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Calculations for Pennsylvania local taxes

In Pennsylvania, there are 2 types of local taxes: Local Services Tax (LST) and Earned Income Tax (EIT). This article explains the set up steps needed for Accounting CS to determine the calculations for each tax type.

Set up the client work location

Add or verify the work locations for the client.
  1. Select
    Setup
    , then
    Clients
    .
  2. Select the
    Main
     tab.
  3. Select
    Locations
    .

Set up the employee residential address

Add or verify the residential address for the employee.
  1. Select
    Setup
    , then
    Employees
    .
  2. Select the
    Main
     tab.
  3. When you enter or modify the address, we recommend that you take the following steps:
    • Use the address verification feature to verify the address.
    • Mark the
      Resident address
       checkbox.

Set up the employee work location

Choose from the work locations set up and verified for the client.
  1. Select
    Setup
    , then
    Employees
    .
  2. Select the
    Main
     tab.
  3. Use the
    Location
     dropdown lists in the Location column of the Locations and Departments grid.
note
If an employee works in multiple locations, Accounting CS calculates the LST tax that corresponds to the work location selected during data entry. Additionally, if the work location has the higher EIT tax, Accounting CS calculates the EIT tax accordingly.

Specify that the client has nexus in the resident localities

After you've verified the employee and employer addresses with the address verification feature, you'll need to specify that the client has nexus in these localities.
  1. Select
    Setup
    , then
    Clients
    .
  2. Select the
    Payroll Taxes
     tab.
  3. Select
    Local
     in the State section.
  4. Mark the
    Nexus
     checkbox for the localities' EIT and LST tax.

Use the Pennsylvania tax calculator

Accounting CS attempts to match Pennsylvania's online tax calculator. The following examples will help you to read the reports that the tax finder generates.
The screenshot below shows the main page of the site, where you will enter the employee's home and work location addresses and then select
View Information
.
Extract from Pennysylvania website. Shows 2 groups of fields under the heading 'Find your Withholding Rates by Address'. The 2 groups of fields are for Home address and Work address. Each group contains fields for Street Address, City, State and Zip. The View Information button appears after the address fields.
In the LST and EIT examples that follow, we will use the information that displays when you select
View Information
 in the online tax calculator.
Example 4a: Local Services Tax (LST)
Accounting CS calculates the LST that corresponds to the employee's work location. In this example, the work address is in Hazleton.
Combining the LST taxes for both locations, you can see in this sample report that the total LST amount in the Total Taxes to be Withheld section is
$52
.
Extract from Pennsylvania website after you've pressed View Information. There are 2 grids: Home and Work. The Work grid has 6 columns. The LST column is highlighted and shows an amount of $52.00 for the Hazelton City (Work) row and $0.00 for the Hazelton Area S D (Work) row. After the two grids is a Total Taxes to be Withheld section, which shows the total LST as $52.00.
note
The LST amount listed is the amount due annually. Accounting CS divides this amount by the number of pay periods per year to determine the single check amount. For example, a weekly pay schedule employee would pay $1 per check ($52 / 52 weeks = $1).
Example 4b: Earned Income Tax (EIT)
Accounting CS compares the rates of the employer and employee EIT taxes and calculates based on the higher rate.
In this example, the employee's work location tax rate is 1.85% and their residence location tax rate is 1%, so Accounting CS calculates the higher 1.85% work location rate and assumes that the taxes will be remitted to Hazleton City.
Accounting CS uses the total of the municipality and school district rates to determine the total EIT rate. So, in this instance, the total EIT rate based on the home address is 1%. The work location municipality is Hazleton (1.85%), and the school district is also South Fayette Township (0%).
Extract from Pennsylvania website after you've pressed View Information. There are 2 grids: Home and Work. The Home grid has 3 columns. he Resident EIT column is highlighted and shows an amount 0.500% for the Canonsburg Boro (Home) row and 0.500% for the Canon-McMillan S D (Home) row. The Work grid has 6 columns. The Non Resident EIT column is highlighted and shows an amount of 1.850% for the Hazelton City (work) row. After the two grids is a Total Taxes to be Withheld section, which shows the total EIT as 1.850%.
note
When the employee's home rate is the same as the work location rate, Accounting CS calculates the work location EIT (as specified under Act 32).
Internal use only
In some circumstances, we have made exceptions and updated individual rates when they are reflected in the Real-Time Register but before they are reflected in the Official Register. However, there are ongoing maintenance and risk issues in making these exceptions, so we do not do this as a rule.
If you get notification from a user, or another source, that a PA locality has updated a rate with an effective date prior to the next update of the Official Register:
  1. Duplicate the incorrect rate.
    note
    Use the work and resident address in your application to reproduce it.
  2. Select the Nexus for the locality:
    1. Select
      Setup
      , then
      Client
      .
    2. Select the
      Payroll Taxes
       tab.
    3. Select
      Local
      l.
    4. Mark the
      Nexus
       checkbox for the locality.
  3. Once you've duplicated the incorrect rate, gather as much information as you can.
    note
    This includes: the tax type, school district name, county, new rate, effective date from your source.
  4. Visit the Resolver with this information to obtain permission to enter a ADO item.
  5. Write the information up for Development's review in ADO. Include all the information you have gathered about the situation.
    note
    From there, it will be verified and entered into Development's Database (ADO). Development will research, evaluate, and decide if and when to update.

This article applies to:

  • Product: Accounting CS
  • Subject: Payroll checks

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