Act 32 Information

PLEASE DO NOT SEND CERTIFICATE COPIES TO COMPLETE PAYROLL RESOURCES UNTIL WE REQUEST THEM

In 2008, the Commonwealth of Pennsylvania amended the Local Tax Enabling Act (“LTEA”), better known as Act 511 of 1965 to streamline and reform the local earned income tax collection system. This has resulted in major changes to the manner in which you will be required to withhold and remit earned income taxes on behalf of your employees.

The changes to the law required that all taxing bodies within each county choose one tax collector to administer the earned income tax for that county. As of the 1st quarter of 2012, all employers/self reporting individuals will be required to file the taxes due with the county’s chosen administrator.

NOTE: Act 32 places the responsibility on the employer to assure that the proper rate is being withheld from each of its employees. Failure to do so could result in the employer being liable for any taxes due. Failure to comply with the changes, as mandated by Act 32, can result in fines and delinquent fees being assessed to both the individual and employer.

If an employee lives or works in the City of Philadelphia, employers should withhold the Philadelphia Wage Tax. Since the City of Philadelphia is under a separate Act (Sterling Act), it is not subject to Act 32 provisions.

The following steps are a required part of Act 32 of 2008 and will become effective on
January 1, 2012 for the 2012 Tax Year:

(Keystone Collections Group was an early adopter which made Act 32 go in affect Jan 1, 2011)

Step 1:

ALL employers with locations within Pennsylvania (except Philadelphia employers) are required to withhold earned income taxes from their employees based on the higher of the two (2) tax rates the employee is subjected to.

• The employee’s resident tax rate or the employer jurisdiction’s non-resident tax rate.

The employer must identify the rate for each employee and withhold and remit at the higher of the two (2) rates listed above (Step 2). The employer is also required to identify the Political Subdivision (PSD) code in which the business is located, as well as the PSD code for each employee’s residence.(Step 2).

Example 1:

• Employer is located in Worcester Township where the non-resident rate is 1%. Employee A resides in Collegeville Borough where resident rate is 1.4%.

The Employer would withhold at 1.4% for Employee A

Example 2:

• Employer is located in Worcester Township where the non-resident rate is 1%. Employee B resides in Upper Merion Township where resident rate is 0%.

The Employer would withhold at 1% for Employee B.

Step 2:

Employers will be required to obtain from every employee a certification of their place of residence. Also on this form the employer must fill out the required sections.

If you are in need of the form: Click Here.

• The form will need to be completed by all existing and new employees. The form will also need to be updated any time an employee moves. The employer should keep these completed forms along with the employee's W-4, I-9, etc.. because it is subject to audit by the tax administrator.

If you have questions regarding the appropriate tax rate or PSD code for an employee, information can be obtained on the State’s Municipal Statistics website at: http://munstatspa.dced.state.pa.us/FindLocalTax.aspx.

*If you are just looking for the employee's Tax information only put in the employee's address*
*To find which rate you should be paying, enter the employee's address and your work address*

If you are currently a company with no local or a local changing Tax Collector you will need to register with the appropriate Tax Collector.

• To find out your Tax Collector Click Here

All the Tax Collectors have not been selected yet; if yours has not been selected please do not worry and just check back at a later date (Employees can still fill out the certificate).

To download an excel file with all PSD codes Click Here