The tax bill signed by Governor Tom Wolf on October 30, 2017, made significant changes to Pennsylvania’s 1099-MISC withholding tax requirements. Act 43 of 2017 created a withholding obligation for certain payors of Pennsylvania-source income and lessees of Pennsylvania real estate to non-residents.[note]Pennsylvania Department of Revenue, revenue.pa.gov, 1099-MISC Fact Sheet [/note] The bill also expanded the requirements with respect to when a copy of Federal Form 1099-MISC is required to be filed with the Pennsylvania Department of Revenue.
Beginning January 1, 2018, anyone that makes the following payment is required to withhold from such payments an amount equal to the Pennsylvania tax rate, currently 3.07%.[note]Pennsylvania Department of Revenue, revenue.pa.gov, Tax Law Policies Bulletins Notices [/note]
1099-MISC Withholding Payments:
- Payments of Pennsylvania-source non-employee compensation or business income to a non-resident individual or disregarded entity that has a non-resident member and is reported on a 1099-MISC.
Real Estate Payments:
- A lessee of Pennsylvania real estate who makes a lease payment in the course of a trade or business to a non-resident lessor.[note]Pennsylvania Department of Revenue, revenue.pa.gov, 1099-MISC Fact Sheet [/note]
Of note, withholding is optional for payors or lessees paying less than $5,000 annually. However, if you are uncertain of the total amount of payments that will be made during the year, you would be encouraged to withhold and remit income tax from all payments made.
In addition, businesses that do not withhold Pennsylvania personal income tax from employee compensation or businesses will have to register for 1099-MISC withholding account using Form PA-100. Withholding payments, quarterly returns, and annual reconciliations must be submitted electronically to the department through e-TlDES, the Department’s online business tax filing system.
ln the event the payor or lessee fails to withhold and remit the required Pennsylvania personal income tax, the Department of Revenue can collect the personal income tax from the payor or lessee.
If you wish to discuss the impact of this new law on your situation, please contact Joseph A. Bellinghieri at (610) 840-0239 or [email protected].
Joseph A. Bellinghieri is an attorney with the Law Firm of MacElree Harvey, Ltd. in West Chester, PA. Joe is a seasoned attorney with over twenty years of experience representing individuals and businesses with a variety of estate, tax, real estate and business issues. Contact Joe at (610) 840-0239 or [email protected].