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Act 32 Discussion

Act 32 Discussion. Capital Tax Collection Bureau. Why Consolidate?. Currently, there are more than 550 earned income tax collectors in Pennsylvania; more than all other states combined Act 32 consolidates local earned income tax collection to the county wide level

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Act 32 Discussion

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  1. Act 32 Discussion Capital Tax Collection Bureau

  2. Why Consolidate? • Currently, there are more than 550 earned income tax collectors in Pennsylvania; more than all other states combined • Act 32 consolidates local earned income tax collection to the county wide level • One collector per Tax Collection District • Collector is selected by the Tax Collection Committee for each TCD • 69 TCDs (none in Philadelphia, 4 in Allegheny County) • 21 remaining collectors

  3. Standardization • Standardized forms created by the DCED • Standardized regulations created by the DCED • Standardized codes • 6 digit codes (first two digits are county, second two are school district and third two are municipality)

  4. New Requirements • Employers must register with the Act 32 tax collector within 15 days • Certificate of Residence (CoR): Every employer must obtain a CoR from every new employee or every time a current employee changes their domicile • Based on the 6 digit codes provided on the CoR, employers must determine the employee’s residence tax rate and the employer’s non-resident tax rate • Employers must withhold the greater of the employee’s resident tax rate or the non-resident tax rate of where they work as in the DCED tax register

  5. Withholding examples • Compare the two tax rates: • The employee’s resident tax rate • The non-resident tax rate where the employer is located If the non-resident tax rate is higher than the resident tax rate, where the employee works is entitled to the difference (distressed cities)

  6. Examples • 1. Resident Rate is 0.5% and the non-resident rate of 1.0%: The employer withholds 1% and remits it to the county-wide collector. 0.5% is due to where the employee lives and 0.5% is due to where the employee works

  7. Examples • 2. Resident rate is 1.125% and non-resident rate is 0%: Employer withholds 1.125% and remits it to the county-wide collector. It all gets paid to where the employee lives

  8. Examples • 3. Resident rate is 0%, non-resident rate is 1.0%: Employer withholds 1.0% and remits it to the county-wide collector. 1.0% is paid to where the employee works • General rule: Money first goes to where the employee lives

  9. New Requirements • Employers must file and remit on a quarterly basis • Exception: If multiple worksites in Pennsylvania and if employer is headquartered in Pennsylvania, an employer can file detail and remit all withholdings for all locations to the county-wide collector for the county where their payroll operation is located • If headquartered outside PA or in Philadelphia, the employer can file all detail and remit all withholdings to any county-wide collector where they have a place of business • If you do this, you must file monthly and electronically • You must also provide 30 days notice to the county-wide collector for where you wish to file and they must agree to do it • Must also provide notice to collectors where you would normally file

  10. Reporting Requirements • Employee name • Employee SS# • Employee address (must be physical street address, no PO Box) • 6 digit code of where employee lives • Employee’s wages for the quarter • Amount withheld for each employee for the quarter

  11. Official Tax Register • Maintained by the DCED • Updated 1/1 and 7/1 of each year • http://munstatspa.dced.state.pa.us/ • 6 digit PSD codes: http://www.newpa.com/get-local-gov-support/municipal-statistics • Example: Brady Township in Huntingdon County is 310101 • Must use DCED to confirm tax rates

  12. Filing Options • Paper return • You can download from our website or we can mail a copy with information from previous quarter already completed • Electronically • You can file online (this is the easiest option for employers!) • CD (CSV format, EFW2 extended) • Instructions for filing electronically are on our website

  13. Act 32 Changes for Individual Taxpayers • Individuals may no longer use Net Losses from business as an offset against W-2 wages earned • Can offset loss from one business against net profits of another • Self employed or those employed outside of Pennsylvania are required to file and pay quarterly

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