax withholding, meaning your checks are bigger. If that's the case, then there is nothing for you to do.



Always check with your employer first because the city recently made a change that allows businesses to change employee's withholdings in bulk.

If your employer has not done either of those things then you will have to file for the wage tax refund individually.

For more information on the City of Philadelphia's tax guidance in response to COVID-19 click here.
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