Summary. In addition to withholding state and local income tax from employees’ wages, Pennsylvania employers must also comply with special tax rules. Pennsylvania Department of Community & Economic Development Governor's Center for Local Government Services 400 North Street, 4th Floor Harrisburg, PA 17120-0235 Phone: 888-223-6837 Fax: 717-783-1402 Email: RA-munistats@pa.gov Am I required to register my business with each tax local collector where my employees live? Pennsylvania Department of Community and Economic Development, https://dced.pa.gov/wp-content/themes/business2015/images/logo-l.png. If it does, the income exemption provided may differ from the municipality and can be anywhere from $0 to $11,999. Sign up to receive the latest Pennsylvania news, direct to your inbox. Pennsylvania State Payroll Taxes. Employers with worksites located in Pennsylvania are required to withhold and remit the local Earned Income Tax (EIT) and Local Services Tax (LST) on behalf of their employees working in PA. However, there are important implications associated with doing so, including: In order to exercise the option to make combined filings and remittances, follow the steps outlined below: Employers are required to withhold the Philadelphia resident rate for employees who live and work in Philadelphia. Follow the steps outlined on the Local Income Tax Requirements for Employers page for more information. By clicking the continue button or continuing to use our website, you are consenting to our, Collaboration between Universities and Industry, Certified Economic Development Organizations, Educational Improvement Tax Credit Program (EITC), Opportunity Scholarship Tax Credit Program (OSTC), Residency Certification Form (Addendum to Federal W-4 Form), Register Business with Local Tax Collector for Local Tax ID, Act 172-2016 Volunteer Firefighter Tax Credit, Interactive Map with TCD Lists and Weighted Vote Calculations, Wolf Administration Announces More Than $1 Million in Funding to Support Affordable Housing in Centre County, Wolf Administration Offers Resources for Pennsylvanians to Safely Support Local Restaurants. Our mission is to improve the quality of life for Pennsylvania citizens while assuring transparency and accountability in the expenditure of public funds. Depending on the state, local income taxes may be levied by counties, municipalities, school districts, or special districts, with most levied by municipalities (3,816) and school districts (954). The more state tax withholding allowances an employee claims on their state W-4, the less you withhold. REV-331A -- Authorization Agreement for Electronic Tax Payments. Act 32 does not apply. An employer is any individual, partnership, association, corporation, government body or other entity … First things first, calculate your employee’s gross wages. In the case of employees with temporary job assignments, the employer shall withhold and remit the following taxes: Businesses with multiple worksite locations across the state may file and remit all local Earned Income Tax (EIT) withholdings to a single local tax collector. Pennsylvania does not have a form equivalent to the federal Form W-4 because the personal income tax is a flat rate of tax and does not change according to income brackets. When nonresident employees perform services within Pennsylvania. Examples of business worksites include, but are not limited to: factories, warehouses, branches, offices and residences of home-based employees. All other information remains the same. As an employer, you must complete the Residency Certification Form for each employee in order to compare the “Total Resident EIT Rate” (for the municipality in which the employee lives) to the “Work Location Non-Resident EIT Rate” (for the municipality in which the employee works). “Income from all sources” is defined as the same earned income and “net profits” that are used to determine the local earned income tax. Develop a skilled workforce that meets the needs of Pennsylvania’s business community, Promote access to good-paying jobs for all Pennsylvanians, Create career pathways to fast-growing, 21st century jobs. No action on the part of the employee or the personnel office is necessary. Get help with setting up your local Pennsylvania tax. As an employer, you are required to register your business with each local tax collector for your PA worksite location(s). RESIDENCY CERTIFICATION FORM Local Earned Income Tax Withholding EMPLOYEE INFORMATION - RESIDENCE LOCATION TO EMPLOYERS/TAXPAYERS: This form is to be used by employers and/or taxpayers to report essential information for the collection and distribution of Local Earned Income Taxes. RESIDENCY CERTIFICATION FORM Local Earned Income Tax Withholding EMPLOYEE INFORMATION - RESIDENCE LOCATION TO EMPLOYERS/TAXPAYERS: This form is to be used by employers and/or taxpayers to report essential information for the collection and distribution of Local Earned Income Taxes. Summary. Pennsylvania law requires employers to withhold Pennsylvania personal income tax from employees’ compensation in two common cases: When resident employees perform services within or outside Pennsylvania; and. Free Federal and Pennsylvania Paycheck Withholding Calculator. The income tax rate has changed from 3.8809 percent to 3.8712 percent for residents and from 3.4567 percent to 3.4481 percent for nonresidents for the city of Philadelphia, Pennsylvania. Employees working in the City of Philadelphia shall be covered under the Sterling Act. Examples of business worksites include, but are not limited to: factories, warehouses, branches, offices and residences of home-based employees. The out-of-state resident employee will still be subject to and owe the “Work Location Non-Resident EIT Rate,” as well as the Local Services Tax (LST), based on the PA worksite municipality. The mission of the Department of Community and Economic Development (DCED) is to foster opportunities for businesses to grow and for communities to succeed and thrive in a global economy. The applicable EIT rate owed and to be withheld is always the higher of the two rates. PSD Codes are a necessary component of information required to be provided on this form. You are required to make remittances to the local tax collector(s) for the worksite location(s). This form needs Javascript to display, which your browser doesn't support. PA Department of Community and Economic Development. Find gross pay. If the tax is levied at $10 or less, it is the first place of employment during the calendar year based on the following priorities (listed in order): Develop a skilled workforce that meets the needs of Pennsylvania’s business community, Promote access to good-paying jobs for all Pennsylvanians, Create career pathways to fast-growing, 21st century jobs. How should employers withhold local Earned Income Tax for employees who travel from site to site on a regular basis and do not maintain a single place of employment? How often are employers required to remit local taxes to the local tax collectors? Pennsylvania is one of 43 states that have a state income tax and one of 14 states that have local taxes. Pennsylvania's Local Services Tax provides information on the assessment, withholding, collection, exemption, remittance, and administrative procedures. Quarterly filings and remittances are due within 30 days of the end of each calendar quarter. Sign up to receive the latest Pennsylvania news, direct to your inbox. Local Income Tax Requirements for Employers. Interested in doing business in Pennsylvania? Published: August 12, 2020 Effective: Pay Period 15, 2020. However, employers with multiple worksites who have elected to remit to a single local tax collector must file and remit on a monthly basis. | Business Opportunities in Israel, South Korea & the United Kingdom, | Business Opportunities in Australia, India & Vietnam. Published: March 13, 2019 Effective: Pay Period 04, 2019. A mere 3.07%. Pennsylvania law requires every employer located or transacting business in Pennsylvania to withhold Pennsylvania personal income tax from compensation of resident employees for services performed either within or outside Pennsylvania, and from compensation of nonresident employees for services performed within Pennsylvania, unless the nonresident lives in one of the reciprocal agreement states. Much of the burden comes from local taxes, as the state’s income withholding tax is a flat rate. How is an individual employee’s local Earned Income Tax liability determined? Employees working for less than 90 consecutive days at a job location, the greater of the employee’s resident tax or the employee’s nonresident tax based on the location of the permanent home office of the employer. Finally, Complete Your W2-R Form Following the close of the calendar year, employers must complete and submit the W2-R, also known as the Annual Reconciliation Earned Income Tax Withheld from Wages form. UC benefits are not taxable by the Commonwealth of Pennsylvania and local governments. Contact one of the local tax collectors with whom you have registered to request that they act as your single local tax collector and accept all local Earned Income Tax (EIT) remittances for all of your worksite locations. Our mission is to improve the quality of life for Pennsylvania citizens while assuring transparency and accountability in the expenditure of public funds. Through courtesy withholding, employees don’t need to pay local taxes separately, as the employer deducts these amounts and pays them on the employee’s behalf. Employers “restart” withholding of the LST by withholding (1) a “catch-up” lump sum tax equal to the amount of tax that was not withheld from the employee as a result of the exemption; and (2) the same amount per payroll period that is withheld from other employees. If you already have an employer withholding account with the Pennsylvania Department of Revenue, you can simply begin withholding at the rate of 3.07%. The nonresident income tax rate for the city of Philadelphia, Pennsylvania, has changed from 3.4481 percent to 3.5019 percent. For more information, refer to the Application for Exemption from Local Services Tax and the Application for Refund from Local Services Tax. Where can I find information about the $12,000 low-income exemption for the Local Services Tax (LST)? As an employer, how does Act 32 and local Earned Income Tax withholding apply to me? ... “Employee compensation is subject to Illinois Income Tax Withholding when the employee has performed normal work duties in Illinois for more than 30 working days. Remittances are made directly to the Department of Revenue. Summary. You are required to withhold the higher of the two EIT Rates, as well as the Local Services Tax (LST), and make remittances to the local tax collector(s) for the worksite location(s). You do not need to register your business with the local tax collectors for your employees’ home municipalities—unless you have employees who work from home, thus establishing additional worksite locations. Follow the steps outlined on the Income Tax Requirements for Employers page for more information. The municipality where the employee maintains his or her principal office or is principally employed; The municipality where the employee lives and works if the municipality levies the local services tax; The municipality where the employee works and is nearest to his residence if that municipality imposes the tax. If you choose not to withhold and remit, then please notify your PA resident employee that they will be responsible for making quarterly estimated payments on their own directly to the local tax collector(s) for their PA home municipality. The option to make combined filings and remittances does not apply to the Local Services Tax (LST). Commonwealth of Pennsylvania New Hire Reporting Program P.O. PSD Codes play an integral role in assisting employers and Tax Officers to remit and distribute the correct amount of local Earned Income Tax to the appropriate taxing jurisdictions. If an PA-100 -- PA Enterprise Registration Form and Instructions. As an out-of-state employer, you are NOT required to complete the Residency Certification Form or withhold the local Earned Income Tax (EIT) for a PA resident employee. The school district for the municipality in which a worksite is located may or may not levy an LST. Local Earned Income Tax Withholding EMPLOYEE INFORMATION – RESIDENCE LOCATION ... (City, Borough, Township), PSD CODES, and EIT (Earned Income Tax) RATES, please refer to the Pennsylvania Department of Community & Economic Development website: dced.pa.gov/Act32 CLGS-32-6 (05/17) Pennsylvania’s state tax withholding rate? Most states update their W-4 forms annually. No action on the part … Remittances are made directly to the Department of Revenue. Examples of business sites include but are not limited to factories, warehouses, offices and residences of home-based employees. Employers who make combined filings and remittances are required to file and remit electronically and on a monthly basis, rather than quarterly. TAXES 20-09, Pennsylvania (Local) Income Tax Withholding. Therefore, as an out-of-state employer, you may withhold the “Total Resident EIT Rate” as a courtesy to your PA resident employee and make remittances to the local tax collector for their PA home municipality. All other information remains the same. Except for monitoring when an employee who has filed an exemption certificate earns more than $12,000, the intent of the amendment is that employers are not responsible for investigating exemptions, monitoring tax exemption eligibility or exempting an employee from the tax. As an employer, you must complete the Residency Certification Form for each employee. Gross pay is the total … Pennsylvania state income taxes are relatively simple with a 3.07% flat income tax rate. Therefore, the employer may still be required to make separate remittances to multiple LST collectors. Find the Payroll service you have below, then follow the steps to set up employees and your company's local tax. Local income taxes are typically used to fund local programs, such as education, parks, and community improvement. Published: April 1, 2020 Effective: Pay Period 05, 2020. To connect with the Governor’s Center for Local Government Services (GCLGS) by phone, call 888.223.6837. For an employee who lives out-of-state, the “Resident PSD Code” will be 880000, and the “Total Resident EIT Rate” will be 0%. The income tax rate will change from 1.18 percent to 1.65 percent for residents for the city of Erie, Pennsylvania. Employer Withholding. However, it isn’t the only tax … PA Department of Community and Economic Development. The local tax is computed at the rate of the local … Intuit Online Payroll Enhanced or … All other information remains the same. Courtesy withholding is an optional benefit where employers collect local income tax for employees who live in another city. Must the Local Services Tax (LST) be withheld on a prorated basis, or can it be deducted as a one-time lump sum? 2021 W-4 Help for Sections 2, 3 and 4 (Latest W-4 has a filing status line, but no allowance line. If a municipality and school district’s combined Local Services Tax rate is more than $10, employers must withhold the tax based on their number of annual payroll periods and are prohibited from withholding the tax in a lump-sum payment. As a small business owner, you must fill out Form PA-100 to register for a federal employer identification number for state withholding. Employers are required to remit the Local Services Taxes withheld from their employees and file a Local Services Tax Quarterly Return thirty (30) days after the end of each quarter of a calendar year. If that person’s earned income from the primary employer exceeds $12,000 or the municipality’s tax collector informs the employer that the employee’s income has reached $12,000, employers “restart” withholding of the LST by withholding: (1) a “catch-up” lump sum tax equal to the amount of tax that was not withheld from the employee as a result of the exemption; and (2) the same amount per payroll period that is withheld from other employees. Our mission is to improve the quality of life for Pennsylvania citizens while assuring transparency and accountability in the expenditure of public funds. Notify all other local tax collectors with whom you have registered that you will be remitting to a single local tax collector by completing and submitting the. REV-415 -- Employer Withholding Information Guide - General Information for Withholding Pennsylvania Personal Income Tax Visit your state’s website to verify you are using the most up-to-date state W-4 form. Pennsylvania personal income tax must also be withheld from compensation of nonresident employees for services per- formed within Pennsylvania, unless a nonresident lives in a state with which Pennsylvania has a reciprocal tax agreement (see Reciprocal Tax Agreements on Page 10 for details). TAXES 20-21, Pennsylvania (Local) Income Tax Withholding. Three Colorado cities impose flat taxes on compensation. Box 69400 Harrisburg, PA 17106-9400 By clicking the continue button or continuing to use our website, you are consenting to our, Collaboration between Universities and Industry, Certified Economic Development Organizations, Educational Improvement Tax Credit Program (EITC), Opportunity Scholarship Tax Credit Program (OSTC), Guide for Using the Address Search Application, Local Income Tax Requirements for Employers, of Intent to file Combined Returns and Make Combined Payments, Application for Exemption from Local Services Tax, Application for Refund from Local Services Tax, Understanding POWER 2021: An Application Workshop, Wolf Administration Announces More Than $1 Million in Funding to Support Affordable Housing in Centre County, Wolf Administration Offers Resources for Pennsylvanians to Safely Support Local Restaurants. Examples of business worksites include, but are not limited to: factories, warehouses, branches, … Each political subdivision that levies an LST at a rate exceeding $10 is required to exempt persons whose total earned income and net profits from all sources within the political subdivision is less than $12,000 for the calendar year in which the LST is levied. However, the PA resident employee will still be subject to and owe the “Total Resident EIT Rate” based on their PA home municipality. PA local tax withholding is much easier with software tools at your disposal. Remittances are made directly to the Department of Revenue. Since Maryland shares a state tax reciprocity agreement with Pennsylvania, only the local tax should be withheld for Pennsylvania residents working in Maryland and living in a jurisdiction that taxes Maryland residents. Employers are required to withhold the Philadelphia resident rate for employees who live in Philadelphia, but work outside of Philadelphia. If the local income tax is a withholding tax, then you are required to withhold it from employee wages. Employees working for 90 or more consecutive days at a job location, the greater of the employee’s resident tax or the employee’s nonresident tax based on the job location. Aurora charges $2 per month … Or if the local income tax is an employer tax, you must pay it. 400 North Street Harrisburg ... Download File Residency Certification Form Local Earned Income Tax Withholding Pdf. Employers are required to withhold the Philadelphia non-resident rate for employees who work in Philadelphia, but live outside of Philadelphia. This form needs Javascript to display, which your browser doesn't support. Effective January 1, 2016, all Local Services Taxes should be remitted to Jordan Tax Service, 102 Rahway Road, McMurray, PA 15317. www.jordantax.com. Guidance - Pennsylvania Local Tax Collectors Telecommuting Policies and Procedures & Tax Impact for Employees. The primary place of employment is determined the day the taxpayer first becomes subject to the tax during the payroll period if the tax is levied at more than $10. Employers with worksites located in Pennsylvania are required to withhold and remit the local Earned Income Tax (EIT) and Local Services Tax (LST) on behalf of their employees working in PA. EMPLOYER WITHHOLDING REQUIREMENTS Pennsylvania law requires every employer located or transacting business in Pennsylvania to withhold Pennsylvania personal income tax from compensation of resident employees for services performed either within or outside Pennsylvania, and from compensation of nonresident employees for services performed within Pennsylvania, unless the … Pennsylvania Department of Community and Economic Development, https://dced.pa.gov/wp-content/themes/business2015/images/logo-l.png, Frequently Asked Questions about Act 32 and Local Earned Income Tax. 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