Delaware’s City of Wilmington Amends Wage Tax Law

Wilmington City Council has passed legislation clarifying and updating Wilmington’s Earned Income Tax code, commonly referred to as the City’s “wage tax.” This is the first major amendment to the Earned Income Tax code in almost 40 years.

wilmington tax

The new amendments include:

  • taxpayer protest procedures;
  • jeopardy assessments (the right of the City to demand immediate payment if collection of a tax would be jeopardized by a delay);
  • accuracy related penalties (authorizing the City to assess a 25% penalty for substantial underpayment or underreporting of tax); and
  • safe harbor provisions for armed forces personnel actively serving in military combat zones.

Wilmington, the cultural and financial hub of Delaware’s New Castle County, has made collection of the wage tax a priority in recent years. Since January of 2006, the City has performed over 3,000 wage tax audits and collected more than $5.5 million in unpaid wage tax. According to City Finance Director Ron Morris, Wilmington expects to conduct approximately 12,000 tax audits over the next few years and add $2.1 million in new revenue in Fiscal Year 09 alone.

The wage tax is currently set at 1.25%.

Any person who works in the City of Wilmington or conducts business in the City from which he derives wages or business income, is subject to the City’s Earned Income Tax, regardless of whether he lives inside the City.

In addition, all residents of the City of Wilmington are subject to the wage tax. City residents must pay the tax on all earned income (whether derived from wages or business income) regardless of where residents work.

More information about the wage tax is available online at www.WilmingtonDE.gov. or by calling the City of Wilmington Finance Department, Earned Income Division, (302) 576-2418.

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