{"id":24077,"date":"2025-01-12T08:02:36","date_gmt":"2025-01-12T08:02:36","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/tax-implications-for-philadelphia-residents-and-workers\/"},"modified":"2025-01-12T08:02:36","modified_gmt":"2025-01-12T08:02:36","slug":"tax-implications-for-philadelphia-residents-and-workers","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=24077","title":{"rendered":"Tax Implications For Philadelphia Residents and Workers"},"content":{"rendered":"


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\"COVID-19:<\/p>\n

Photo by Anastasiia Chepinska<\/a> on Unsplash<\/a><\/p>\n<\/div>\n

2020 is going to go down in history as the year of COVID-19. The World Health Organization officially declared COVID-19 a pandemic on March 11, 2020. Since then, tales of closed businesses, lost jobs, and family struggle have dominated news and conversations alike.<\/p>\n

We all can\u2019t wait for the year to be over and are hoping 2021 will be infinitely better.<\/p>\n

Well, the good news is it might be\u2026 from a tax perspective. Here\u2019s why.<\/p>\n

Working From Home<\/h2>\n

If you were told to work from home by your employer this year, you may not have to pay the Philadelphia city wage tax.<\/p>\n

\"COVID-19:<\/p>\n

Photo by Tina Witherspoon<\/a> on Unsplash<\/a><\/p>\n<\/div>\n

The city of Philadelphia has a wage tax \u2013 one of the highest in the nation. All Philadelphia residents must pay the tax, regardless of where they work. But workers who live outside the city and have been told to work from home, do not have to pay the tax. The city issued new wage tax policy guidance<\/a> on November 4th<\/sup>, 2020. The new policy states:<\/p>\n

\u201c<\/em>Non-resident employees who work for Philadelphia-based employers are not subject to Philadelphia Wage Tax during the time they are required to work outside of Philadelphia.\u201d<\/em><\/p>\n

Be sure to read the entire policy to make sure you qualify for this exemption. If you decided to work from home for your own convenience, for example, the policy does not apply to you.<\/p>\n

New Required Minimum Distribution (RMD) Rules<\/h2>\n

When you reach age 70\u00bd (or 72 if your 70th<\/sup> birthday was after July 1, 2019), you are required to withdraw a certain amount of money from your retirement account each year. This dollar amount is called the Required Minimum Distribution or RMD. If you do not take any distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed.<\/p>\n

\"COVID-19:<\/p>\n

Photo by Tina Witherspoon<\/a> on Unsplash<\/a><\/p>\n<\/div>\n

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted on March 27, 2020, changes that. Qualified individuals<\/a> do not have to take the RMD and those that do may have the early distribution penalty reduced or dismissed. Failing that, you may have the option to repay a coronavirus-related distribution to an eligible retirement plan provided you complete repayment within three years of the date the distribution was received.<\/p>\n

IRS rules around retirement plans and IRA RMDs are complicated. You can learn more on the irs.gov site<\/a> or set up an appointment for us to provide guidance.<\/p>\n

Payroll Protection Program<\/h2>\n

The Payroll Protection Program (PPP) was enacted as part of the CARES Act on March 27, 2020.<\/p>\n

\"COVID-19:<\/p>\n

Photo by Gabriella Clare Marino<\/a> on Unsplash<\/a><\/p>\n<\/div>\n

The PPP is a government loan designed to provide a direct incentive for small businesses (businesses with less than 500 employees) to keep their workers on the payroll during COVID-19. The US Small Business Administration will forgive loans provided all employee retention criteria are met and the funds are used for eligible expenses<\/a> like rent and utilities.<\/p>\n

Originally, loan recipients had 10 months to apply for loan forgiveness, however, the Small Business Administration (SBA) has indicated the expiration date has been extended while Congress considers legislative proposals to ease the process of forgiveness. As of 11\/07\/20, we are still waiting.<\/p>\n

For now, we are recommending small businesses hold off on their loan forgiveness applications. Many of the banks that issued loans are also awaiting guidance so it\u2019s unlikely you\u2019d get a decision quickly anyway. In the meantime, be sure to keep detailed payroll and expense records.<\/p>\n

New Business Owners<\/h2>\n

Lastly, with lockdowns, business closures, reduced spending, and limited government relief, many people have lost their jobs. Some have decided to \u201ctake the leap\u201d and start a business on their own.<\/p>\n

The United States Census Bureau publishes time series \/ trend charts showing annual and quarterly new business formulations. Over the past 5 years, seasonally adjusted numbers have been growing at a rate of between roughly 5 and 9 percent a year. This year, there was a huge jump in the 3rd<\/sup> quarter with the number of new business formulations almost doubling from the quarter prior (from 24,349 to 46,789). Year-to-date figures are showing a whopping 43.3% increase over the year prior.<\/p>\n

\"COVID<\/p>\n

Business Applications With Year-to-Year Percent Change: Week 49: US Census<\/a><\/p>\n<\/div>\n

If you are one of the many people who have decided to take this path, know that there are requirements and tax implications for starting a new business<\/a>. The decisions you make now can affect your income for years to come. It may be worth your while to consult with a legal and\/or tax consultant before filing any papers.<\/p>\n

COVID-19 has brought many changes to businesses, individuals, and families over the past year. More will be necessary as we continue to battle our way through these unprecedented times. Please know that Dale S. Goldberg, CPA & Associates is here to help. Feel free to contact us to set up an appointment if you would like advice or services.<\/p>\n

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