Pennsylvania Wage and Payroll Tax Facts

Miscellaneous Pennsylvania Tax Information

Reciprocal Agreement(s)

Reciprocal agreements are when workers who live and work in different states are only required to pay taxes to the state where they live. Pennsylvania currently has reciprocal agreements with the following states:

• Indiana
• Maryland
• New Jersey
• Ohio
• Virginia
• West Virginia

Residents from these states who work in Pennsylvania will need to submit a completed REV-419 form to allow their employer to withhold taxes for their state of residence.

Paid Sick Leave (PSL) Taxes

The state of Pennsylvania doesn't require employers to collect PSL taxes, nor does the state have a program providing such leave to employees. The city of Philadelphia, however, does have a program providing such leave to eligible employees:

*Unless the employer opts to give them more.

Paid Family and Medical Leave (PFML) Taxes

The state of Pennsylvania doesn't require employers to collect PFML taxes, nor does the state have a program providing such leave to employees.

Local Earned Income Tax (EIT) Rates

Employers in Pennsylvania must withhold and remit a local EIT to the state on each employee’s behalf. The rates for this tax vary based on the employer’s location and the employee’s residence, which are each identified by a Political Subdivision (PSD) code. The higher of the two rates (the resident PSD’s rate or the work PSD’s rate) is what’s withheld from the employee’s wages. The work PSD also determines which state-based tax collector receives the withheld funds and is always used to report wages. Meanwhile, the resident PSD is used on quarterly tax returns so the state-based collector knows which local township or municipality should receive the funds.

Local Services Tax (LST) Rates

Some local townships or municipalities in Pennsylvania also require employers to withhold and remit an LST to the state on some employees' behalf. Like local EIT rates, LST rates vary based on where the employee works but are solely based on that work location. Not all local townships or municipalities require an LST, but those that do typically will require one of three annual amounts:

• If the LST’s annual amount is $10.00, the tax will be withheld from the employee’s first paycheck of the year.
• If the LST’s annual amount is $52.00, a $1.00 weekly tax will be applied throughout the year and adjusted based on the employee’s pay frequency.
• If the LST’s annual amount is $156.00, a $3.00 weekly tax will be applied throughout the year and adjusted based on the employee’s pay frequency.

Low-income employees who make less than $12,000 annually are exempt from LSTs. 

Local Taxes

The city of Philadelphia has its own income tax (the Philadelphia Wage Tax) in lieu of a state EIT for those who work and live within its city limits. The rates for this tax are:

• 3.75% for city residents
• 3.44% for nonresident employees

Note, the city also requires employers to report a company’s entity type classification information on its quarterly returns: 

• TST - Trust
• IND - Individual/Sole Proprietor
• CRP - Corporation
• PART - Partnership
• EST - Estate
• GOVT - Government
• NONP - Nonprofit
• DIS - Disregarded Entity

Pennsylvania Employer Registration

The agencies below can help with your state-based employer registration, including best practices, account numbers, and unemployment information. Contact the Department of Revenue for withholding tax topics and the Department of Labor & Industry for unemployment tax topics.

As part of their registration, Pennsylvania-based employers are also required to make any deposits using their Employer Assigned Filing Frequency. The deposit frequency is based on the amount of withholding by the employer, while the filing type is decided by the Department of Revenue based on a quarterly average of tax withheld. The agency will provide employers an annual notice of their frequency or changes to their frequency.

• Semi-Weekly: Employers that can reasonably anticipate their employer withholdings will be $20,000 or more in a calendar year
• Semi-Monthly: Employers with a quarterly average amount of $1,000.00 or greater
• Monthly: Employers with a quarterly average amount of less than $1,000.00, but greater than or equal to $300.00
• Quarterly: Employers with a quarterly average amount of less than $300.00

Note, all active employer withholding tax accounts must file quarterly reconciliation returns of income tax withheld.