A Practical Guide to the Procedures for Complying with the EIT Regulations
Whether an employer has one location or more, the same procedure can be followed for each business location. Just keep in mind that if your company has telecommuters that work from home, the employee's residence is a business location.
So employers should follow the four steps outlined below:
1. Identify the Location of the Business
An employer has to establish two locations in order to determine if it is obligated to withhold any earned income taxes. The two locations are (1) the municipality in which the business is located, and (2) the school district in which the business is located. Identifying these exact locations is often complicated by the fact that some mailing addresses in Pennsylvania may cover several townships and a school district may cover several boroughs and townships.
The exact location of a business can be determined using a web site provided by the U.S. Census Bureau. Go to http://www.census.gov/main/www/cen2000.html. and click on the link for “Enter a street address to find Census 2000 data.”
For example, suppose the business is located at 300 South 18th Street, Camp Hill, PA. The address finder shows that this address is actually located in Lower Allen Township. I specifically used this example since the townships surrounding Camp Hill Borough all have a Camp Hill mailing address, but the Borough has one tax rate and each of the surrounding townships have different tax rates.
2. Identify the Local Tax Administrator and Tax Rates
As mentioned previously, the Pennsylvania Department of Community and Economic Development maintains the Earned Income Tax Register that is accessible online. To use the Register go to http://www.newpa.com/default.aspx?id=134 and click on the link for the current year tax rates. On the page that comes up, click on the link for Access the Municipal Tax Rates.
Under the heading Select Register click on the radio button for the “Earned Income Tax (with tax collector information).” Under the heading Select County/Municipality of Interest type the name of the municipality in the box in upper case letters.
Next, click on the button for “View Report.” If you are unsure of the municipality name, you can click on the colored button for “Map Search.” In the next window, click on the county name and then select the municipality name from the drop-down list. When you click on the “Select” button, it will take you to the window below.
Next, click on the button for “View Register.” However, please note the following warning: The data will actually appear in a pop-up window that Internet Explorer will block. To by-pass the block, you must hold down the CTRL key when you click on the “View Register” button. (The tax collector’s address and telephone number display only if you click on the small plus sign.)
Please note the differences in tax rates. Only residents pay the school district EIT, which in this case is .95%, so the total EIT for residents is 1.45%. However, the school district EIT cannot be imposed on non-residents, but non-residents can have a municipal EIT tax rate imposed on them that is higher. In this case the non-resident rate is 1%. So this business would have to withhold 1% on all of its employees, plus any residents of Lower Allen Township would also have the additional .45% withhold.
3. Register with the Local EIT Tax Administrator
When an employer registers with a tax administrator, the tax administrator (or collector) will provide quarterly report forms that will have to be completed and submitted when the withheld tax is remitted each quarter.
Of course, if the business is liable for withholding either Philadelphia or Pittsburgh local taxes, you must contact either city directly.
4. Identify the Residence of Each Employee
This information is required on all quarterly reports that are filed with the local tax administrator so that any tax that has to be forwarded to another tax administrator may be done correctly. If the exact location of an employee's residence is questionable, the employer can use the U.S. Census Bureau site described above.
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