Employer Frequently Asked Questions
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How do I register as an Employer?
Not all employers need to register. If you received a mailing from Keystone identifying you as an employer then you are already registered.
If you did not receive a mailing from Keystone or you are a new employer, you can register on-line through Keystone’s Business Portal or select “Employer Registration” and register by submitting the Employer Listing Form EL-1 with your quarterly remittance.
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Where do I find the applicable tax rate(s) for employee withholding?
The applicable tax rate(s) are located on the DCED Municipal Statistics website. Keystone provides a direct link to the DCED tax rate information from the “Employer Resources” page.
Remember, you must withhold the higher of the employee's resident tax (where the employee lives) or the employee's nonresident tax (where the employee works).
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How do I identify the taxing jurisdiction of my employee’s residence?
The Pennsylvania Department of Community and Economic Development (DCED) lists the various jurisdictions and jurisdictional codes on its webpage. For your convenience, Keystone offers a link to this DCED jurisdictional information.
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What should I do if my employees live out of state?
The Department of Community and Economic Development (DCED) provides a jurisdictional code to identify out-of-state employees. Employers should report the appropriate information and withhold the appropriate non-resident tax, if applicable.
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Is there an easy way to report and withhold employee earnings?
Employers may easily fulfill local tax obligations electronically. To get started, go to our “Employer Resources” page and select “e-file Business.”
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Does every employee have to fill out a Certificate of Residency?
Starting in 2012, every PA employer must require each employee to complete a Certificate of Residency form. This form is an addendum to the Federal Employee's Withholding Allowance Certificate (Form W-4). An employer shall require any employee who changes his or her address to complete a new Certificate of Residency form. Employers located in taxing districts that chose to implement the new law early (such as the Lebanon and Chester County Districts) must begin using the Certificates of Residency in 2011.
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If my employee lives and works in an area that doesn’t levee an earned income tax, should I report anything for that individual?
The employer should include all employees on the Employer Quarterly Earned Income Tax List Form EL-1, including the proper detail for where each employee lives and works.
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We are a business. Do we need to send W-2s or is an employee listing sufficient?
While the listing sheet is sufficient during the four quarters, by law W-2s must accompany the employer’s final return. W-2s are necessary.
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Our business sends EIT withholdings monthly instead of quarterly. Do we follow a different reporting format to identify the payment detail?
No. Whether you are submitting your company’s employee withholdings on a monthly or quarterly basis, each submission must include the taxpayer identification listing and a breakdown of the withholding detail by employee.
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I operate more than one business. If one business has a PROFIT and the other business has a LOSS, can I enter the net?
Yes. You may use net losses from operation of one business to offset net profits from another business, but not to offset earned income (i.e. wages paid by an employer). You must show net profit and net loss on separate lines on the return.
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What is Act 32?
Act 32 is a Pennsylvania law that brings standardization to the local earned income taxing system. It consolidates the process by creating new tax collection districts, standardizing forms and mandating employer withholding starting in 2011 for certain jurisdictions and statewide in 2012.
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Where can I find additional information on the requirements of Act 32?
The Employer Resources section of the website provides an overview of the law and information on payroll withholding. There you will find a user-friendly web-portal to assist you in the process. In addition, the Pennsylvania Department of Community and Economic Development (DCED) offers information on Act 32.
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If my business is located in an area that doesn’t levee an earned income tax, do I have to withhold anything for my employees?
By 2012, all employers in Pennsylvania must withhold the local tax based upon the employee’s place of residence. Some jurisdictions already require employers to withhold the greater of the amount of the resident tax for where an employee lives, or the nonresident tax for where the business is located.
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If I am a tax preparer, am I able to use the eFile Business Portal to file online for my clients?
Yes. After completing the business portal registration, tax preparers and businesses may enter and submit withholding information.
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Should I submit the Certificate of Residency form to Keystone?
No. Like the federal form W-4, the Certificate of Residency serves as an information tool for the Employer. The Certificate of Residency helps the employer provide accurate information to the tax collector, such as the correct political subdivision codes (PSD Codes) and other employee identification information. Employers should maintain the Certificates and, upon request, provide them to the taxing authority or the DCED.
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What do I do if my employee moves part way through the reporting period?
While the employee’s tax rate may change based upon the new residence (and new PSD Code), the employer is still responsible for withholding earned income tax during the period of employment.
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How often are employers required to submit tax revenue to the tax collector?
Within 30 days following the end of each calendar quarter, every employer shall file a quarterly return Form EQ-1 and pay the amount of income taxes deducted during the preceding calendar quarter to the Keystone.
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When are employers required to reconcile employee withholdings to the tax collector?
By February 28 of the next year, every employer shall file an annual return Form ER-1. Employers must file an individual withholding statement by reporting actual State wages and local tax withholdings on Form W-2, for each employee.
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What if the business closes during the tax year?
Any employer that discontinues business prior to December 31 of the current year shall file the required returns and pay any outstanding tax due within 30 days after closing its business.
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If my business has multiple locations throughout Pennsylvania can the employee withholdings be submitted to a single tax collector?
Beginning in 2012, a business with employment locations in more than one tax collection district may file and pay the total amount of income taxes withheld from employees in all work locations to the tax collector for the district where the employer's payroll operations is located. If an employer chooses to file in one district for multiple locations, it MUST file monthly rather than quarterly, and MUST report and pay withholdings electronically. Moreover, the employer must file a notice of intention to file combined returns and make combined payments with the tax collectors for each place of employment at least one month before filing its first combined return.
