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Pennsylvania Withholding: What you need to know

Pennsylvania employers that are obligated to withhold federal income taxes are also required to deduct state income tax from wages of both resident and nonresident employees during each payroll period at the rate of 3.07 percent.
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Reciprocal state agreements. Pennsylvania has agreements with the following states for withholding each other's income tax when the employee is a resident of the other state: Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia, under which one state will not tax employee compensation subject to withholding of the other state. Residents of these states must file a certificate of nonresidence, Form Rev-420, with their employer.
Taxes must be withheld on “compensation” paid for services. Compensation includes any remuneration whether paid in cash or another medium, wages, salaries, commissions, certain sick pay, termination pay, and similar types of payments. Pennsylvania's withholding requirements are similar to those under federal law, but with some major differences. Pennsylvania does not automatically recognize changes to the federal Internal Revenue Code. Thus, new federal exemptions from income do not apply unless specifically enacted into state law.
Exclusions. Payments that are not subject to Pennsylvania income tax include:
• Employee contributions to an Internal Revenue Code Section 125 plan for coverage for hospitalization, sickness, disability or death, supplemental unemployment benefits, or strike benefits.
• Sick pay and sick leave not representing regular wages, including payments made by third-party insurers for sickness or disability.
• Pension or retirement pay.
• Meals and lodging provided to an employee by the employer.
• Personal use of employer-owned or leased property and/or services, at no cost or at a reduced cost.

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State Requirements

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Pennsylvania Withholding Resources

Withholding Products

Taxation and Withholding Explained Webinar Recording
BLR Webinar: "Taxation and Withholding Explained: Compliance Tips for Multistate Employers""
Employment Taxes in Multiple States Webinar Recording
BLR Webinar: "Employment Taxes in Multiple States: Step-by-Step Calculation and Reporting Strategies""
Payroll Webinar Recording
BLR Webinar: "Payroll: How to Legally Handle Tax Levies and Garnishments""
IRS and ICE Audit Alert Webinar Recording
BLR Webinar: "IRS and ICE Audit Alert: How to Avoid and Manage Payroll and Recordkeeping Scrutiny""
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We’ve compiled a list of the 100 most commonly asked questions we have received on the federal Fair Labor Standards Act (FLSA) overtime regulations.
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This report, "Top 100 FLSA Q&As", is designed to provide you with an examination of the federal FLSA overtime regulations in Q&A format, including valuable tips for bringing your workplace into compliance in an affordable manner.

At the end of the report, you will find a list of state resources on wage and hour issues. This report includes practical advice on topics such as:
  • FLSA Coverage: How FLSA regulations apply to all employers and any specific exemptions from the overtime requirements
  • Salary Level: Qualifying for exemptions and nonexempt employees
  • Deductions from Pay: Deducting for violations, disciplinary reasons, sick leave, or personal leave


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