PA Tax Alert for 1099-Filers:  Withholding Required for Non-Employee Compensation and Certain Lease Payments to Non-Residents

Posted on Wed, Jan 03, 2018 ©2021 Drucker & Scaccetti

1200px-Seal_of_Pennsylvania.jpgBy:  Rachel Kieser, CPA, MT

As is the case each year, Forms 1099-MISC must be filed by January 31, 2018.  This year, however, 1099 filers in Pennsylvania must pay special attention to a new law (Act 43) released by Pennsylvania on December 14, 2017.

Starting January 1, 2018, anyone that pays Pennsylvania-source non-employee compensation or business income to a non-resident individual or disregarded entity with a non-resident member and must file a Federal Form 1099-MISC may have to withhold Pennsylvania income tax at the current rate of 3.07% from these payments.


Additionally, anyone leasing Pennsylvania real estate that makes a lease payment in the course of their trade or business to a non-resident lessor who is an individual, trust, or estate (including a disregarded entity owned by an individual, trust, or estate) is also required to withhold Pennsylvania income tax at the current rate of 3.07% from the lease payments.


Withholding is optional for payors or lessees paying a payee or non-resident lessor less than $5,000 annually, and government payors (except for state owned and state affiliated universities) are generally exempt from the withholding requirements.


Taxpayers unsure of the total payments that will be made to a payee or lessor during the year are encouraged to withhold and remit tax from all payments to the payee or lessor.


Lessees must submit a Federal Form 1099-MISC to both the lessor and the Pennsylvania Department of Revenue showing the amount paid to them from Pennsylvania sources and the Pennsylvania withholding.


In addition, payors and lessees subject to these provisions must apply for a 1099-MISC withholding account by completing Form PA-100, and additional filing and reporting requirements apply including withholding returns filed at least quarterly.


Depending on the level of withholding per quarter, taxes must be remitted via Pennsylvania’s e-TIDES online system semi-weekly, weekly, monthly, or quarterly.  Therefore, if you believe you or your company is subject to these rules, it is extremely important to review your list of payees immediately to determine your potential remittance schedule and to register with Pennsylvania.


See Pennsylvania Notice 2017-01 for more detailed information and look for our follow-up blog which will provide a more in-depth discussion of the new requirements.

Topics: Withholding, Pennsylvania, 1099-MISC, Kieser, Act 43, Pennsylvania withholding, Pennsylvania income tax, Pennsylvania Notice 2017-01

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