Act 43 of 2017 created a withholding obligation for certain payors of Pennsylvania-source income and lessees of Pennsylvania real estate to non-residents. It 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 payments is required to withhold from such payments an amount equal to the tax rate specified per 72 P.S. §7302 (currrently, 3.07%):
- 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.
- A lessee of Pennsylvania real estate who makes a lease payment in the course of a trade or business to a non-resident lessor.
Governmental payors, including the Pennsylvania State System of Higher Education and its institutions, are exempt from the requirement of withholding on non-employee compensation and business income.
Typically, a payment is considered "non-employee compensation" if it is made to: (i) someone who is not your employee; and (ii) for services in the course of your trade or business.
A lease payment includes, but is not limited to, rents, royalties, bonus payments, damage rents and other payments made pursuant to a lease. A lessor includes only individuals, estates and trusts.
PAYOR / LESSEE RESPONSIBILITIES
Any payor/lessee required to withhold must apply for a 1099-MISC withholding account by completing a PA-100 Pennsylvania Enterprise Registration Form electronically at www.pa100.state.pa.us. If you already have an employer withholding account and you do not want to report the 1099-MISC separately, you do not have to complete a new registration. However, if you want to report the 1099-MISC separately, you must register for a 1099-MISC withholding account.
WITHHOLDING AND REMITTING
Payors and lessees are required to withhold and remit taxes on income according to the following schedule:
- Semi-Weekly - If total withholding is $5,000 or greater per quarter ($20,000 per year).
- Semi-Monthly - If total withholding is $1,000 to $4,999.99 per quarter, the taxes are due within three banking days of the close of the semi-monthly period.
- Monthly - If total withholding is $300 to $999 per quarter, the taxes are due the 15th day of the following month.
- Quarterly - If total withholding is under $300 per quarter, the taxes are due the last day of April, July, October, and January.
FILING AND PAYING
If the payor or lessee is required to perform electronic filing for Pennsylvania employer withholding purposes, the Federal Form 1099-MISC shall be filed electronically with the Department. Electronic submission is available through the Department's e-TIDES system.
If the payor or lessee is not required to perform electronic filiing for Pennsylvania employer withholding purposes but is registered to do so, the Federal Form 1099-MISC may and is strongly encouraged to be filed electronically with the Department through e-TIDES.
If the payor or lessee is neither required nor registered to perform electronic filing for Pennsylvania employer withholding purposes and does not wish to register via e-TIDES, the Federal Form 1099-MISC shall be submitted in paper format to: The Pennsylvania Department of Revenue, P.O. Box 280412, Harrisburg, PA 17128-0412.
The annual withholding statement (REV-1667R), along with the individual 1099-MISC forms, must be filed electronically with the Department by January 31 of the ensuing tax year.
Payors or lessees are required to file a Federal Form 1099-MISC with the Department and are required to provide a coy to the payee or lessor by January 31 of the ensuing tax year.
If a corrected Federal Form 1099-MISC is issued to a payee or lessor and the amounts related to income from sources within Pennsylvania changes for nonresident recipients or the total amount changes for resident recipients, a paper copy of the corrected Federal Form 1099-MISC should be submitted in paper format to: Pennsylvania Department of Revenue, P.O. Box 280412, Harrisburg, PA 17128-0412.
IMPORTANT: If 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 the payee or lessor pays the tax, the Department cannot collect the Personal Income Tax from the payor, but it can collect interest and penalties attributable to any late payment of Personal Income Tax by the payee to the payor.
PAYEE / LESSOR RESPONSIBILITIES
Payees and lessors having tax withheld who receive a copy of the Federal Form 1099-MISC from the lessees are required to file a copy thereof with their Pennsylvania tax return.
FREQUENTLY ASKED QUESTIONS
To view a list of Frequently Asked Questions, click here to visit the Pennsylvania Department of Revenue website and view and/or download a .PDF of the 1099-MISC Fact Sheet.