Act 32 For Employers/Payroll Service Providers
Employers who maintain worksites in PA or employ individuals who may work from their homes are required to withhold applicable earned income tax from those employees.
Follow the 4 steps outlined below in order to determine PSD Codes/EIT rates and register your business with the appropriate Local Tax Collector(s).
1) Use the Address Search Application.
Use the Address Search Application to look up the relevant information (PSD Codes, EIT Rates, etc.) needed to complete the forms described in the following steps. Note: You will want to print or save the report generated by the Address Search Application for future reference!
How to use the Address Search Application:
IF YOU LIVE OR WORK OUT-OF-STATE
Enter the PA address in both the home address and work address fields in the Address Search Application. However, on the Residency Certification Form (described in Step 2), enter only the relevant information for the PA address, and for the out-of-state address, use PSD Code 880000 and EIT Rate 0%.
PO BOXES AND RURAL ROUTE ADDRESSES
The Address Search Application does not accept PO Boxes or Rural Route addresses.
“ADDRESS NOT FOUND” ERROR
If your address cannot be found in the Address Search Application database, please contact your local tax collector to determine local rates and PSD codes, or refer to this workaround tip sheet for more information.
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Employers with multiple worksite locations:
Choose one of the three following scenarios that best describes the employee’s work environment:
EMPLOYEE TEMPORARILY WORKING AT PA FACILITY
If an employee is working temporarily at a PA facility for a period of time that encompasses a “reporting quarter,” then the facility site would be the work location address used to determine the EIT rate and corresponding PSD code in the Address Search Application.
EMPLOYEE “FLOATS” OR IS TRANSFERRED BETWEEN BUSINESS SITES
If an individual works for an employer who has a central business location in PA, but the employee “floats” or is transferred daily, weekly or monthly between other business sites, then the central or main employer business location would be the work location address to determine the EIT rate and corresponding PSD code in the Address Search Application.
EMPLOYEE RECEIVES WORK ORDERS OR INSTRUCTIONS AT HOME, BUT PHYSICALLY REPORTS ELSEWHERE
If an employee is hired by an employer and receives work orders or instructions at home in PA, but physically reports to other business sites on a daily, weekly or monthly basis, then the employee’s home address should be used as both the home and work location address used to determine the EIT rates and corresponding PSD codes in the Address Search Application.
2) Complete the necessary forms.
Complete the Residency Certification Form for each employee, and save a copy in the employee’s personnel file. This form allows the employee to verify that the employer is withholding the correct tax rates for the correct municipalities.
Complete the Employer Registration for Local Earned Income Tax Withholding form, and submit the form to the appropriate Local Tax Collector(s) (as shown on the report generated from the Address Search Application in Step 1) in order to register your business and obtain a local tax ID number.
3) Withhold and remit local income taxes.
Quarterly remittances can be made to the appropriate Local Tax Collector(s) using the Employer's Quarterly Earned Income Tax Return form. Quarterly filings and remittances are due within 30 days after the end of each calendar quarter.
4) Complete the W2-R Annual Reconciliation Earned Income Tax Withheld From Wages form.
Within 30 days of the close of each calendar year, employers must complete and submit the W2-R Annual Reconciliation Earned Income Tax Withheld From Wages form to the appropriate Local Tax Collector(s).
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