This is a reminder to all Pennsylvania business owners that the reforms to the local earned income tax collection system, known as PA Act 32, go into effect at the beginning of the new year.

Act 32 reduces the number of local earned income tax collectors from 560 to 69 and standardizes forms and definitions. Philadelphia County is exempt from Act 32 and is not required to change its tax collection system. PA Act 32 only applies to Pennsylvania employers.

The Act also includes the following reforms to the Pennsylvania local earned income tax collection system:

• A Pennsylvania employer is required to deduct from an employee's wages the local earned income tax rate, which is the greater of the tax rate where the employee is employed or the tax rate in effect where the employee lives. The tax rates for each jurisdiction are maintained by the Pennsylvania Department of Community and Economic Development (DCED).
• Each Pennsylvania employer is required to obtain from each employee a Residency Certification Form.
• Pennsylvania employers will be required to file an individual withholding statement and remit all local earned income tax withholding within 30 days of the end of each calendar quarter.
• A Pennsylvania employer with business in several Pennsylvania counties may file its local earned income tax return and pay the total amount of local earned income taxes deducted from employees to the county where they are headquartered. Employers choosing this option are required to remit withholdings and employee wage detail electronically on a monthly basis.
• The Act does not change the local tax filing requirements for self-employed individuals. Self-employed individuals should use the local earned income tax rate where they live.

You can visit http://www.newpa.com to learn more about tax rates by jurisdiction and to get Residency Certification Forms for your employees. It is important that you coordinate the implementation of Act 32 with your payroll company. Please contact them if you have not done so already.

If you have any questions or if you would like more information, please contact Fred Schutz at 856-722-5300 ext. 201 or Dave Gill at ext 210.