pennsylvania withholding form

C o m m o n w e a l t h o f P e n n s y l v a n i a Employer Withholding Information Guide GENERAL INFORMATION for WITHHOLDING PENNSYLVANIA PERSONAL INCOME TAX evenue www.revenue.state.pa.us PENNSYLVANIA DEPARTMENT OF REV-415 AS (06-03) Revised June 2003 TABLE OF CONTENTS Page Employee Withholding Requirements . . . . . . . . . . . . . . . . . . . . .1 How to Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Federal Employer Identification Number (FEIN) . . . . . . . . . . . . .1 Withholding Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Exclusions from Compensation . . . . . . . . . . . . . . . . . . . . . . .3 Taxable Compensation Not Subject to Withholding . . . . . . . .4 Employee Fringe Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Nontaxable Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Taxable Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Business Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Withholding Instructions for Employees . . . . . . . . . . . . . . . . . .10 Instructions for Resident Employees . . . . . . . . . . . . . . . . . .10 Instructions for Nonresident Employees . . . . . . . . . . . . . . . .10 Reciprocal Agreements . . . . . . . . . . . . . . . . . . . . . . . . .11 Non-withholding Provisions . . . . . . . . . . . . . . . . . . . . . .11 Computation of Withholding Tax . . . . . . . . . . . . . . . . . .12 Payment of Taxes Withheld . . . . . . . . . . . . . . . . . . . . . . . . .12 Payments Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Reconciliation Returns (W-3) . . . . . . . . . . . . . . . . . . . . .13 Interest and Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Electronic Filing: e-TIDES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Electronic Funds Transfer (EFT) . . . . . . . . . . . . . . . . . . . . . . . .15 Overpayments and Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Amended Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Withholding Statements (W-2) . . . . . . . . . . . . . . . . . . . . . . . . . .17 Magnetic Media Reporting . . . . . . . . . . . . . . . . . . . . . . . . . .18 General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Commonly Asked Questions Brochures . . . . . . . . . . . . . . . . . .20 Revenue District Offices . . . . . . . . . . . . . . . . . .Inside Back Cover CUSTOMER SERVICES & TAXPAYER ASSISTANCE General Information Taxpayer Service and Information Center . . . . . .(717) 787-1064 Employer Withholding General Information . . . . . .(717) 787-1064 FACT & Information Line . . . . . . . . . .1-888-PATAXES (728-2937) Internet . . . . . . . . . . . . . . . . . . . . . . . . .www.revenue.state.pa.us Online Customer Service Center . . . . . .www.revenue.state.pa.us Service for Taxpayers with Special Hearing and/or Speaking Needs . . . . . . . . . . . .(TT Only) 1-800-447-3020 Electronic Filing Information Line . . . . . . . . . . . . . . . . . . . . . . . . . .1-800-892-9816 Forms Ordering 24-hour Forms Ordering Message Service . . . . .1-800-362-2050 Taxpayers may also request tax forms and specific reference brochures listed in this handbook on page 20 by writing: PA Department of Revenue Tax Forms Service Unit 711 Gibson Blvd. Harrisburg, PA 17104-3200 Rulings and Regulations . . . . . . . . . . . . . . . . . .www.pacode.com Employer Withholding Requirements Pennsylvania law requires the withholding of Pennsylvania Personal Income Tax from compensation of resident employees for services performed either within or outside Pennsylvania, and from wages of nonresident employees for services performed within Pennsylvania. Every employer paying compensation subject to withholding must withhold Pennsylvania Personal Income Tax from each payment of taxable compensation to his employees. This booklet is designed to help employers recognize and fulfill these requirements. Questions may be directed to the PA Department of Revenue by calling (717) 787-1064, writing to: PA Department of Revenue, Dept. 280904, Harrisburg, PA 17128-0904, or visiting any of the PA Department of Revenue district offices listed on the inside back cover of this booklet. Taxpayers with Special Hearing and/or Speaking Needs may call 1-800-447-3020 (TT only). Definition of Employer An employer is any individual, partnership, association, corporation, government body or other entity that employs one or more persons for compensation, who is required under the Internal Revenue Code, to withhold Federal Income Tax from wages paid to an employee. How to Register Register for Employer Withholding Tax online through the PA Open for Business Web site. Selecting the online version of the PA-100 Enterprise Registration form allows business owners to register to withhold employer taxes with the Department of Revenue and open Unemployment Compensation accounts administered by the Department of Labor and Industry. The online PA-100 is for the most common types of registration, and can be accessed through the PA Open for Business Web site at www.paopen4business.state.pa.us. To obtain a paper PA-100 form, call the 24-hour Forms Ordering Message Service at 1-800-362-2050, or download the form from the Department’s Web site at www.revenue.state.pa.us. Employer Account Number The PA Department of Revenue will issue an 8-digit Account ID Number to file and pay Employer Withholding Tax. Please reference this number when paying or corresponding with the Department regarding your employer tax account. Federal Employer Identification Number (FEIN) New employers, who have a Federal Employer Identification Number (FEIN), are required to provide the Department with this number. New employers who have not yet received a FEIN will be assigned a temporary Entity ID Number until the EIN is obtained, at which time the PA Department of Revenue must be 1 notified. Direct questions relating to identification numbers to the PA Department of Revenue, Dept. 280901, Harrisburg, PA 17128-0901, or telephone our Taxpayer Service and Information Center at (717) 787-1064. Withholding Documents Each employer registered with the PA Department of Revenue will receive a coupon book containing deposit statements and quarterly reconciliation documents. Coupons are preprinted with employer identification data, period ending dates and payment or filing due dates. A sufficient number of documents are included to fulfill the employer’s yearly payment and reporting requirements. The book also includes other coupons: • • • Account Cancellation Form (REV-1706); W-2 Transmittal Form (REV-1667); and Change/Correction Form (REV-1705). Report corrections or changes to the identification data to the PA Department of Revenue on the Change/Correction Form (REV-1705). If changes are requested on the employer’s name, EIN number or payment frequency, a new employer coupon book will be provided with the updated information. Upon receipt of a new coupon book, the employer should destroy the old book and use the new coupons to avoid posting errors. Address changes do not result in the production of a new coupon book, but Department records will be updated for proper mailing of future correspondence. Employer Withholding coupon books will be mailed each December for semi-monthly and monthly filers, and each February for quarterly filers. COMPENSATION Compensation means remuneration received for services whether directly or through an agent and whether paid in cash or in property. Compensation includes salaries, wages, tips, gratuities, commissions, bonuses, incentive payments, vacation or holiday pay, termination or severance pay, sick leave pay (unless excludable), reimbursements and allowances in excess of allowable business expenses and payments realized in the form of property or a discharge of indebtedness, unless specifically excludable from compensation. Compensation paid in any medium other than cash is valued at fair market value. Additional information regarding Pennsylvania compensation can be obtained by requesting the Employer Withholding for Pennsylvania Taxable Compensation Guide (REV-20) booklet. See page 20 for ordering information. 2 Exclusions from Compensation Certain payments are not compensation, such as: 1. Payments made under workers’ compensation acts, occupational disease acts, or similar legislation for injuries received while working and damages (whether by suit or otherwise) for personal injuries or sickness. Group term insurance policies purchased for employees, so long as the employer’s program is not discriminatory. Unlike the Internal Revenue Code, Pennsylvania’s statute does not have a threshold ($50,000) above which life insurance coverage becomes taxable. Prizes and awards, unless the winner is required to render any substantial services as a condition to receiving the prize or award. Scholarships. Fellowships and stipends which are deemed nontaxable. Fellowship awards made on the basis of need or academic achievement for the purpose of encouraging or allowing the recipient to further his/her educational development, and not as compensation for past or present employment or in expectation of future employment services, are not taxable. Fellowship awards and stipends constitute compensation for services if the recipient is required to apply his skill and training to advance research, creative work, or some other project or activity, unless the recipient can show that: 2. 3. 4. 5. • The benefits resulting from the services of the recipient are so minimal, given the actual services performed or expected to be performed, that they constitute no realistic basis for compensation; or The activities of the recipient are so closely and directly supervised and immediately controlled by regular faculty members so as to constitute a burden on the institution which would offset any benefit it receives from the recipient's activities; or The recipient is a candidate for a degree, and the same activities are required of all candidates for that degree as a condition to receiving such degree. • • Stipends paid to medical interns and residents pursuant to an internship or residency program that conforms with the Essentials of an Approved Internship or the Essentials of an Approved Residency as established by the American Medical Association are taxable. 3 For additional information order Scholarships, Fellowships, and Stipends (REV-614). See page 20 for ordering information. 6. An employee’s personal use of employer-provided property or of employer-provided services. See Employee Fringe Benefits and Welfare Benefit Programs (page 5). TAXABLE COMPENSATION NOT SUBJECT TO WITHHOLDING Withholding of PA tax is not required for remuneration paid to: 1. Agricultural workers whose remuneration is not subject to Federal Social Security Tax (FICA) withholding. Duly ordained, commissioned, or licensed ministers of a church in the exercise of their ministry, or by members of a religious order in the exercise of their ministry, or by members of a religious order in the exercise of duties required by such order. Domestic servants in a private home, local college club, or local chapter of a college fraternity or sorority. 2. 3. For additional information order Hiring Household Workers (REV-617). See page 20 for ordering information. 4. Casual employees for services performed that are not in the normal course of the employer’s trade or business. (Federal limitations less than $50 and at least 24 days on the job per quarter will apply.) Employees of foreign governments or international organizations who are citizens or residents of the United States. Nonresident alien employees who are tax residents of Pennsylvania, but who perform services outside the United States. Newspaper carriers and news vendors under age 18. Seamen engaged in interstate or international trade, and individuals engaged in interstate transportation activities such as railroad crews, airplane crews, or truck or bus drivers, to the extent that their pay is exempt from withholding under federal law. 5. 6. 7. 8. Miscellaneous Provisions Payments received as consideration for terminating employment before reaching normal retirement age, or refraining from the performance of such services, also constitute taxable compensation. Such payments are subject to withholding if the payor is an employer required to withhold Federal Income Tax from the wages or compensation paid to the employee during the taxable year. 4 EMPLOYEE FRINGE BENEFITS AND WELFARE BENEFIT PROGRAMS Employee fringe benefit programs, such as pension, profit-sharing and stock bonus plans, and Simplified Employee Plans, are established by employers to provide additional compensation to participating employees upon or after separation from service, upon the completion of a fixed period of participation, the lapse of a fixed number of years, or upon a showing of financial hardship. Employee welfare benefit programs are established by employers to provide welfare benefits to employees (or their beneficiaries), such as child care facilities, life, accident or health insurance coverage, legal services, medical benefits, supplemental unemployment compensation (SUB), tuition reductions, disability benefits, strike benefits, and dismissal pay. Nontaxable Benefits Generally, payments made by employers for benefit plans that provide medical, dental, or vision care for their employees are not considered taxable compensation for Pennsylvania purposes. Further, strike benefits, supplemental unemployment compensation benefits, and most life insurance premium payments should not be included in compensation. Other payments that are not subject to withholding are: • • • • Amounts received for the permanent loss or loss of use of a part or function of the body, or permanent disfigurement. Amounts that are computed with reference to the nature of a sickness or injury and without regard to the period the employee is absent from work. Amounts (other than regular wages or sick leave pay), which are computed with regard to the period that the employee is absent from work due to sickness or disability. Amounts paid to the beneficiaries or the estate of an employee who has died. Since January 1, 1998, the personal use of an employer’s property (leased or owned), or a service provided by the employer, is not considered taxable compensation. Nontaxable items include the personal use of a company car, accounting services, or childcare provided – not reimbursed – by the employer. Generally, an employer provides a service or property when the company assumes the financial responsibility for the liability or payment. In other words, the expense is billed to the company, and the company is responsible for the payments. For example, a company seeking to provide transportation as a nontaxable benefit for their employees could use a company van to transport 5 them. The benefit becomes taxable when the company reimburses their employees for bus fare to commute, or provides a transportation allowance. Finally, federally excludable no-additional cost services, qualified employee discounts, working condition fringe benefits, or qualified transportation fringe benefits, are not considered taxable so long as the employee does not have the choice between cash and the benefit, or the employee does not reduce his/her salary in order to receive the benefit. For example, a program under which an employee is furnished with parking facilities, use of company grounds, picnic areas, or a workout facility, and the employee neither reduces his salary or is reimbursed by the employer for the benefit is not compensation, and thus, is not subject to withholding. Taxable Benefits Non-cash benefits, which are reportable as compensation under IRS rules, are generally taxable for PA Personal Income Tax purposes and are therefore subject to withholding. Taxable benefits include, but are not limited to: • • Payments made by the employer to help employees with adoption expenses. Payments made by the employer to help employees with additional medical or dental expenses not covered by medical insurance, unless allowable as an ordinary, reasonable, and necessary business expense. Medical expenses paid under a qualifying self-insured medical reimbursement account such as a Medical Savings Account, are not taxable. • • • • Life insurance payments made by the employer on employees’ dependents. Amounts paid by the employer for non-job related educational assistance provided to the employees or their dependents. Amounts paid to employees in lieu of using vacation days. Payments made by employers into pension plans, 401(k) plans or other retirement plans, pursuant to the employee’s election or by salary reduction agreement, or through periodic payroll deductions, are taxable to employees and should be included in PA gross wages on their W-2 forms. For additional information order Employee Fringe Benefits and Wage/Salary Supplements (REV-634). See page 20 for ordering information. 6 Employer Contributions Contributions by an employer to employee deferred payment programs and welfare benefit programs on behalf of such employees generally are excludable from the employee’s income to the extent the contributions constitute reasonable compensation for services and are not subject to withholding. Pennsylvania tax law makes no distinction between stockholder-employees or officers and other employees. Pennsylvania tax law concerning Simplified Employee Plans (SEP) differs from federal law. For Pennsylvania Income Tax purposes, employer contributions to a SEP are excludable from the compensation of an employee and are not subject to withholding. For Federal Income Tax purposes, an employer contribution to a SEP must be included in gross income and then deducted by the employee. BUSINESS EXPENSES Reimbursement for Expenses All reimbursements and allowances paid to employees are compensation unless: 1. The expenses which you reimburse are allowable business expenses; and 2. Your employees are required to, and do, account for these expenses to you; and 3. You reimbursed your employee in the exact amount of the allowable business expense. A fixed mileage allowance or a per diem living expense allowance that does not exceed applicable federal limits, also is not reportable compensation, and therefore, is not subject to withholding. Allowable Business Expenses To be an allowable business expense, the expense must be ordinary, actual, reasonable, and necessary. This means the expense must be: 1. Customary and accepted in the industry or occupation in which the employee works; and 2. Directly related to the taxpayer’s present occupation, as opposed to an occupation which he plans to enter in the future; and 3. Reasonable in amount and not excessive; and 4. Necessary to enable the employee to perform properly the duties of his employment. 7 Expense Reimbursements The following expense reimbursements are compensation subject to withholding: 1. 2. 3. Personal, living or family expenses. Capital expenditures. Dues to professional or fraternal societies, chambers of commerce or recreational club memberships. Subscriptions to publications. Political or campaign contributions. Charitable contributions. Commuting expenses. Cost of meals while working late, except while traveling away from home overnight. Occupational privilege taxes. 4. 5. 6. 7. 8. 9. 10. Educational expenses, except nontaxable scholarships, fellowships and stipends. 11. Moving expenses, except as allowable on Schedule UE. 12. Childcare and elderly care expenses. 13. Life, disability income and health service insurance premiums. 14. Malpractice insurance premiums, except where required by law or employers. 15. Pension contributions. 16. Fines, penalties, legal fees (except to recover back wages) and bad debts. 17. Bribes, kickbacks or other illegal payments. 18. Expenses to secure employment. Vouchered Reimbursements The following vouchered reimbursements are not compensation and are not subject to withholding: 1. Union dues, assessments, and initiation fees if: a. Such payments are a condition of a continued membership in the union, and membership is related directly to the employee’s present job; or b. Such payments are required to be deducted from regular wages under an agency shop agreement. 8 2. The cost incurred by an employee to purchase and maintain uniforms or work clothing to protect the employee from bodily injury if they are both: a. Of a type specifically required by the employer as a condition of employment; and b. Not adaptable to general usage. 3. Expenditures for required small expendable tools and supplies not furnished by an employer. Trade, professional, or occupational licenses or fees required as a condition of employment (including malpractice insurance and fidelity bond premiums where required by law or employer). Expenses for travel, meals, and lodging on business trips, transportation expenses (but not commuting), and business expenses incurred by outside salesmen. Office or work area expenses if: a. The duties of employment require a suitable work area; and b. A suitable work area is not provided by the employer; and c. The work area used constitutes a principal place of work; and d. The work area is used regularly and exclusively to perform the duties of employment. 4. 5. 6. 7. Expenses paid or incurred by an employee for moving themselves and their immediate family, household goods, and personal effects, provided the transfer is in the interest of, and benefits their present employer, and is from one permanent duty station to another. Education expenses only if: a. The education specifically is required by law or by the employer to retain an established employment status or rate of compensation; and b. The education is not part of a program for a new occupation, trade, or business, even if the employee does not intend to enter that new occupation, trade, or business. (Education costs voluntarily paid or incurred merely to maintain or improve skills are not allowable business expenses.) 8. 9. Business gifts. 9 WITHHOLDING INSTRUCTIONS FOR RESIDENT EMPLOYEES 1. When a Pennsylvania resident performs services in Pennsylvania, the employer must withhold Pennsylvania Personal Income Tax from the employee’s compensation. Where the employer is subject to Pennsylvania withholding requirements and a Pennsylvania resident is rendering services as their employee wholly in another state, the employer must withhold on the entire compensation paid to the employee, unless the other state has an income tax and the employer is withholding the other state’s tax. When a Pennsylvania resident is performing services partly within and partly outside the Commonwealth: 2. • If the other state has an income tax and the employer is withholding such tax, the employer also shall withhold the Pennsylvania income tax on compensation for services rendered within the Commonwealth. Compensation attributable to services within the Commonwealth is that proportion of the total compensation, which the total number of working days employed within the Commonwealth bears to the total number of working days employed both within and outside the Commonwealth, exclusive of non-working days. x Total Compensation Pennsylvania = # of PA Working Days Compensation Total # of Working Days • If the other state does not have an income tax, the employer must withhold the PA income tax on the entire compensation paid to the employee. 3. The Commonwealth imposes tax on earnings of traveling salespersons or other employees whose compensation depends directly on the volume of business transacted by them within the Commonwealth. The amount of compensation subject to PA withholding is determined by allocating PA sales volume, by total sales volume, multiplied by the total compensation. Pennsylvania = Compensation $ Volume in PA $ Total Volume x Total Compensation WITHHOLDING INSTRUCTIONS FOR NONRESIDENT EMPLOYEES 1. When nonresidents perform services in Pennsylvania, their employers shall withhold Pennsylvania tax from their compensation, except when reciprocal agreements apply (see Reciprocal Agreements on page 11). 10 2. When nonresidents perform services partly within and partly outside the Commonwealth, only compensation for services within the Commonwealth is subject to PA withholding. The method of computation for determining Pennsylvania compensation is identical to those for a resident employee as detailed on page 10 in Withholding Instructions for Resident Employees. Employers must withhold on all compensation paid to nonresidents who work within and outside of Pennsylvania, unless the employer maintains adequate current records to determine the accurate amount of compensation from Pennsylvania sources. The employer may determine the portion of compensation allocable to Pennsylvania on the basis of the preceding year’s experience, on the basis of an estimate for the preceding year’s experience, or on the basis of an estimate for the current year made by the employee or his employer. The employer shall make any necessary adjustment during the year to assure that the proper amount is withheld for the current year. Reciprocal Agreements: The Commonwealth of Pennsylvania has reciprocal agreements with the states of Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia. These agreements provide that: 1. If a Pennsylvania resident employee receives compensation for services performed in one of these six states, the employer in that state withholds the Pennsylvania Personal Income Tax from compensation received, and forwards that tax to Pennsylvania. If a nonresident employee from one of these states receives compensation for services performed within Pennsylvania, no withholding of Pennsylvania Personal Income Tax is required provided an Employee’s Statement of Nonresidence in Pennsylvania and Authorization to Withhold Other States’ Income Tax (REV-420), is filed by the nonresident employee with the Pennsylvania employer. The Pennsylvania employer withholds the income tax of that state in which the nonresident employee resides and pays the tax to that state. 2. For additional information order Reciprocal Agreements (REV-615). See page 20 for ordering information. Non-withholding Provisions Special withholding rules apply to employees who are entitled to Tax Forgiveness under Pennsylvania law. An employer is not required to withhold PA tax from the compensation of an employee, if the employee submits a completed Non-withholding Application (REV-419). The withholding rate for such an employee is zero. 11 If the Pennsylvania taxable gross compensation of an employee, who has submitted a Non-withholding Application, exceeds $1,625 for any quarter, the employer must promptly forward a copy of the application to the PA Department of Revenue, Dept. 280904, Harrisburg, PA 17128-0904 for approval. If the Department disapproves the application, the employer must commence immediately withholding at the regular rate. COMPUTATION AND PAYMENT OF WITHHOLDING TAXES Computation of Withholding Tax The Pennsylvania Personal Income Tax shall be withheld on compensation subject to withholding at the current applicable rate. For each payroll period, an employer must compute the tax to be withheld from an employee’s compensation by multiplying such compensation subject to withholding by the applicable rate. The term payroll period means a period for which a payment of compensation ordinarily is made to an employee by his employer and may be daily, weekly, bi-weekly, semi-monthly, monthly, quarterly, semi-annually, or annually. If an employee receives supplemental or other compensation, an employer shall determine the tax to be withheld by adding the supplemental or other compensation for the current payroll period and multiplying this amount by the withholding rate. Payment of Taxes Withheld Every employer withholding tax must pay the tax required to be deducted and withheld quarterly, monthly, or semi-monthly to the Department. The payment schedule is determined: 1. Quarterly: Where the aggregate amount required to be deducted and withheld for each quarterly period reasonably can be expected to be less than $300, the employer shall remit on or before the last day of April, July, October, and January for the (4) quarters ending the last day of March, June, September, and December. Mail the payment and the PA-W3 to: PA Department of Revenue, Dept. 280415, Harrisburg, PA 17128-0415. Monthly: Where the aggregate amount required to be deducted and withheld for each quarterly period reasonably can be expected to be $300 or more, but less than $1,000, the employer shall remit the tax monthly on or before the 15th day of the succeeding month for January to November and on or before January 31 for the month of December. Mail the payment and the PA-501 to: PA Department of Revenue, Dept 280414, Harrisburg, PA 17128-0414. 2. 12 3. Semi-Monthly: Where the aggregate amount required to be deducted and withheld for each quarterly period reasonably can be expected to be $1,000 or more, the employer shall remit the tax within three (3) banking days after the close of each semi-monthly period. The semi-monthly periods end on the 15th and on the last day of the month. Mail the payment and the PA-501 to: PA Department of Revenue, Dept. 280414, Harrisburg, PA 17128-0414. If the amount to be remitted is $20,000 or more, the employer is required to remit the payment by Electronic Funds Transfer (EFT). See page 15 for EFT remittance instructions. A schedule of reporting periods and due dates is available by requesting. Period Ending and Administrative Due Dates for the Remittance of Employer Withholding Tax and Filing of Quarterly Returns and W-2 Forms (REV-1716). See inside front cover for ordering information. Changes: An employer may change to a less frequent payment schedule only at the beginning of a calendar year. Changes to a more frequent basis of filing must be made at the beginning of any quarter that follows a quarter in which the $300 or $1,000 limits are exceeded. Notification of such changes shall be reported by completing the Tax Account Information Change/Correction Form (REV-1705) and mailing it to: PA Department of Revenue, Dept. 280901, Harrisburg, PA 17128-0901. Filing Reconciliation Returns Every employer required to deduct and withhold tax shall file a quarterly return of income tax withheld on or before the last day of April, July, October, and January for each three-month period ending the last day of March, June, September, and December. Employers who remit withheld taxes on a monthly or semi-monthly schedule must mail the quarterly reconciliation document, Employer Quarterly Return of Income Tax Withheld (PA-W3), to: PA Department of Revenue, Dept. 280903, Harrisburg, PA 17128-0903. Employers who remit withheld taxes quarterly must mail the quarterly reconciliation document, Employer Quarterly Deposit Statement and Return of Income Tax Withheld (PA-501/W3), to: PA Department of Revenue, Dept. 280415, Harrisburg, PA 17128-0415. 13 INTEREST AND PENALTIES Interest If any amount of tax required to be withheld is not reported and paid in full on or before the due date, simple interest will be charged daily from the date the tax is due and payable to date of payment. The rate of interest will be announced annually by the PA Department of Revenue. This interest rate will continue for the calendar year regardless of subsequent change in the federal interest rate in such calendar year. Interest is computed by multiplying the late paid or unpaid tax x days delinquent x daily interest rate. The daily interest date = annual interest rate divided by 365. Request Interest Rates and Calculation Methods for All Taxes (REV-1611), for interest rates. See inside front cover for forms ordering information. Penalties Failure to file a quarterly return may result in the imposition of additional tax of five (5) percent per month of the underpayment for each month or fraction thereof (maximum penalty of 25 percent). Failure to pay withheld tax to the PA Department of Revenue on or before the due date for filing the quarterly reconciliation return will result in an additional tax of five (5) percent per month of the underpayment for each month or fraction thereof (maximum penalty of 50 percent). If any part of any underpayment of tax that is later proved to be the result of fraud, an amount equal to 50 percent of the underpayment will be added to the tax. Personal Responsibility All taxes required to be withheld pursuant to law, or under the color of law, constitute a trust fund. If tax is not withheld or is misapplied, an employee or representative of the employer who has a duty to collect or pay tax, or prepare tax documents, an officer, director, or partner of the employer, and a person who receives trust fund monies may be held personally liable for payment. Any person required to collect, account for, and pay any income tax who willfully fails to collect, truthfully account for, or attempts to evade or defeat any such tax or the payment thereof, shall be liable to a penalty equal to the total of tax evaded, not collected or accounted for, and paid. Criminal Prosecution Any person who willfully fails or refuses to collect and remit tax, fails to pay the tax, fails to file a return, files a fraudulent or false 14 return, or presents for payment of the tax a check which is returned to the Commonwealth as uncollectible, may be subject to criminal prosecution. ELECTRONIC FILING: E-TIDES The PA Department of Revenue and Labor & Industry have partnered to bring you e-TIDES (Electronic Tax Information and Data Exchange System). E-TIDES is an Internet based business tax filing system, available free of charge. • • Safe: The site and your data are secure. Easy: Register online to activate your e-TIDES account. There is a two-step registration process. First, register to obtain an electronic signature, and then register your enterprise for electronic filing. Convenient: File your returns and make payments together, or you can file returns and payments separately. Pay electronically using Automated Clearing House (ACH) Debit, ACH Credit or credit card. Efficient: E-TIDES allows you to import data from standard business software. The import specifications provide instructions to accommodate multiple enterprise registrations, tax filings and payments. Customer Driven: You can approve multiple individuals to file returns and/or payments within or outside your business. Prompt: Register online for Electronic Funds Transfer (EFT). Access ACH reporting instructions online. • • • • REMITTANCE OF TAX PAYMENTS BY ELECTRONIC FUNDS TRANSFER (EFT) By regulation, the PA Departments of Treasury and Revenue have implemented a program enabling taxpayers to remit tax payments through Electronic Funds Transfer (EFT). This regulation requires participation of taxpayers remitting a payment of $20,000 or more. Failure to comply with the EFT remittance requirements may result in an assessment of a penalty equal to three (3) percent of the total tax due, not to exceed $500. The 15 penalty may be imposed on all payments of $20,000 or more that are not presented to the Department of Revenue by an approved payment method. If a business does not meet the $20,000 threshold, it may voluntarily request participation in the program. The PA-W3 Employer Quarterly Returns are required to be filed when payments are remitted through EFT. Additional document filing requirements are listed below. EFT Requirement: If you meet the $20,000 payment threshold, you are required to remit your payment electronically. EFT Registration: Prior to enrolling for EFT, a business/enterprise must first register with the Department of Revenue for taxes and services administered by the Department. Registration information is provided on page 1 of this booklet in the How to Register section. To enroll for EFT, register online through the Electronic Tax Information and Data Exchange System (e-TIDES) at www.etides.state.pa.us. If you do not have Internet capability, an EFT Authorization Agreement (REV-331A) form can be faxed or mailed to you by calling 1-800-362-2050. Electronic Payment Methods: Taxpayers can choose one of the following electronic methods: Automated Clearing House (ACH) Debit, Automated Clearing House (ACH) Credit, or credit card. A convenience fee, which is based on the tax due, will be charged by the vendor for processing the credit card transaction. Credit card payments can be made by calling 1-800-2PAYTAX or over the Internet at www.revenue.state.pa.us. Document Filing Requirements 1. Semi-monthly and Monthly filers who remit payments by ACH Debit, ACH Credit, or credit card do not file the PA-501 Employer Deposit Statement of Withholding Tax document. However, the PA-W3 Employer Quarterly Return of Withholding Tax must be filed on or before the due date. 2. Quarterly filers who remit payments by ACH Debit, ACH Credit, or credit card must continue to file the PA-W3 Employer Quarterly Return of Withholding Tax on or before the due date. Penalty Failure to comply with the EFT remittance requirements may result in an assessment of a penalty equal to three (3) percent of the total tax due, not to exceed $500. The penalty may be imposed on all payments of $20,000 or more that are not presented to the Department of Revenue by an approved payment method. 16 OVERPAYMENTS AND REFUNDS Verified overpayments for a quarter will be credited to the most current quarter after offset to any outstanding collectible liabilities, and notification will be sent to the employer. AMENDED RETURNS If an error is discovered after you file a return, you can correct the error by filing an amended return (PA-W3R). This return must be clearly marked amended return. The PA-W3R form may be obtained from any Revenue district office listed on the inside back cover of this booklet, or by calling our 24-hour Forms Ordering Message Service at 1-800-362-2050. Taxpayers with Special Hearing and/or Speaking Needs may call 1-800-447-3020 (TT only). • • • • If the error results in an overpayment, the amended PA-W3R must be filed within three (3) years from the date the original payment was received in order to receive a credit or refund. If a payment was remitted with your original return, include the amount of this payment in total deposits for the quarter. If a credit was received from your original return, deduct that amount from the total deposits for the quarter. If the amended return results in a balance due, remit the tax due with the amended return. You will be billed for late charges, if applicable. If, in any filing period, more than the correct amount of tax is deducted from any wage payment, the employer is authorized to make the appropriate adjustment in his withholding for a subsequent period or periods in the same taxable year. If the over withholding is not offset by the last withholding period of the year, the employee shall report the amount actually withheld on his yearly income tax return. Mail your amended return to: PA Department of Revenue Dept. 280903 Harrisburg, PA 17128-0903 WITHHOLDING STATEMENTS An employer must complete two (2) copies of the Wage and Tax Statement (Form W-2) for each employee to satisfy Pennsylvania tax requirements. One copy must be furnished to the employee, and one copy submitted to the PA Department of Revenue. The Wage and Tax Statements must contain the following information: 17 1. The name Pennsylvania printed, stamped, or typed on the form; Employer’s name, address, and Employer Identification Number (EIN); Employee’s name, address, and Social Security Number; Total amount of compensation subject to the Pennsylvania Personal Income Tax for the entire tax year; Total amount of Pennsylvania tax withheld. The total amount of tax withheld must be shown in the box provided on your form for State Tax Withheld. This block specifically must be identified as withheld state tax for the Commonwealth of Pennsylvania. 2. 3. 4. 5. All W-2 forms must be submitted to the PA Department of Revenue by January 31 following the year of compensation, or 30 days from the termination of business, if the business terminated during the calendar year. An employee whose employment is terminated before the close of a calendar year may request, in writing, the employer to furnish him a W-2 form at an earlier time. If there is no reasonable expectation on the part of both employer and employee of further employment during the calendar year, then the employer shall furnish the W-2 form to the employee on or before the 30th day after the date of the request, or the 30th day after the date on which the last payment of wages is made, whichever is later. Any employer who willfully furnishes a false or fraudulent W-2 form, or willfully fails to furnish a statement in the prescribed manner or time, or fails to show the information required is liable for a penalty of $50 for each failure. Electronic Reporting Employers can now file their year-end employee W-2 Wage and Tax Statements and W-2 Transmittals (REV-1667) online through the e-TIDES business tax filing Web site. Employers can also upload computer files containing W-2 data to e-TIDES eliminating the need to enter the data. Visit e-TIDES at www.etides.state.pa.us for more information. Magnetic Media Reporting of W-2’s In lieu of filing copies of the W-2 forms with the PA Department of Revenue, employers may submit information on magnetic tape or cartridge. The Department accepts the combined federal-state annual W-2 reporting specifications as indicated in the Social Security’s Magnetic Media Reporting Publication TIB-4. Effective for tax year 2001 due in 2002, all employers must adapt and use the Social Security Administration’s Magnetic Media Reporting and Electronic Filing (MMREF-1) filing specifications to 18 report W-2 information to the Department. Additional information on tape reporting can be obtained by writing to: PA Department of Revenue Dept. 280900 Harrisburg, PA 17128-0900 Reporting W-2 information on diskettes is not accepted by the PA Department of Revenue. An employer may also submit a computer-printed listing in lieu of copies of the W-2 forms. The listing must include all the information printed on the W-2 forms to be acceptable by the Department. The W-2 forms, magnetic media, or printed listing must be forwarded to the PA Department of Revenue accompanied by the W-2 Transmittal (REV-1667). The W-2 Transmittal Form and a mailing label are located in the back of the Employer Withholding coupon book. GENERAL INFORMATION • • Promptly forward your coupon book to your accountant or tax preparer. Use the Change/Correction Form (REV-1705) to request account changes. This form is included in your coupon book. Do not report changes or change any preprinted information on the PA-501 or PA-W3. Replacement coupon books are available by contacting the PA Department of Revenue, Dept. 280901, Harrisburg, PA 17128-0901, or by calling the Taxpayer Service and Information Center at (717) 787-1064. The request must include the employer’s name, address, Account ID Number, and Employer Identification Number. Use PA-501R and PA-W3R forms only when you do not have preprinted coupons, or you have not received a coupon booklet, or lost the necessary forms. Instructions are included with these forms. • • 19 COMMONLY ASKED QUESTIONS BROCHURES REV–20 . . .Employer Withholding for Pennsylvania Taxable Compensation Guide REV– 527 . . .Taxpayers Bill of Rights REV– 571 . . .So You Are Moving To PA REV– 580 . . .Employer Withholding REV– 588 . . .The Beginners Guide for Starting a Business in PA REV– 611 . . .Determining Residency for PA Purposes REV– 612 . . .Military Pay REV– 614 . . .Scholarships, Fellowships, and Stipends REV– 615 . . .Reciprocal Agreements REV– 617 . . .Hiring Household Workers REV– 629 . . .How Nonresidents are Taxed REV– 631 . . .TAX BACK/Tax Forgiveness REV– 634 . . .Employee Fringe Benefits and Wage/Salary Supplements REV– 637 . . .Unreimbursed Allowable Employee Business Expenses REV– 696 . . .Who is an Independent Contractor? These brochures can be ordered directly through the Department’s 24 hour Forms Ordering Message Service by dialing 1-800-362-2050, or by selecting the forms ordering options on the Department’s toll-free automated FACT & Information Line at 1-888-PATAXES (728-2937). Service for Taxpayers with Special Hearing and/or Speaking Needs 1-800-447-3020 (TT Only). These brochures are also available on the Department’s Web site at www.revenue.state.pa.us. 20 REVENUE DISTRICT OFFICES* Altoona Ste. 204 Cricket Field Plz. 615 Howard Ave. Altoona, PA 16601-4867 (814) 946-7310 Bethlehem 44 E. Broad St. Bethlehem, PA 18018-5998 (610) 861-2000 Bradford Ste. 2 600 Chestnut St. Bradford, PA 16701-2292 (814) 368-7113 Doylestown Ste. 104 600 Louis Dr. Warminster, PA 18974-2847 (215) 443-2990 Erie 448 W. 11th St. Erie, PA 16501-1501 (814) 871-4491 Greensburg Second Fl. 15 W. Third St. Greensburg, PA 15601-3003 (724) 832-5386 Harrisburg Lobby Strawberry Sq. Harrisburg, PA 17128-0101 (717) 783-1405 Indiana Canterbury Office Stes. 2263 Philadelphia St. Indiana, PA 15701-1595 (724) 357-7600 Johnstown Third Fl. 345 Main St. Johnstown, PA 15901-1641 (814) 533-2495 Lancaster Ste. 201 315 W. James St. Lancaster, PA 17603-2979 (717) 299-7581 New Castle 103 S. Mercer St. New Castle, PA 16101-3849 (724) 656-3203 Newtown Square Ste. 1 90 S. Newtown St. Rd. (Route 252) Newtown Square, PA 19073-4090 (610) 353-4051 Norristown Second Fl. Stoney Creek Office Center 151 W. Marshall St. Norristown, PA 19401-4739 (610) 270-1780 Philadelphia Rm. 201 State Office Bldg. 1400 W. Spring Garden St. Philadelphia, PA 19130-4007 (215) 560-2056 Pittsburgh Rm. 104 State Office Bldg. 300 Liberty Ave. Pittsburgh, PA 15222-1210 (412) 565-7540 Pottsville 115 S. Centre St. Pottsville, PA 17901-3047 (570) 621-3175 Reading Ste. 239 625 Cherry St. Reading, PA 19602-1186 (610) 378-4401 Scranton Rm. 305 Samters Bldg. 101 Penn Ave. Scranton, PA 18503-1970 (570) 963-4585 Sunbury 535 Chestnut St. Sunbury, PA 17801-2834 (570) 988-5520 Washington Ste. 145 UL Millcraft Center 90 W. Chestnut St. Washington, PA 15301-4549 (724) 223-4550 Wilkes-Barre Ste. 201 Thomas C. Thomas Bldg. 100 E. Union St. Wilkes Barre, PA 18701-3200 (570) 826-2466 Williamsport 440 Little League Blvd. Williamsport, PA 17701-5055 (570) 327-3475 York 140 N. Duke St. York, PA 17401-1110 (717) 845-6661 * THE LOCATIONS OF THE LISTED DISTRICT OFFICES CAN CHANGE WITHOUT NOTICE. PLEASE CALL TO VERIFY THE LOCATION. evenue Commonwealth of Pennsylvania PENNSYLVANIA DEPARTMENT OF www.revenue.state.pa.us