XpressHR Pennsylvania Residency

Act 32 is a Pennsylvania law that brings standardization to the local earned income taxing system. It consolidates the process by creating new tax collection districts, standardizing forms and mandating employer withholding starting in 2011 for certain jurisdictions and statewide in 2012. Employers who maintain worksites in PA or employ individuals who may work from their homes are required to withhold applicable earned income tax from those employees. Under Act 32, employers are required to withhold the higher of the employee’s resident earned income tax amount (rate of total resident EIT where they reside) vs. the employee’s municipal non-resident earned income tax amount (rate of non-resident EIT where they are employed).

Starting in 2012, every PA employer must require each employee to complete a Certificate of Residency form.
• New hires
• Existing employees

Any employee who changes his or her name or address has to complete a new Certificate of Residency form. This form is to be used by employers and/or taxpayers to report essential information for the collection and distribution of Local Earned Income Taxes. This form must be utilized by employers when a new employee is hired or when a current employee notifies employer of a name and/or address change.

In addition, due to these changes in Pennsylvania’s Earned Income Tax legislation under Act 32 of 2008, Political Subdivision (PSD) codes have been formulated to designate each of the 69 tax collection districts, along with the school districts and municipalities therein. Act 32 of 2008 requires that employers and tax officers use PSD codes prescribed by the Department of Community and Economic Development (DCED). PSD codes have been designed to identify the municipalities and school districts for each tax collection district and aid in ensuring that employee Earned Income Tax withholding is remitted and distributed to the proper taxing authority.