Beginning January 1, 2012, Pennsylvania Act 32 became mandatory for employers. Under the Act, which was passed in 2008, employers must collect local earned income taxes (EITs) for all employees who live or work in Pennsylvania.

EITs must be withheld and sent to the tax collector designated for the work address. For each employee, employers must withhold the higher of the resident EIT for the employee’s home address or the non-resident EIT for the employee’s worksite address.

To comply, employers must do the following:

• register with your local tax collection district
• complete a residency certification form for every employee who works in Pennsylvania, have it signed by the employee, and keep it on file
• send withheld taxes for all employees to the appropriate collector either quarterly or monthly
• within 30 days of the close of each calendar year, submit an annual withholding reconciliation form to the appropriate office

Note that a residency certificate must be completed every time an employee is hired or undergoes a change of name or address.

For employees who live in Pennsylvania but work outside of the state, employers are not required to withhold the employees’ home EIT rates, but must withhold any applicable local taxes based on the work location. The residency certificate is not required for these employees. For out-of-state employees who work in Pennsylvania, you must withhold taxes based on the employee’s work address and complete a residency form.

Detailed instructions, including all necessary forms, location codes, and tax collector information are available on the Act 32 - Employers page of the Pennsylvania Department of Community & Economic Development website at www.newpa.com.