PA ACT 32 wihtholding change

[Deleted]

I have email into PA and into my local CPA for guidance on how we are supposed to handle the new PA ACT 32.

We are a construction company with temporary work sites that are always changing. We also have a permanent office location in PA.

What I am trying to find out is if we need to use our temporary work sites as the employee's work location or if we can use our office location for all employee's work location.

Any thoughts? Anyone else running into this?

[rangerj]

State and local governments have jurisdiction to tax based upon residence and being paid for services while in a given jurisdiction (location), e.g. city, county, township, etc. The local tax on the employees income should be accounted for based upon each and every job site and the appropriate amount of taxes should be withheld and paid over to the taxing authority, e.g. county, city, township, etc. based upon the employees time spent at the job site(s).

[Deleted]

ugh. that is not the answer I wanted to hear.


So far, our CPA and the tax collector in PA have indicated that we should just use our office location as the worksite, but neither wanted to own that answer.

[mwcpa]

I do not think the law has changed for PA local tax, just how it is paid to central locations now....

I got this from PA ( www.newpa.com/get-local-gov-support/tax-information/earned-income-tax/ )

"If an ordinance contains a provision imposing the earned income tax on nonresidents, the employer is required to withhold from all employees regardless of their place of residence and remit the money to the tax officer. Responsibility for transmitting withheld taxes of nonresidents to the employees’ place of residence rests with the tax officer, not with the employer."

[Deleted]

Thanks, mw

something is changing, that is for sure... What do you think about the location to use for workers at temporary work locations?

[Deleted]

The general manager of our PA office just emailed me and said that he went to a seminar on the new Act and that we are supposed to us our office location as the work site for our field employees unless we are on a job for more than 3 months or if we have an office trailer at the job..


Who knows?!?

[mwcpa]

I am far from an expert on PA local tax law, but here is what I found...

"Do you have employees who live and work in PA? - As an employer, you must compare the total resident vs. non-resident EIT rates for each employee, withhold the higher of the two and send it to the tax collector of the work address (standard Act 32 rules; the Residency Certification Form applies)."

I guess the issue is how does PA define "work address?" And that is an answer that would require research by your CPA..... I would not want to venture to guess.... each state has its own unique and sometimes insane tax laws (by example, a state like NJ is a "gross income" tax state... so, make a million dollar salary from your S corporation.... your share of the s-corporation loss is one million dollars and you have adequate basis.... on your federal tax return you made zero, in NJ, you pay tax on the million salary... the loss is not allowed in the current year..... )

[Deleted]

Dec 8, 2011 7:52:32 GMT -5 mwcpa said:

I guess the issue is how does PA define "work address?" And that is an answer that would require research by your CPA.....

Thanks again.

So far it seems like no one, including PA itself, knows how it is defining work address.

[jeffreymo]

Archie, We're hearing the same type of contradictions from our tax payment software provider. They have an outsourcing division that has contacted every single one of the TCD's (collectors), and not all of them have agreed on the interpretation. I suppose you could contact a CPA as a method of c-y-a, but in the end, if a locality disagrees with his/her assessment, you will still be audited and penalized. I'm not a CPA, but I can tell you that the PA local income tax is a completely different beast compared to some of the other withholding taxes I deal with (my co. is in 49 states).

I would think that if you wanted to be completely above-board, you could track and withhold based on the temporary locations and make a pretty good argument about why you're doing it that way. That process of course would be very labor intensive and costly.

My suggestion would be to contact the TCD for the location of your central office and see what they say, and perhaps get a CPA to vouch for their explanation. Next, document the process for which you intend to withhold.

2012 is going to be the year that everyone works out the kinks. I don't know that the collector's themselves understand the magnitude of the workload they will be handling, and I don't expect them to have the resources to audit and review every single company they come across.

The purpose of ACT 32 (supposedly) was to get the money disbursed to the correct localities in a quicker and more ordily fashion. I'd say that as long as you're actually reporting the resident locality for each employee you should be okay. Not all localities have a non-resident rate, and the ones that do aren't always higher than the resident rate of another locality (hope that makes sense), so the number of employees that could truly have incorrect withholding is only a fraction of your total PA workforce.

[Deleted]

I just spoke to the CPA that gave the seminar that our PA manager attended. I'm not sure what I was expecting to hear, but I should have known it would not be a black and white answer. He said that we as a company need to make a decision about whether our temporary work locations meet the criteria as a work address based on our presence at the site, ie, work trailer, equipment stored there, payroll received there, etc. and our duration at that site.

[mwcpa]

leave it to a state legislature to leave language so vague and a state tax department unwilling to take a position.... you know they are going to audit and subsequently fine a lot of businesses/people over this vagueness....

[Deleted]

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[Deleted]

$%&&^$ *&^@ $ &*^@ $&^ @(&*^$ *(&%^@ (^&*^@(*^( $(&*^@&(@^*&@%$# you Pennsylvania!

[mwcpa]

hey, at least you do not have the 30 year temporary MTA surcharge to deal with or the MTA payroll tax (so the board can keep their million dollar salaries and free metro cards and ez pass)

[Deleted]

That is true and I am grateful for that.

I am just getting so friggen pissed right now, and part of it is because of our bandaided friggen payroll system. We run all of our payroll through an accounting system so that our job costs are correct. Then we have a bridge program that takes the payroll info and puts it into a file that can uploaded to ADP. Then we upload that info to ADP and they pay and file our taxes for us.

So I have to make this change in 3 friggen different systems, none of which can help me because they don't know what the f- they are doing or how we use the 3 systems together. What a great F-ing time saver this is..

[mwcpa]

I feel your pain....

I have a client that "refused" to deal with stuff until today... at 130pm (NY).... banks are generally closed tomorrow, and try to find an open post office....

He only made 400K and he has 10K for taxes.... I just threw up my arms and said time to drop 15 and punt...

Looks like the problems you have with the PACT 32 thing is a lot like the issues we had when the MTA payroll tax started... there were no forms from the state until a month before the form was due and all of the software companies had to rework things... and the payment dates are not on the same quarter as anything else adding to more confusions.... now that they worked it out, it's being partially repealed... the fun part was explaining to a client that I had to charge them 200 to file in a form that had 20 in tax...sometime the legislatures that come up with these things just do not get it...

[Deleted]

Have I said, lately, how much I hate PA?

[Deleted]

Maybe I misunderstand the question, but worksite seems to be defined in the ACT32 Policy Document www.newpa.com/webfm_send/2029
The 3 month statement is not really correct because the policy ties it to reporting quarters . . . not easy to deal with because it is a quarterly decision --

PG 83
1.    If an employee is working temporarily at a PA facility for a period of time that encompasses a “reporting quarter”, then the facility site would be thework location address used to determine the EIT rate and corresponding PSD code in the Address Search.84

2.    If an individual works for an employer who has a central business location in PA, but the employee “floats” or is transferred daily, weekly or monthly between other business sites, then the central or main employer business location would be the work location address to determine the EIT rate and corresponding PSD code in the Address Search.

3.    If an employee is hired by an employer and receives work orders or instructions at home in PA but physically reports to other business sites on a daily, weekly or monthly basis, then the employee’s home address should be used as both the home and work location  address used to determine the EIT rates and corresponding PSD codes in the Address Search.

[Deleted]

It seems like a month is really the break point, so if your employees move site to site monthly, its easy, then your main office would be the location that you compare with their home location for which is the highest rate.

If they are on a job site for months (more likely with construction) then you need to set a policy you can work with like:

I think you could actually make an internal policy that you will consider 'work site' for the quarter the location that the employees are work at on the first day of the quarter. Have a code for the EIT & hire someone to update the code each quarter. Then create an accounting reserve for one quarters estimated payments, so if your Tax Collector ever challenges the methodology you chose, you have a reserve to pay the minute amount of rebalancing $s. I suspect though, if they are 6+ month contracts that it will be a wash.

Or you need to force all your employees to move to the highest rate EIT & then you just have the one rate to pay. Seems like that would be the easiest thing for you, so that is what I think you should mandate. ;D

The programming on this must be a nightmare as you have to have their residence EIT, then the job site EIT, The table of EITs (updatable) and a compare program to select which one is the higher rate. PA is crazy - why don't they just do it for the employee residence like every other normal state!!!

[Deleted]

It is January 26 and I am still no closer to getting this right. I spoke with one of our programers this afternoon for an hour and a half or so. we worked on fixing some of the issues but we still have a long way to go.

Have I mentioned how much I hate PA?


Also, we made the executive decision that the office was going to be the work location for all of our employees.

[jeffreymo]

Jan 26, 2012 15:05:51 GMT -5 ArchietheDragon said:

It is January 26 and I am still no closer to getting this right. I spoke with one of our programers this afternoon for an hour and a half or so. we worked on fixing some of the issues but we still have a long way to go.

Have I mentioned how much I hate PA?


Also, we made the executive decision that the office was going to be the work location for all of our employees.

I think you're decision was wise.

We're slowly plodding away at it. We had workplace codes applied to all of our employees by the start of the year. Now we're going about the process of applying the resident codes for each of the forms we've received. Right now we've received and entered 1200 out of 2000 employees.

In February I'm going to start looking at the reporting and making updates and corrections to our tax payment software. Once 1st quarter is in the books it should be smooth sailing.

[Deleted]

Dayum... 2000!!!


Now I feel badly for complaining so much. ; )