How Will Act 32 of 2008 Affect Employer Withholding Responsibilities
How Will Act 32 of 2008 Affect Employer Withholding Responsibilities?
By Dorothy Laskey, CPP
SB 1063 was signed into law on July 2, 2008 as Act 32 of 2008. Act 32 would reduce Pennsylvania’s number of earned income tax (EIT) collectors from 560 to 69. Although the reduced number of EIT collectors is congruent with counties, the collection would not be a function of county government. Instead, the collection responsibility would fall on countywide committees made up of representatives from local municipalities and school districts. The committees would establish tax collection districts and elect tax officers who would collect EIT.
Act 32 requires uniform withholding of income taxes and remittance to a single local collector. The provisions of consolidated collection of local income taxes are contained in Chapter 5 of Act 32. Chapter 5 of the act shall apply to income taxes levied and collected after December 31, 2011.Newly appointed tax officers shall start withholding EIT on January 12, 2012. Act 32 entails several changes for individuals, tax collectors, employers, and local governments.
Changes that affect employers include the following:
Changes in Withholding Responsibility
Employers shall continue to be required only to remit taxes withheld to the jurisdictionwhere their workplace is located, but at the appropriate rate for where the employee lives and works. Employers shall withhold both resident and nonresident taxes and remit the withheld taxes to the jurisdiction where the employers’ workplace is located
Determination of Withholding Rates
Employers shall deduct from compensation due to each employee at the place of business the greater of the employee’s resident tax or the employee’s nonresident tax as released in the official register.
Election to Remit Taxes to One Tax Collection District for Employers with Multiple Worksites
If an employer has more than one place of employment in more than one tax collection district, the employer may file the return and pay the total amount of income taxes deducted from employees in all work locations to the tax officer for either the tax collection district in which the employer's payroll operations are located or as determined by the department. The return and income taxes deducted shall be filed and paid electronically on a monthly schedule. The employer must file a notice of intention to file combined returns and make combined payments with the tax officer for each place of employment at least one month before filing its first combined return or making its first combined payment.
NOTE: This paragraph shall not be construed to change the location of an employee's place of employment for purposes of nonresidenttax liability.
Clarification on Tax Register rules
Employers shall not be required to deduct from compensation of their employees or make reports of compensation in connection with any withholding tax that is not released on the official register as of June 15 and December 15 of each year, unless the political subdivision imposing the tax has provided written notice to the employer of the tax or tax rate and the withholding requirement.
Certificate of Residency Form
An employer shall require each new employee to complete a certificate of residency form, which shall be an addendum to the Federal Employee’s Withholding Allowance Certificate (Form W-4). An employer shall also require an employee who changes their address to complete a certificate of residency form. The certificate of residency form shall provide information to help identify the political subdivisions where the employee lives and works.
New Jurisdiction Codes
Employers and tax officers shall use political subdivision and tax collection district codes prescribed by the department.
Information to Include on Employee Withholding Statement (Form W-2)
Every employer shall provide each employee with Form W2, on or before February 28 of the succeeding year. The form shall include:
- employee’s name
- address
- social security number
- amount of compensation paid to the employee
- amount of income tax withheld
- amount of income tax paid to the tax officer
- numerical code prescribed by the department representing the tax collection district where the payments were required
- and any other information prescribed by the department
The Department of Community and Economic Development (DCED), with the help of the Department of Revenue, is required to develop uniform forms and returns, and to promulgate rules and regulations regarding tax collection committees, the selection of tax collectors and the collection, and administration of local income taxes.