Pennsylvania ACT 32

Does your company have employees in Pennsylvania? Regardless of where you are headquartered, Under Act 32, all companies doing business in Pennsylvania are now responsible for collecting local Earned Income Taxes for all employees on behalf of a new county-wide tax agency. The changes are effective January 1, 2012.

Customer Questions:

We've been getting a lot of customer questions about the local taxes and how to comply with this Act.

Sage informed us that the proposed solutions they provided for the webinars were modified for the release. Some of the functionality they hoped to add was not added. The system will not ask you for the PSD codes when you add local taxes on the Tax Withholding screen. However, you should still enter both the resident and nonresident tax for the employees, and Sage HRMS will withhold the higher of the two taxes during the payroll run.

Solution for our Sage HRMS Customers:

We've created two Crystal reports for Local Taxes that we believe our Sage HRMS customers will find helpful. They allow you to search and sort all PA local taxes by Tax Table ID, PSD Code, or Tax Description. The "Crystal 2008" version has added functionality to sort right on the preview window.

To receive copies of these reports, please contact us:

866-885-7212 or aeaubstomrra@yesssrierc.comsd

More Information

Pennsylvania Act 32

Regardless of where you're headquartered, Under Act 32, all companies doing business in Pennsylvania are now responsible for collecting local Earned Income Taxes for all employees on behalf of a new county-wide tax agency. The changes are effective January 1, 2012.

Pennsylvania's Earned Income Tax legislation under Act 32 of 2008 requires that employers and tax officers utilize political subdivision (PSD) codes as recommended by Department of Community and Economic Development (DCED). The PSD codes have been designed to identify the municipalities and school districts for each tax collection district and aid in ensuring that employee Earned Income Tax withholdings are remitted and distributed to the proper taxing authority.

Current PA Local Tax Situation:

2,900 local taxing jurisdictions in PA
$237M lost annually due to inefficiencies in the system.
Fragmented administration and rules increases the cost of conducting business in PA.

Act 32:

Act 32 pertains to all municipalities and school districts except Philadelphia
Must be implemented by all companies with locations in PA by January 2012
Some counties enacted Act 32 in January 2011

What's changing:

County-Wide Tax Collection Districts (TCD)

Reducing the number of tax collectors from 560 to 69 (+4 for Allegheny County)
School districts crossing over counties will be kept whole for taxing purposes
Each TCD will assign a Tax Collection Officer

Employers can remit to one TCD

Businesses with multiple locations will be allowed to remit to the county where they are headquartered.
Businesses who exercise this option will be required to remit electronically on a monthly basis.

Employer withholding changes

Employer must withhold the greater of the employee’s resident tax or the employee’s nonresident tax as released in the official register.

Certificate of Residence Form

Employees must fill out a certificate of residence form. This form will identify the employee's address and PSD code.

Join Dresser & Associates for a FREE webinar to ensure that your company's payroll department is prepared!

Watch our FREEPennsylvania Act 32Informational Webinar Demo