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Employers Required to Provide EITC Notice to Philadelphia Employees by February 1, 2021

Thomas M. Frascella Director, Tax Strategies, State & Local Tax Group Leader

The City of Philadelphia requires businesses to notify their Philadelphia resident employees about the Federal Earned Income Tax Credit (EITC) and the City of Philadelphia Income-Based Wage Tax Refund Program. You can notify your employees electronically or via a printed copy, but this must occur no later than February 1, 2021.

More details about these two programs and links to the City's notification language that you can utilize are below.

Federal Earned Income Tax Credit (EITC)
Low to moderate income individuals and families are eligible to receive the EITC via their federal tax return. While the average benefit of $2,500 per tax return provides a welcome income boost to these taxpayers, many Philadelphia residents are not claiming the credit. For this reason, the City of Philadelphia wants to ensure its residents are aware of the credit and apply for it if they meet the eligibility requirements.

The City provides a notice that you can send to your employees that explains how they can claim the EITC. Businesses are required to supply this notice - either printed or electronically - to Philadelphia employees in conjunction with their W-2, 1099, or similar forms. You can download the notice from the City of Philadelphia's website here.

City of Philadelphia Income-Based Wage Tax Refund Program
The City reduces the Wage and Net Profit Taxes rate to 1.5 percent for eligible taxpayers who complete Schedule SP (Pennsylvania Special Tax Forgiveness) on their income tax return. Eligible taxpayers can request a refund from the Philadelphia Department of Revenue by submitting an Income-Based Wage Tax Petition.

You may not reduce your Philadelphia employees' wage tax withholding, but you should send an Income-Based Wage Tax Petition to any employees who receive a W-2 and earned less than $100,000 in 2020. Eligible employees can then file the petition to receive a refund of their Wage Tax paid in excess of 1.5 percent for the previous year.

Income-Based Wage Tax Petitions for 2020 will be available on the City of Philadelphia's website shortly, at which point you can download and print the document or share the web page with your employees. The web page is located here.

If you have any questions about these required notifications, please contact Thomas M. Frascella, head of Kreischer Miller's State and Local Tax Strategies practice, or you can contact your Kreischer Miller relationship professional here.

Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.

Contact the Author

Thomas M. Frascella

Thomas M. Frascella

Director, Tax Strategies, State & Local Tax Group Leader

State and Local Tax Services Specialist

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