ACT-32 EMPLOYER FAQs

W-2 Form Processing

 

What is Act 32?

Act 32, signed into law in 2008, completely restructures and significantly changes the withholding, reporting and collection of local Earned Income Tax (EIT) in Pennsylvania.

The legislative goals of Act 32 include:

  • Establishing uniform withholding, remittance, and distribution requirements;
  • Providing for more accountability, transparency, oversight, and enforcement and strengthening reporting requirements to better track every tax dollar;
  • Developing uniform forms, notices, reports, schedules, and codes for school districts, municipalities, and tax collection districts;
  • Consolidating and streamlining the EIT collection process across the Commonwealth.
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What changes does Act 32 make?

Act 32 makes the following changes:

  • Significantly reduces the number of tax collectors in Pennsylvania (from 560 to 69) and establishes a single Tax Collection District (TCD) in each county (except Allegheny County, where there are 4 TCDs, and Philadelphia County, which is exempt from Act 32);
  • Requires all employers to withhold Earned Income Tax (EIT) on behalf of all employees;
  • Establishes strict reporting requirements for tax collectors collecting EIT;

Authorizes the Pennsylvania Department of Community and Economic Development (DCED) to adopt uniform rules, regulations, and forms to be followed and utilized in each TCD by its designated Tax Officer.
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Are Employers required to withhold EIT on behalf of all Employees?

Yes.  Effective January 1, 2012, Earned Income Tax (EIT) must be withheld by Employers on behalf of all Employees.  This is not optional.  Withheld EIT is then reported and paid to the Tax Officer (collector) of the appropriate Tax Collection District (TCD).
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Who is the Tax Officer for the TCD where my business is located?

A list of current Tax Officers, by TCD, is available here.

Effective January 1, 2012, Jordan Tax Service, Inc. (JTS) will be the Tax Officer for the Allegheny County Central and Southwest Allegheny County Tax Collection Districts (TCDs). The Allegheny County Central TCD includes the City and School District of Pittsburgh and the Borough of Mount Oliver. The Southwest Allegheny County TCD is made up of 66 Political Subdivisions throughout southwestern Allegheny County.
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Where and When do I report and pay withheld EIT?

  • Employers with a single location, or with multiple locations within a single Tax Collection District (TCD):

Employers with a single location, or with multiple locations within a single TCD must file returns and remit withheld Earned Income Taxes (EIT) to the appropriate Tax Officer for that TCD.

If you have Employees that work within the Allegheny County Central and/or Southwest Allegheny County Tax Collection Districts, you must remit their withheld EIT to JTS within 30 days of the end of each calendar quarter, together with a quarterly return.  The first quarterly return and payment are due on or before April 30, 2012.  Subsequent payments are due on or before July 31st and on or before October 31st of the same calendar year, and on or before January 31st of the following year.

Employers are also required to file annual returns on or before February 28th of the succeeding year.  The annual return must be accompanied by a copy of each Employee’s Form W-2.
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  • Employers with places of employment in more than one TCD:

Employers with locations in more than one TCD may remit their Employees’ withheld EIT, on a quarterly basis, to each TCD where the Employer has a place of business.

Alternatively, Employers may remit all of their Employees’ withheld EIT to one TCD on a monthly basis – either to the TCD where their payroll department is located or another TCD if approved by the DCED.  If that Tax Officer will not accept combined monthly returns or if the Employer’s payroll department is located outside of Pennsylvania or in Philadelphia, the Employer may file combined monthly returns with the Tax Officer of a TCD where the Employer has a place of business employing one or more Employees.

In order to take advantage of this alternative option, Employers should refer to the regulations promulgated by the DCED or consult a legal or accounting professional. (NOTE: This link provides access to the text of the DCED’s proposed regulations. The original text of the regulations may no longer be current. Jordan Tax Service, Inc. does not warrant any content linked to this page. Users should consider seeking legal assistance to verify the current status of the law.)
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Do I have to register as an Employer with JTS?

By law, every Employer that:

  • has a location in the Allegheny County Central and/or Southwest Allegheny County Tax Collection Districts (TCDs);
  • where it employs one ore more persons, and
  • has not previously registered with JTS must, within 15 days after becoming an Employer, register with JTS as an Employer.

If you are an Employer and you have not yet registered with JTS, register here.
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I don't have (or can't find) my Registration Postcard. What should I do??

Please call our Act 32 Help Line at 412-345-7966 and a customer service representative will assist you with locating the Registration ID and Password that were on the card. Once you have these two (2) items, you may register here.
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How do I report and pay withheld EIT to JTS?

JTS has developed an easy-to-use, secure online interface for Employers who have registered with JTS to file returns and make payments through one of several payment options, including ACH Debit (also known as e-Check), credit card and paper check. Employers of ten (10) or more Employees must file their returns electronically by using the online interface. 

While JTS would prefer that all Employers file their returns electronically, for those Employers with 9 or less Employees who do not wish to file electronically, please Contact Us.

If you have already registered with JTS as an Employer, you may log-in and begin using our reporting/payment website.  If you are an Employer and you have not yet registered with JTS, register here.

Once registered, Employers have three options to provide their EIT data to JTS through the online interface:

  1. Type data directly into the online interface; (Available in 2012)
  2. Create a separate document conforming to the JTS Electronic Filing Format Specifications (available here) and upload it to the online interface (this option is recommended for larger Employers and Payroll Companies because creating a separate document according to the JTS Electronic Filing Format Specifications allows the Employer/Payroll Company to pre-enter large amounts of Employee EIT information into one document and upload this single document into JTS' online interface);
  3. Employers may arrange for an alternative means of electronic transmittal, such as emailing encrypted files, only with prior authorization from JTS. In any case, any files transmitted must meet the JTS Electronic Filing Format Specifications.
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I do not have a place of business in Pennsylvania but some of my Employees live in Pennsylvania. Do I have to withhold for them?

There is no withholding requirement imposed on out-of-state Employers. "Out of state" is defined as not having any Employees working within Pennsylvania. Pennsylvania residents that work outside of Pennsylvania are considered “self-employed” and must file and pay quarterly estimates to the Tax Officer for the Tax Collection District in which they reside.

How does Act 32 affect Employees who work in Pennsylvania but reside out-of-state?

Employees who work in Pennsylvania but reside out-of-state are subject to a non-resident Earned Income Tax (EIT) if the Political Subdivision (PSD) where they work imposes such a non-resident Tax. Under Act 32, Employers must withhold their out-of-state Employees’ non-resident EIT and report and pay it to the Tax Officer for the Tax Collection District in which the Employer is located.

I am an Employer with Employees who live and/or work in the City of Philadelphia. What effect does Act 32 have on me?

Act 32 does not apply to the City and County of Philadelphia. We suggest you consider consulting your legal or accounting professionals with any questions related to EIT for Philadelphia.

How do I determine the correct amount of EIT to withhold from each Employee?

Act 32 requires that Employers withhold the higher of the Employee’s resident EIT amount (based on the resident rate where they reside) or the Employee’s municipal non-resident EIT amount (based on the non-resident rate in the municipality where they are employed).

Please note that the following examples are based on the official withholding rates as of December 15, 2010, and are subject to change. These examples are for illustrative purposes only and should not be relied on for withholding purposes.

If an Employee lives in West Mifflin Borough, Allegheny County, Pennsylvania, which imposes a resident EIT rate of 1,0%, and he or she works in the City of Duquesne, Allegheny County, Pennsylvania, which imposes a non-resident EIT rate of 1.3%, then the Employer would withhold a total of 1.3%.

If an Employee lives in Bethel Park, Allegheny County, Pennsylvania, which imposes a resident EIT rate of 1.4%, and he or she works in Dormont, Allegheny County, Pennsylvania, which imposes a non-resident rate of 1%, then the Employer would withhold a total of 1.4%.

If an Employee lives in Upper St. Clair Township, Allegheny County, Pennsylvania, which imposes a resident EIT rate of 1.3%, and works in Rosslyn Farms Borough, Allegheny County, Pennsylvania, which does not impose a non-resident EIT rate, then the Employer would withhold a total of 1.3%

If an Employee lives in the State of West Virginia, but works in Robinson Township, Allegheny County, Pennsylvania, which imposes a 1% non-resident rate, then the Employer would withhold a total of 1%, regardless of the resident rate in the Employee’s home community. The Employee would be responsible for seeking any potential credits or refunds.

To find the withholding rates for municipalities throughout Pennsylvania, see the Municipal Statistics section of the DCED website, available here.

My business uses a payroll service company to manage our Employee paychecks. Do I still need to register with JTS?

Yes.  Even if you use a third party payroll service company, you must register as an Employer with JTS.  You will be able to provide contact information for your payroll service company during the registration process.

Please be aware that, while JTS will work with your payroll service company, Employers remain responsible for fulfilling all of their obligations under Act 32.
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What if I discontinue my business?

Any Employer who discontinues business must, within 30 days after discontinuance, file any and all returns and withholding statements required and pay all of the Taxes due.
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What if I do not withhold EIT and/or file the mandated Employer returns?

An Employer who willfully or negligently fails or omits to make the deductions and file the returns required by Act 32 shall be liable for payment of the Earned Income Tax (EIT) that should have been withheld, to the extent that the EIT are not recovered from the Employee. The Employer may also face criminal and civil legal consequences, including significant fees, costs, fines and penalties.

Where a legal action is brought for the recovery of Taxes due, the person liable for the Taxes shall also be liable for interest, fines, and other penalties as proscribed by law. The person liable for the Taxes may also be liable for Costs of Collection if their Tax Collection District (TCD) has adopted a resolution to that effect. Costs of Collection in the Allegheny County Central Tax Collection District and the Southwest Allegheny Tax Collection District can range from 10% to 20% of the amount of the Taxes due. For more information, contact JTS at (412) 345-7966.

See Act 32 or contact a legal or accounting professional for more information.(NOTE: This link provides access to the text of Act 32, as finally passed by the Pennsylvania General Assembly. The original text of the law may no longer be current. Jordan Tax Service, Inc. does not warrant any content linked to this page. Users should consider seeking legal assistance to verify the current status of the law.)
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I am Self-Employed and have Employees, how does Act 32 affect me?

As an Employer, you must withhold Earned Income Tax (EIT) on behalf of your Employees, file quarterly and annual returns with the appropriate Tax Officer and otherwise comply with all Employer requirements of Act 32.

As a Taxpayer paying Net Profits Tax (NPT), Act 32 does not alter your obligation to make quarterly NPT payments based on your estimated Net Profits and to file a final Taxpayer return.
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Can I be audited?

Yes. 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.
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Are interest and penalties added for late or delinquent Taxes?

Yes. Generally speaking, if Taxes are not paid when due, interest and penalties are added to the principal. Interest accrues at the rate established by Section 806 of the Pennsylvania Fiscal Code. This rate is set annually by the U.S. Secretary of the Treasury.

An additional 1% penalty is added each month or part of a month during which the Tax remains unpaid, up to 15% of the Tax owed.
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How do I appeal a determination made by JTS?

Act 32 requires each Tax Collection District (TCD) to establish an appeals board to handle appeals by Taxpayers, Employers, Political Subdivisions or other TCDs from a determination of the Tax Officer relating to the assessment, collection, refund, withholding, remittance or distribution of Taxes.
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Will Employee Tax information submitted to JTS be kept confidential?

Yes. Employee Tax information is confidential and is protected under Act 32, the Local Taxpayers Bill of Rights, and other applicable law.
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Does the law require me to provide my Employees with specific information regarding Act 32?

No.  However, JTS has prepared a sample “Notice to Employees” for your convenience, available here in .pdf format. Please feel free to post this Notice at your business for the benefit of your Employees.

In addition, each Employer must obtain from each Employee a Certificate of Residency Form, available here, which should be attached to the Employee's Federal Withholding Allowance Certificate (Form W-4).

Employers will need the information provided on this form, including accurate PSD codes, to prepare and file accurate quarterly returns.

Employers should maintain this Form and update it as each Employee’s information changes. Employers must make the form available to Jordan Tax Service, Inc. (JTS), the Tax Collection District (TCD) or DCED upon request.

Taxpayer-specific FAQs may be reviewed here.
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What are PSD codes and what do they have to do with Act 32?

PSD codes, or political subdivision codes, are six-digit numbers issued by the DCED which are used to identify the location of an Employee’s residence and work site. PSD codes aid both Employers and Tax Officers in identifying the correct amount of EIT to be withheld from Employees and in the distribution of the withheld EIT to the proper taxing bodies. For this reason, accurate PSD codes must be included when filling out an Employee’s Certificate of Residency Form [available here]. More information about this form is available here.

A list of PSD codes is available from the DCED, in Excel format, here. These PSD codes are distinct from and are not to be confused with any other DCED codes or any codes used by payroll service companies.

Are there any ACT32 forms available?

Yes, please click here.
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Where can I find out more about Act 32?

More information about Act 32 is available at the Pennsylvania Department of Community and Economic Development (DCED) Earned Income Tax (EIT) collection system webpage.
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