by Rick Tonarelli, CPA, Tax Senior Manager
Effective January 1, 2018, Pennsylvania requires payors of certain PA source income to withhold PA income tax from such payments. The withholding pertains only to non-employee compensation and business income (including royalties and bonuses) paid to non-resident individuals (or disregarded entities with a non-resident owner), for which a Federal 1099-MISC will be filed. Withholding of tax is required for payments of $5,000 or more annually, and is optional on payments of less than $5,000.
In general, governmental payors are exempt from this requirement, including The United States government, the Commonwealth of Pennsylvania, their agencies, instrumentalities, and any political subdivisions of Pennsylvania.
A payment is considered "non-employee compensation" if it is made to: (i) someone who is not your employee; and (ii) for services in the course of your trade or business.
Further, lessees of PA real estate making "lease payments" to non-resident lessors are also required to withhold personal income tax on such payments. Residential rental payments are exempt from the withholding requirement.
The withholding amount is equal to the specified rate, which is currently 3.07%, multiplied by the gross amount paid.
In circumstances where the payor is unsure of the total amount of annual payments, it is recommended to withhold and remit PA income tax on all payments to the payee.
by Bill Bodnar, CPA, MST, Tax Director
The Tax Cuts and Jobs Act was signed by President Trump on December 22, 2017. The Act represents the most comprehensive change to the Internal Revenue Code since 1986. There have been a number of changes affecting all taxpayers, and to assist in identifying those which may impact you, we have put together a summary of the major provisions from the new legislation. Generally, most of these changes will become effective in 2018.
The new legislation will produce both opportunities and drawbacks that differ from taxpayer to taxpayer. Many of the specific rules for implementing the new laws will require further guidance from Treasury, which will be issued in 2018. We certainly understand that each taxpayer is unique, so we look forward to working individually with each of our clients to ensure the proper treatment of these new rules and to implement the most advantageous tax approach. Please feel free to contact us at H2R CPA with any follow-up questions or insight that may be of interest to you.
Highlights and some details of the new law are provided in the attached letter.
Contact H2R CPA at 412-391-2920 or firstname.lastname@example.org for additional details or interpretation related to the Tax Cuts and Jobs Act, as needed. Our tax team members would be pleased to assist you with your tax planning.
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