How the Payroll Process Determines Pennsylvania Political Subdivision Codes

The payroll process uses political subdivision (PSD) codes in the calculation of Pennsylvania local earned income taxes.

The payroll process uses the higher of these rates.

• Resident (city + school)

• Nonresident (city only)

In cases where the rates are the same, the payroll calculation automatically withholds the resident rate.

How Resident PSD Codes Are Derived

The payroll process uses this hierarchy to determine an eligible employee's resident PSD code.

1. Checks the resident PSD Code on the Pennsylvania Residency Certificate section of their Tax Withholding card.

2. Attempts to determine the code based on the employee's home address.

3. If it's unable to derive the resident PSD code, or if you have specified an invalid code on the Residency Certificate, the payroll process:

   1. Stops calculation for that employee.

   2. Logs an error in the payroll results.

4. If the residency certificate has multiple PSD codes in the same pay period, the payroll process calculates taxes based on the PSD code as of the pay period end date.

How Nonresident PSD Codes Are Derived

The payroll process uses this hierarchy to determine an eligible employee's nonresident PSD code.

1. Checks the nonresident PSD Code of the Pennsylvania Residency Certificate section on their Tax Withholding card.

2. Attempts to determine the code based on the employee's work address.

3. If it's unable to derive the nonresident PSD code, or if you have specified an invalid code on the Residency Certificate, the payroll process:

   1. Stops calculation for that employee.

   2. Logs an error in the payroll results.

4. If there are multiple PSD codes in the same pay period, the payroll process calculates taxes based on the PSD code as of the pay period end date.