Act 43 of 2017 imposed a withholding requirement on payors of Pennsylvania-source income to non-resident individuals and single member LLCs. The requirement has proven difficult for businesses to implement and led to many questions for payors. In response, the Pennsylvania Department of Revenue has issued REV-1832, 1099-MISC Withholding Exemption Certificate. The form is intended for use in determining a payee’s residency status or entity type. The form is required, by the department, when the payor is not required to withhold from the payee.
Payees may claim an exemption from withholding based on a valid exemption basis, including:
- Individual is a Pennsylvania resident
- Trust or Estate is established by or includes a Pennsylvania resident
- Payee is not subject to Pennsylvania personal income tax, i.e., corporation, partnership, multi-member LLC or income is not PA-source income
A payor that receives a properly completed REV-1832, in good faith, is not required to withhold from the payee. The form must include the reason for exemption and signature to be valid. If the payor receives an invalid form, it is required to withhold until a properly completed certificate is received.