Configure Pennsylvania Local Taxes

Employees living and working in Pennsylvania require special configuration on their tax cards.

The following operations are available.

What you want to do	How you do it
Enable political subdivision (PSD) codes for use	Use the Load Payroll Tax Information for US process to get the latest PSD info.
Set up PSD codes for Pennsylvania work locations	Use the Locations task to set the PSD code for each Pennsylvania location.
Withhold local courtesy taxes	To withhold local taxes for Pennsylvania residents who work outside of Pennsylvania as a courtesy, you configure your payroll statutory unit (PSU) or tax reporting unit (TRU).
Configure Pennsylvania and Maryland reciprocity	A reciprocity agreement exists between Pennsylvania and Maryland. You must perform configuration at the organization level to support employees subject to this agreement.
Verify and correct the PSD code for new employees	Use the Calculation Cards task to confirm that new employees are assigned to the correct PSD.
Configure exemptions to local taxes	Use the Calculation Cards task to set exemptions for local income taxes and occupational or head taxes.

For further info, see the following sections.

Enable Political Subdivision Codes

Run the Load Payroll Tax Information for US process.

For further info, see Load Payroll Tax Info for the US in the Help Center.

Set Up PSD Codes for Work Locations

Use the Locations task to set the PSD code for each Pennsylvania location.

From My Client Groups, click Workforce Structures.
Under Locations, click Location Details.
Click Add.
Select Legislative Info as the info you want to manage, and click Continue.
Use the workflow to define the location.
In the Legislative Info step, under Pennsylvania Work Location PSD Information, select the location's PSD code.

Note: When setting up a work location, enter the PSD code associated with the location's taxation jurisdiction. Leave this field blank for locations with Philadelphia taxation. Leave the nonresident EIT rate field blank for all Pennsylvania locations.

Once you have entered a PSD code for a work location, all employees assigned to that location have that work PSD code automatically populated on the Pennsylvania Residency Certificate of their tax card.

For further info, see Tax Withholding Card in the Help Center.

Withhold Local Courtesy Taxes

To withhold local taxes for Pennsylvania residents who work outside of Pennsylvania as a courtesy, configure your PSU or TRU appropriately. Configurations at lower levels override configurations at higher levels.

To withhold local taxes for residents working outside of Pennsylvania:

From your implementation project, start the appropriate task.
- Legal Entity Calculation Cards
- Legal Reporting Unit Calculation Cards
Set an effective as-of date, and click Calculation Rules for Tax Reporting and Payroll Statutory Unit.
In Component Groups, click PA under the Regional node.

Add this node if it doesn't already exist.
In Calculation Component, highlight State Income Tax.
Click Enterable Calculation Values on Calculation Cards.
Click Create, and add the Calculate PA Resident Tax for Non-PA Work Location calculation value. Enter Y as the value.
Click OK, and save your work.

For further info, see Configure Organization Calculation Cards for the US in the Help Center.

Configure Pennsylvania and Maryland Reciprocity

A local tax reciprocity agreement exists between Pennsylvania and Maryland, specific to four Pennsylvania Tax Collection Districts (TCD). For further info about which local tax districts within these four TCD codes allow reciprocity, see the Vertex Calculation guide.

When an employee works in Maryland and lives in Pennsylvania, the payroll process doesn't withhold Maryland state and county taxes where appropriate, if you do the following.

Configure your PSU or TRU to withhold Pennsylvania local taxes for employees working outside of Pennsylvania.
Set up the employee's Residency Certificate section of the tax card with the appropriate PSD code and school district info.
Enter Yes for Maryland Nonresident.

When an employee lives in Maryland and works in Pennsylvania, the payroll process doesn't withhold Pennsylvania local taxes where appropriate if you do the following.

Enter 880000 for the Resident PSD code in the Pennsylvania Residency Certificate section on the employee tax card.
Ensure the employee has the correct work PSD code pertaining to one of the four TCDs subject to this agreement. Enter the code in the Pennsylvania Residency Certificate section of the employee's tax card.
Enter Yes for Pennsylvania Nonresident.

For further info, see State Reciprocity Agreements in the Help Center.

Verify and Correct PSD Codes for New Employees

Confirm that any new employee's record has the correct PSD code and school district populated for the resident and work fields on their Residency Certificate. The New Hire process automatically populates the PA tax card with the PSD code and school district for the resident fields based on the city. However, that info may not be accurate because Pennsylvania addresses often have varying taxation jurisdictions. You must validate and correct this info accordingly.

To find the correct PSD code, go to the Pennsylvania Municipal Statistics website and click the Taxes link to find local withholding by address.

The payroll process also automatically populates the PSD code and school district for the work fields. These values are based on the info you entered when setting up your work location.

Once the resident PSD code and school district are correct, the payroll process withholds the higher of the two rates. Those rates are:

Resident rate (city and school)
Nonresident rate (city only)

In cases where the rate is the same, the payroll process automatically withholds the resident tax.

Configure Exemptions to Local Taxes

You can use the Pennsylvania Residency Certificate portion of the tax card to set exemptions for these local taxes.

Local Services Tax
City tax
School district tax

For further info, see Pennsylvania Tax Exemptions on the Help Center.