Starting January 1, 2018, Pennsylvania business owners who issue IRS Form 1099-MISC for payments to non-resident service providers or landlords (“Payee”), may be required by Pennsylvania law (Act 43 of 2017) to withhold 3.07% income tax on these payments.
To determine which payee(s) requires you to withhold Pennsylvania Income Tax from their payments, see below:
Payee must be a non-resident of Pennsylvania and subject to Pennsylvania Income Tax (i.e. they worked in Pennsylvania). It is recommended a form PA REV-1832 (“1099-MISC Withholding Exemption Certificate”) be provided to each payee. The completed and signed PA REV-1832 should be retained for your records indefinitely.
You made total payments to the payee of $5,000 or more for the tax year. Payments include but are not limited to “non-employee compensation”, rents, royalties, bonus payments, damage rents and other payments made pursuant to a lease. However, if you are unsure that total payments will be $5,000 or more for the tax year, it is recommended that you withhold and remit income tax from each payment made.
Pennsylvania will not assess penalties for failure to file for a period ending prior to July 1, 2018. However, when tax is withheld, it must be filed and remitted as required by law.
Pennsylvania is requiring all withholding tax payments, quarterly returns, and annual reconciliations be submitted electronically to the Pennsylvania Department of Revenue through their online business tax filing system e-TIDES at www.etides.state.pa.us . The Annual Withholding Statement (REV-1667) along with the individual 1099-MISC forms are due by January 31 of the following tax year. All payments of $1,000 or more must be remitted by Electronic Funds Transfer (EFT).
If you believe your business is subject to the 1099-MISC withholding requirements, please contact our offices. We’d be happy to assist you.