Effective January 1, 2012, employers are expected to be registered with the applicable Tax Collection District(s) and begin withholding local earned income tax for all employees earning income within the Commonwealth. This means employers are required have in their possession a signed residency certification form from each employee setting forth the correct political subdivision code for both the employee’s residence and work location. By the way, there are almost 3,200 political subdivisions from which to choose.
Typically, employers shall report and remit withheld taxes on a quarterly basis. Eligible employers with multiple locations within more than one tax collection district may opt for monthly, combined electronic reporting and remittance.
On the newPA.com website, the Department of Community and Economic Development (DCED) provides links to standard forms, proposed regulations, tax officer/collector information, political subdivision codes and other information. Although the DCED has attempted to help employers understand the complexities of Act 32, it should be noted that the regulations are not final and only the most common scenarios are addressed, leaving unanswered many situations faced by employers, such as:
- What are the reporting requirements for employees who work within multiple taxing jurisdictions throughout the year?
- What are the consequences if an employee fails to sign a residency certification form?
- Are electronic signatures acceptable?
- Does an employer need a residency certification form for each taxing jurisdiction in which an employee might work?
The State and Local Tax (SALT) group at Schneider Downs has been assisting employers in various industries in resolving these and other unanswered questions. We invite you to contact us with any questions and concerns in order to be in compliance with Act 32 by January 1, 2012.
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