More information is available here.
Understanding and Complying with Act 32,
a significant change in Pennsylvania Local Earned Income Tax Collection
History of Act 32.
Act 32 of 2008 was signed into law by Governor Rendell on July 2, 2008. Act 32 completely restructures the collection of local earned income taxes in Pennsylvania. The law provides that no later than January 1, 2012, employers in Pennsylvania will be obligated to withhold Local Earned Income Taxes on behalf of their employees. Act 32 reduces the number of local earned income tax collectors in Pennsylvania from approximately 560 to 69. A single Tax Collection District was established in each County, except Allegheny County, which has 4 Tax Collection Districts. The County/City of Philadelphia is exempt from the requirements of Act 32.
Each Tax Collection District (“TCD”) established a Tax Collection Committee (“TCC”), made up of delegates from each political subdivision (taxing body) located in the TCD. By September 2010, each TCC must appoint a Tax Officer (collector) to collect earned income taxes on behalf of all of the political subdivisions in each TCD. The appointed Tax Officer may be a political subdivision, public employee, tax bureau, county or a private entity.
According to a July 2, 2008 press release issued by Governor Rendell, Act 32 includes a number of important improvements, including:
- establishing uniform withholding, remittance and distribution requirements;
- requiring that employers withhold all local income taxes imposed on the compensation of their employees and remit those taxes to only one collector, even if an employer operates in multiple counties;
- instituting a continually updated, comprehensive tax register, maximum twice-yearly rate changes, a uniform definition of taxable income and a system of appeals;
- strengthening reporting requirements so that each tax dollar is tracked from the time it is withheld until it is received by the appropriate taxing jurisdiction;
- requiring that the Commonwealth issue one set of rules and regulations that apply to all collectors, taxpayers and employers;
- requiring that the Department of Community and Economic Development (DCED) develop uniform forms, notices, reports, returns, schedules, codes for school districts, municipalities and tax collection districts;
- requiring that tax collectors keep a record of all public monies received and distributed and submit monthly reports to each taxing jurisdiction and the tax collection district that must be reconciled with other records in an annual audit; and
- providing for more accountability, transparency, oversight and enforcement.
What this means for Taxpayers.
In general, as of January 1, 2012, Taxpayers who currently file quarterly local earned income tax returns will no longer be required to do so because, pursuant to Act 32, their employers must do so on their behalf. Taxpayers will still be required to file final returns, reporting the amount of taxes withheld during the prior tax year. If for some reason an employer is exempt from withholding taxes on behalf of any employee, or fails to do so for any reason, that employee must still file and pay his or her local earned income taxes quarterly. Also, self-employed individuals must file quarterly returns, make quarterly payments and file a final return.
What this means for Employers.
Employers must withhold taxes on behalf of employees and file returns with the Tax Officer selected by the TCD in which the employer is located. For employers located in multiple counties, the Act permits the employer to file in a single TCD or multiple TCDs. Many TCDs will collect both the Local Services Tax and Earned Income Tax from employers through a single Tax Officer.
Jordan Tax Service's Response to Act 32.
Jordan Tax Service, Inc. is developing an easy to use secure on-line interface for employers and taxpayers to file their returns and make payments by one of several payment options, including ACH Debit. Employers will also be permitted to file in person at any one of our several offices and by mail.
Detailed information will be posted on our web site over the next several months containing more specific instructions for employers and taxpayers concerning the web interface as well as the mandated format for employer and taxpayer returns. We will also provide instructions by mail and will have representatives to provide additional educational opportunities as well as make themselves available to answer any question that employers may have.
Jordan Tax is committed to providing the highest quality customer service to our Taxing District Clients as well as to the taxpayers and employers residing and doing business therein. Additional detailed information concerning Act 32 will be added to this web site over the ensuing months so that both taxpayers and employers alike are prepared for the transition.
More information is available here.
FAQs
Under Act 32, employers are required to withhold the higher of the employee's resident earned income tax amount (rate of total resident EIT where they reside) vs. the employee's municipal non-resident earned income tax amount (rate of non-resident EIT where they are employed) and remit to the workplace tax collector.
What is Act 32? ›
Act 32 allows the Tax Officer for your Tax Collection District (TCD) to examine or audit the records relating to Taxes due for any Taxpayer or Employer, or any person the Tax Officer reasonably believes to be a Taxpayer or Employer. Audits must be performed in accordance with the Local Taxpayers Bill of Rights. (Top)
What income is not taxable in Pennsylvania? ›
Pennsylvania income taxes
Pennsylvania tax on retirement benefits: Social Security and Railroad Retirement benefits are not taxed by the state. Income from private employer, government and military retirement plans paid after the taxpayer becomes eligible to retire is tax-exempt.
Who is exempt from filing local taxes in PA? ›
Low-Income Exemption.
Each political subdivision that levies an LST at a rate of $10 or less is permitted to exempt those taxpayers whose total earned income and net profits from all sources within the political subdivision is less than $12,000.
What retirement income is not taxable in PA? ›
Pennsylvania is very tax-friendly towards retirees. Some of the retirement tax benefits of Pennsylvania include: Retirement income is not taxable: Payments from retirement accounts like 401(k)s and IRAs are tax exempt. PA also does not tax income from pensions for residents aged 60 and over.
Do I have to pay local taxes on a 401K withdrawal in PA? ›
PA Tax on 401(k) Distributions
Similar to IRAs, 401(k) distributions are generally not taxable in Pennsylvania at the state level. However, exceptions apply, and federal taxation is a consideration. If you're uncertain about your unique situation, a personalized consultation can offer guidance tailored to your needs.
Is a 32 ACT good enough? ›
Is 32 a good ACT score? A 32 ACT score makes you eligible to apply to most (if not all) colleges, makes you a competitive applicant, and makes you eligible for merit aid. All that considered, yes, a 32 is a good score!
How many people get a 32 ACT? ›
How Many Test Takers Get Top 10% ACT Scores?
| ACT Score | # of Students | Percentile (2023) |
|---|
| 32 | 17,307 | 97 |
| 31 | 20,226 | 96 |
| 30 | 24,113 | 95 |
| 29 | 26,423 | 93 |
1 more rowEffective January 1, 2012 to consolidate the collection of Earned Income Tax (EIT) on a countywide basis.
At what age do you stop paying property taxes in PA? ›
Age requirements
A person aged 65 years or older, A person who lives in the same household with a spouse who is aged 65 years or older, or. A person aged 50 years or older who is a widow of someone who reached the age of 65 before passing away.
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
What income is never taxed? ›
Nontaxable income won't be taxed, whether or not you enter it on your tax return. The following items are deemed nontaxable by the IRS: Inheritances, gifts and bequests. Cash rebates on items you purchase from a retailer, manufacturer or dealer.
Do I have to file local taxes in PA if retired? ›
Any individual who has more than $33 of PA taxable income ($1 of tax), or a net loss from any income class, must file a PA income tax return. However, commonly recognized retirement benefits are not taxable for Pennsylvania purposes if you retired and met the requirements for retirement under your employer's plan.
What happens if I don't file local taxes in PA? ›
For each month or fraction of a month the return is late, the department imposes a penalty of 5 percent of the unpaid tax unless the taxpayer can prove reasonable cause for late filing. The maximum penalty is 25 percent of the unpaid or late-paid tax. The minimum penalty that the department will impose is $5.
Do you pay local taxes on Social Security in PA? ›
There are no taxes on Social Security retirement benefits in Pennsylvania. Retirees with income from other sources may still be required to pay federal income taxes on Social Security, however.
What is included in PA taxable wages? ›
For Pennsylvania personal income tax purposes, the term “compensation” includes salaries, wages, commissions, bonuses and incentive payments whether based on profits or otherwise, fees, tips and similar remuneration received for services rendered as an employee or casual employee, agent or officer of an individual, ...
What is included in taxable wages? ›
Employee Compensation
Generally, you must include in gross income everything you receive in payment for personal services. In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options.
What are taxable wages in the act? ›
Payroll tax is applied to payments that are 'taxable wages'. Taxable wages refer to any payment that an employer provides to an employee in return for services. For payroll tax in the ACT, this includes: remuneration, wages, salary, commission, bonuses, allowances or other benefits.
What is the taxable wage base for PA unemployment? ›
The taxable wage base is $10,000 per employee per calendar year.
