Act 32 Taxpayers FAQ
- Frequently Used Terms
- What is Act 32?
- What changes does Act 32 make?
- I am Self-Employed and have Employees, how does Act 32 affect me?
- How do I know what amount of EIT should be withheld?
- I live in Pennsylvania but work outside the state. How does Act 32 affect me?
- I work in Pennsylvania but live outside the state. How does Act 32 affect me?
- I live and/or work in Philadelphia. How does Act 32 affect me?
- Do I still need to file a final return?
- How do I appeal a determination made by JTS?
- How do I seek a refund of Taxes I think I may have overpaid?
- What if my Employer does not withhold EIT on my behalf?
- Can I be audited?
- Are interest and penalties added for late or delinquent Taxes?
- What are PSD codes and what do they have to do with Act 32?
- Will Employee Tax information submitted to JTS be kept confidential?
- Are there any forms available?
- Where can I find out more about Act 32?
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.
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.
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.
If you are an Employee of another person or entity, you should know how much EIT your Employer should be withholding on your behalf. If you are self-employed or work out-of-state and must pay Net Profits Tax, you will need to know how much EIT you owe.
The Municipal Statistics section of the DCED website offers online access to the tax registers, which record the resident and non-resident EIT withholding rates for municipalities and school districts in Pennsylvania. You may look up rates by municipality or by entering your address. The tax registers can be accessed here.
Please note: Prior to filing any tax returns or making any payments, please consult the DCED website to confirm all relevant EIT withholding rates.
Under existing law, Pennsylvania residents working outside of Pennsylvania are treated as though they are “self-employed,” and are therefore required to make quarterly payments based on estimated Net Profits and to file a final Taxpayer return in Pennsylvania. Act 32 does not change these existing requirements. Employers outside of Pennsylvania are not obligated to withhold or remit EIT to the TCD where you reside. If your Employer withholds for local taxes due in the municipality where you work, you may be entitled to a credit in the municipality where you reside, up to but not exceeding the amount which would be withheld at the resident rate.
For example, if an Employee lives in Moon Township, Allegheny County, Pennsylvania, which has a resident EIT rate of 1.0%, and works for an Employer in another state, the Employee must make quarterly payments and file a final return with Moon Township. If the Employee paid EIT in the state where he or she worked, then the Employee would be responsible for seeking any applicable credit or refund to which he/she may be entitled.
Act 32 requires all Employers to withhold EIT for all Employees. If you work in Pennsylvania but live outside of the state, your Employer is required to withhold at the non-resident rate for the municipality where the Employer is located. Your Employer is not responsible for obtaining a credit or refund on your behalf.
For example, if an Employee works in Carnegie Borough, Allegheny County, Pennsylvania, which imposes a non-resident EIT rate of 1.0%, but lives in Ohio, then the Employer will withhold 1.0%. The Employee would be responsible for seeking any applicable credit or refund to which he/she may be entitled.
Act 32 does not apply to the City and County of Philadelphia. We suggest that you consider consulting your legal or accounting professional with any questions related to EIT for Philadelphia.
Yes. On or before April 15th of each year, each Taxpayer must file a final return with the Tax Officer of the Tax Collection District (TCD) where the Taxpayer lives. For those Taxpayers residing in the Southwest Allegheny County and Allegheny County Central TCDs, final returns may be filed with Jordan Tax Service, Inc. (JTS) in person, or by mail.
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.
A timely claim for a refund must be made on a final or amended final return.
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 is not recovered from the Employee. The Employer may also face criminal and civil legal consequences, including significant fees, costs, fines and penalties.
However, an Employer’s failure or omission to make the deductions required by Act 32 does not relieve each Employee from the obligation to pay EIT due or from complying with the requirements of filing returns.
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, you should contact your Tax Collection District.
If you believe your Employer may not be withholding EIT on your behalf, please Contact Us.
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.)
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. Audits must be performed in accordance with the Local Taxpayers Bill of Rights.
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.
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].
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
More information about Act 32 is available at the Department of Community and Economic Development (DCED) Earned Income Tax (EIT) collection system webpage. In addition, more information is available from your Employer and from the sample “Notice to Employees”.