1. From whom is the employer to withhold the earned income/compensation tax? Changes for 2006.
The York Adams Tax Bureau will become a Non-Resident Collector for Earned Income/Compensation Tax Purposes. This will require all employers, business owners, and payroll services with clients located within the tax area of the York Adams Tax Bureau (Member District List) to withhold Earned Income/Compensation Tax from all employees, regardless where they reside, (Except Maryland residents) and remit the tax to the York Adams Tax Bureau. It will become the responsibility of this tax bureau to forward the tax to the proper taxing authorities and to the other tax offices where the employees reside. Employers should continue to withhold the tax at the proper rate for employee’s residing in the same School District as the business is located. The required maximum tax rate for Non-resident collection is one percent (1%). Additional tax may be withheld at the agreement of the employer and employee.
Note: If an employer located in York Adams Tax Bureau taxing district, employs individuals outside Pennsylvania who also work outside of PA., no local tax should be withheld or sent to the York Adams Tax Bureau as the employee’s neither live or work in PA.
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2. When is an employer required to register with the York Area Tax Bureau?
Within 15 days of locating an office, factory, workshop, branch, warehouse or other place of business within the taxing district, an employer who employs one or more persons (other than domestic servants in a private home) for a salary, wage, commission, or other compensation, shall register with this bureau and deduct the tax from residents of that district and nonresident employee's wages.
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3. Are Photocopies of W-2s acceptable?
Yes. We do accept photocopies of W-2s. In lieu of actual W-2 forms, we will also accept a report listing the following information: Name, address, social security number, gross wage and local tax withheld.
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4. Should W-2s be submitted if no local tax was withheld?
It is not a requirement but we do accept W-2s that show no local withholding. We can use this information to check against what the individual taxpayers have filed.
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5. Is it a requirement to submit W-2 information on magnetic media?
Yes, if the employer has 250 or more employees. Our web site contains the specifications for magnetic media information.
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6. Should employers send copies of 1099's?
It is not a requirement but we do accept copies of 1099's.
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7. What should an employer do if the account does not balance when sending the Form 322 reconciliation statement and W-2s?
A. If tax is due - send the additional amount with the W-2s. If the 4th quarter tax has not yet been paid, the additional amount due can be included in that payment.
B. If the account was overpaid - indicate the difference and request a refund in writing with a signature, or indicate the overpayment is to be applied to the next quarter. It is important that the employer indicate what is to be done with the tax overpayment
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8. How should paid health insurance be handled on W-2 Forms for S-Corp Shareholders?
S-Corp shareholders who receive a W-2 form with paid health insurance included as compensation or as earnings for federal tax purposes, should exclude the premium amount paid for health insurance on the shareholder's W-2 form for local earnings AND also state on the W-2 the amount of the exclusion AND the code SCHI for 'S-Corp health insurance' on the W-2 forms.
Any S-Corp shareholder W-2 not containing this information for local tax purposes will be taxed on the gross compensation or earnings figure indicated on the W-2 form, unless or until an acceptable letter of explanation is received by this Bureau, from the S-Corp for each applicable shareholder. The letter must provide the facts and figures applicable to the individual shareholder for that shareholder's W-2 Form.
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9. Are Maryland employers required to withhold from PA residents?
No, it is not a requirement. If you as an employer choose not to withhold
the employee is then required to make estimated payments if tax owed is more
than $100.00 per tax year. Form ES-77 is the form the individual would use to
file and pay the tax due if not withheld. We do however greatly appreciate if
you choose to withhold on the PA residents.
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10. What is taxable and not taxable Compensation?
Refer to the Form 214 Instructions listed under the Individual Tax Return Section.
Also refer to Taxability of Compensation and Benefits for 2006.
Section 125 Cafeteria Plans (Health Care Portion Only) are no longer taxable. Dependent care, Legal, adoption benefits portions are all taxable.
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11. Can Earned Income/Compensation withholding and EMST tax (formerly OPT) be remitted on same check?
Yes, if we are the collector for the EMST tax. See - Information About Other Taxes That We Collect - for municipalities we collect the EMST tax. Also referenced in the Member District List.doc in Question 1.
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12. Is the employer required to withhold at the higher rate if the employee lives in a school district that has increased the rate of withholding?
Yes, if the business is located and the employee lives in the school district where the rate has increased.
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13. Is FSA Health Care taxable?
Flexible Spending Arrangements are employer-established benefit plans. These may be offered in conjunction with other employer-provided benefits as part of a cafeteria plan – NOT TAXABLE. Employers have complete flexibility to offer various combinations of benefits in designing their plan. You do not have to be covered under any other health care plan to participate. Self-employed person are not eligible for FSA.
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14. Are NON-QUALIFIED Deferred Comp Plans taxable?
Act 40 became law in July, 2005 Part of this bill addressed deferred compensation plans. For PA. Tax purposes, deferrals to nonqualified deferred compensation plans will not be includible in compensation. This would be taxable when the employee, retiree, etc. received the distribution. As we now follow the state’s definition of compensation, we will follow this ruling. Qualified plans (401K; 403b; 457b, etc.) ARE still taxable the year in which the deferral is made.
Note: Non-qualified deferred comp plans – is a compensation arrangement frequently offered to executives that defers the recognition of taxable income to a later date. Generally, a nonqualified deferred comp plan is an agreement or promise by an employer to certain individuals to pay compensation to those individuals at some future date. A nonqualified plan may also be a series of deferred compensation agreements between an employer and certain individuals that are considered to be a plan of benefits. They do not qualify for the special tax treatment afforded to plans that meet the qualification requirements.
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15. Paid-Time Off(PTO) Donation for Hurricane Katrina relief – would such a donation be tax free to employee for Local Income Tax purposes?
The donation would be tax free to the employee for local income tax purposes – assuming this donation would not appear on the employee’s W2 as part of their income for the year and as the employee will realize no benefit from the donation. It would not be taxable.
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16. Is Adoption Assistance taxable?
It is called a Tax Benefit Program by the Federal Government. If the check is given to employee it is NOT TAXABLE. If it is given to a third party it is TAXABLE.
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