In 2008, Act 32, the Local Tax Enabling Act, was passed in Pennsylvania which reformed and standardized local tax collection. Although passed in 2008 the new withholding requirements are effective beginning January 1, 2012. The new law applies to all Pennsylvania resident employees and every Pennsylvania employer with employees in Pennsylvania. It affects political subdivisions outside of Philadelphia and Allegheny County, in other words, the majority area of the state.
Employers are required to remit withholding to a single local tax collector or Tax Officer. There will be 69 of these officers statewide, each with their own district. This is a big change from the 500 School districts and 3,000 townships and boroughs which have separate withholding requirements.
Act 32 puts a paperwork burden on employers and demands workers to state for the record where they work and where they live on a form clgs-32-6, Residency Certification Form. However, this form is easy to find on any search engine and is designed to ensure local taxes are paid to the proper taxing authorities.
First you need to report your domicile address. This may or may not be where you get your mail. Most people know with certainty their domicile address. If there's any doubt, a domicile is:
-A permanent home to which you have the intention of returning when absent;
-A voluntary fixed place of habitation that is not for a special or limited purpose;
-A fixed place of habitation which you consider to be permanent rather than temporary.
If that doesn't settle it for you, there are about nine more considerations used in determining domicile. If you need to consider them, you might want to consult a lawyer first.
A temporary move to new digs does not create a new domicile. Unless the new residence is permanent with all ties to the old residence severed, you probably haven't changed your domicile. But, if you do change permanent living; locations you must fill out a new form for your employer.
The form has spaces for a Resident PSD code and total resident EIT rate. PSD stands for Political Sub-Division and EIT stands for Earned Income Tax. The PSD code determines the school district that gets half of your local tax and the township, borough, city, or town that gets the other half. The EIT rate is most commonly 1.0 percent, but it may be higher. The employer is required to withhold EIT at the higher rate of either the non-resident rate in the employer's jurisdiction or the resident rate in the employee's residence jurisdiction.
There is a PSD code for your domicile and one for where you work. Unless your domicile has no tax or a lower rate, the subdivision where you work gets no part of your earned income tax.
There is another tax due, the Local Services Tax (LST). The LST proceeds go entirely to the political subdivision were you work to pay for services such as police and fire protection. That tax may be levied at a maximum of $1 per week or $52 per year. There is an exemption to the LST for those earning under $12,000 per year. These taxes may go to separate taxing authorities; but if you live and work in the same county, chances are they go to the same tax collector.
To find your domicile and work codes, you can go to http://www.newpa.com, click on the Act 32 Information button on the right, click on the link for "Employee or Self Employed", click on "How do I find EIT rates and PSD Codes?", click on "Address Search". Alternately, you can just Google or Bing "Find your withholding rates by address". Then you can fill in your domicile and work addresses. Next click on "view report", and it will show you the codes, the EIT rates, the LST amount, and the tax collector name and address for both the EIT and the LST.
The employer must obtain Residency Certificates for all Employees living or working in Pennsylvania, must determine the employees' resident EIT and nonresident EIT rates, and withhold at the higher of the two rates. The employer must register with the applicable Tax Collection Bureau and remit the withholding. For employers with multiple locations, they must submit a letter of intent to each work location Tax Collection Bureau one month in advance of making a consolidated tax payments and filing, generally quarterly.
