Home/ Special Taxes/ Pennsylvania Local Taxes

Pennsylvania Local Taxes

2015 Changes - Act 32 Local Earned Income Tax

What is Act 32?

Act 32 is a law that reforms and standardizes the local earned income tax system. The appointment of collection responsibility falls on countywide committees made up of representatives from local municipalities and school districts. The committees established tax collection districts and elected tax officers to collect the Earned Income Tax (EIT).

Act 32 requires uniform withholding of earned income taxes and remittance to a single local collector or Tax Officer. The Act applies to the earned income taxes levied and collected after December 31, 2011.

Employers must begin to withhold the local EIT from employees on January 1, 2015. Appointed tax officers start collecting the EIT on January 1, 2015, unless the tax collection district has opted for early implementation.

ProPay Limitations for Local Taxes

ProPay has certain limitations regarding local taxes:

  • Limited to 5 localities per employer
  • Each locality may have only one withholding rate

Therefore, the new local Act 32 - Local Earned Income Tax cannot be handled via the built-in ProPay Local Tax feature.

Suggested Setup in ProPay

As an alternative, you can handle this local tax in ProPay as a deduction.

Employer setup

  1. Go to Employer > Deductions Setup.
  2. Enter the name of the locality as a deduction.

Employee setup

  1. Go to Employees > Add or Change > select the employee > Deduct/Reim tab. Follow the rules of setting up any other deduction as described in Employee Deductions.
  2. Use the "Pay to Agency" feature to generate payment(s) of taxes to a particular local tax authority.

Although this is not a full blown solution, it may serve as an alternative in some cases.

Related Topics

← Back to Index