Act 32 For Employees/Self-Employed
Employers who maintain worksites in PA or employ individuals who may work from their homes are required to withhold applicable Earned Income Tax (EIT) from those employees.
Follow the steps outlined below to ensure compliance with Act 32 local earned income tax withholding:
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 Residency Certification Form (described in Step 2).
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.
All new employees are required by law to complete a Residency Certification Form. This form must also be completed with any name or address change. Failure to supply employer with this information may result in a higher tax rate being withheld than what an employee is responsible for.
If self-employed, 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) If self-employed (or obtaining compensation other than through an employer/business entity), then make quarterly estimated tax filings and payments.
If an individual is self-employed or obtains compensation other than through an employer/business entity, a Quarterly Estimated Local Earned Income Tax Withholding form must be filed with the Local Tax Collector for the tax collection district where the individual resides within 30 days following the end of each quarter of the calendar year.
The contact information for the Local Tax Collector(s) is also shown on the report generated by the Address Search Application (in Step 1).
Note: A PA resident whose work location is outside of PA is also required to make quarterly estimated tax filings if the employer is not doing so on behalf of the employee.
4) Complete the Taxpayer’s Annual Local Earned Income Tax Return form.
No later than April 15, every employee must complete the Taxpayer’s Annual Local Earned Income Tax Return and file with the Local Tax Collector for each tax collection district where the employee has resided during the tax year. Any outstanding local earned income tax obligation must be remitted with this return.
For more information about Act 32, please refer to the Act 32 Procedure Manual.
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