Discussion:Philadelphia Earnings Tax - define taxable wage

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Discussion Forum Index --> Tax Questions --> Philadelphia Earnings Tax - define taxable wage


PennTax (talk|edits) said:

27 March 2011
I'm in the Philadelphia suburbs and have to compute Philadelphia Earnings Tax for a client (city resident) who works out of state. Her W-2 shows wages as computed under federal rules.

I know I must add back the 401(k) and subtract out the group-term life premiums, same as for Pennsylvania wages.

However, I believe that Philadelphia also requires us to add back the health/dental paid under Section 125 plans which is pre-tax for federal purposes. Is this correct? I'd hate for my client to pay any more tax than she has to.

She has a pre-tax transportation allowance which is exempt for both federal and Pennsylvania purposes, and it seems it is exempt for Phila wage tax as well. If I am wrong, please advise.

Any other variations that you know about would be appreciated.

Thanks.

Death&Taxes (talk|edits) said:

27 March 2011
You might try here:

http://www.phila.gov/revenue/pdfs/Rev%20PDFs/Final_Inc_Tax_Regs_020102.pdf

For what it is worth, I believe you are correct but caution you to read Pages 8 & 9 of the enclosed, especially (m) fringe benefits

PennTax (talk|edits) said:

27 March 2011
Yes, I read those regulations before posting above, but they aren't very specific. I searched phila.gov and tried several google searches for more details about taxable benefits, but had no luck. A cafeteria plan is covered by nondiscrimination rules so it seems to be exempt. But I frequently see higher Philly wages than state wages on the W-2, so addbacks seem really common. I hope someone who regularly prepares city paychecks might be able to clarify this for me. If not, I'll leave off the Sec 125 contributions and hope for the best.

Death&Taxes (talk|edits) said:

27 March 2011
I don't have a phone number for the Technical Staff anymore; they might be able to help.

PennTax (talk|edits) said:

28 March 2011
I finally reached a person at the city revenue department (loooong hold time) - the Sec. 125 contributions are NOT taxable in Philly. Thanks for your help, D&T!

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