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.
Under Act 32, employers are required to withhold the higher of the employee's resident earned income tax amount (rate of total resident EIT where they reside) vs. the employees's municipal non-resident earned income tax amount (rate of non-resident EIT where they are employed). Employers are required to obtain information in the Residency Certification Form for every employee.
Do you have employees who live and work in PA? - As an employer, you must compare the total resident vs. non-resident EIT rates for each employee, withhold the higher of the two and send it to the tax collector of the work address (standard Act 32 rules; the Residency Certification Form applies).
Do you have employees who live in PA but work outside of PA? - As an employer you are not obligated to withhold the employees’ home EIT rates, but would be obligated to withhold any local taxes at the work location, if any. The Residency Certification Form does not apply.
Do you have employees who work in PA but live outside PA? - As an employer, you are obligated to withhold local taxes at the work address and send them to the local tax collector. The Residency Certification Form applies.
Do you have employees that live and work in Philadelphia? - Current Philadelphia withholding rules apply.
Do you have employees that work in Philadelphia, but live outside of Philadelphia? - Current Philadelphia withholding rules apply.
Do you have employees that live in Philadelphia, but work in PA outside of Philadelphia? - Act 32 (and the Residency Certification Form) does not apply. Act 48 of 1994 indicates that every employer, who has a place of business within the Commonwealth but outside of Philadelphia, shall withhold the Philadelphia resident Earned Income Tax from their employees (who are Philadelphia residents) and remit the withholdings directly to Philadelphia.(Updated 12/20/11)
Step 1. - Register businesses with the tax collection district. Click here for a list of PA Tax Collection Districts. Click here for list of Tax Collectors and contact information for each county tax collection district.
Step 2. - Fill out the Residency Certification Form. This form must be filled out by the Employer and signed by the Employee. The Employer will retain this form for their records.
Step 3. - Send withheld taxes for all employees to the appropriate tax collector(s)/officer(s). This can be done in two ways:
Step 4. - Within 30 days of the close of each calendar year, employers complete and submit the Annual Withholding Reconciliation Form to the appropriate tax collector(s)/officer(s). Click here for the Annual Withholding Reconciliation Form.
Political SubDivison Codes are used to identify the municipalities and school districts for each tax collection district.
To determine EIT rates, PSD Codes, and tax collector/officer contact information, use the Address Search.
DO's and DON'Ts of the Address Search Application:
- DO use Microsoft Internet Explorer: System requirements are Microsoft Internet Explorer 6.0 or later: Pop-Up Blocker must be disabled.
- DO NOT enter P. O. Boxes or Rural Route Addresses: These will not work in the application.
- DO remember that all addresses may not be in the system: If your address doesn’t show up, FOLLOW the instructions noted at the bottom of the “Find Your Withholding Rates by Address” page. You must contact the Tax Collector/Officer to determine local tax rates and PSD Codes.
- DO remember that if you Live or Work out of state: Enter the PA address in both the work and home address fields. On the Residency Certificate Form enter only the relevant information for the PA address. For the out-of-state address enter the PSD code 880000 and the EIT rate 0.
How should employers withhold local EIT from employees who travel from site to site on a regular basis and do not maintain a place of employment in the areas where they work?
1. 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 thework location address used to determine the EIT rate and corresponding PSD code in the Address Search.
2. 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.
3. 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.
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