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 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

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)

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

Withholding examples Compare the two tax rates: 1.The employee’s resident tax rate 2.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)

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

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

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

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

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

Official Tax Register Maintained by the DCED Updated 1/1 and 7/1 of each year 6 digit PSD codes: support/municipal-statistics support/municipal-statistics Example: Brady Township in Huntingdon County is Must use DCED to confirm tax rates

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

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