Payroll tax in Pennsylvania: What employers need to know [2024]

Hiring in the Keystone State? If you have Pennsylvania employees on payroll (or are based in the state and hire nonresident employees), it’s crucial to stay on top of your manifold tax obligations. Because Pennsylvanian employers need to not only adhere to federal regulations like FICA taxes (including a Medicare tax and Social Security tax) and federal income taxes. There are also state tax requirements—like a flat personal income tax rate and unemployment contributions—and even local taxes levied across dozens of different municipalities. 

Whether you’re just getting a new Pennsylvania small business up and running or running a global company with Pennsylvania employees, it’s important to understand, pay, and file your taxes on time to avoid any costly compliance mishaps. So read on for our guide on everything you need to know about Pennsylvania’s payroll taxes. 

Pennsylvania's payroll taxes

The Pennsylvania Department of Revenue administers the state's payroll taxes. Employers are required to withhold taxes from paychecks for any Pennsylvania resident employees or nonresident employees working within state boundaries. 

Pennsylvania has both a state income tax levied at a flat rate and local taxes which vary across 69 tax collection districts designated by the Department of Community and Economic Development (DCED). Employers have to report new employees online within 20 days of the hiring date, so Pennsylvania authorities can monitor contributions to benefits programs. Failure to report can carry a $25 fine per violation. 

Learn more about Pennsylvania's payroll taxes below.

Unemployment insurance tax

Pennsylvania's Unemployment Compensation (UC) fund is a state-run program that offers temporary payments to employees who lost their jobs for reasons outside of their control. Pennsylvania's UC Office sends employers a different contribution rate every calendar year, which is applied to an employee's gross wages.

The UC Office uses several types of rates to determine employer contributions for unemployment. If you're paying wages for the first time, Pennsylvania authorities assign a "new employer" rate, which currently has a base withholding of 10.5924% for employees in construction and 3.822% for all other employees, plus a surcharge adjustment, which is subject to change annually. 

The office also levies a standard contribution rate, which changes based on an employee's reserve account balance, an experienced-based rate after an employer pays into the UC scheme for two years, and a delinquency rate if an employer hasn't filed quarterly UC tax returns or paid full contributions. 

Visit the UC office website for more information on how unemployment rates are calculated. Keep in mind that this state-run unemployment fund is separate from federal unemployment taxes, which employers also have to withhold at a rate of 6% of the first $7,000 of an employee's wages. 

Local Earned Income Tax

Pennsylvania employers have to withhold and remit a local Earned Income Tax (EIT), which varies by municipality. The state assigns six-digit Political Subdivision (PSD) codes to establish tax collection agencies and set separate tax rates. Philadelphia County's code, for instance, is 510101. 
Employers need to submit a Residency Certification Form to register for EIT and can search their address online to find their PSD code and EIT rate. Below is a quick sampling of rates across Pennsylvania's three most populous counties.

Local Services Tax

Many Pennsylvania municipalities also levy a Local Services Tax (LST), imposed for doing business in certain designated cities, including Pittsburgh, Scranton, and Harrisburg. Employers typically withhold LST on their employees' behalf. Individual employees only contribute a max of $52 per year. Regions with LST rates of $10 or less can exempt taxpayers earning less than $12,000 annually. 

Personal income tax

The state of Pennsylvania levies a flat personal income tax rate of 3.07%, the lowest flat rate of any state in the US. Employers can withhold personal income tax from employee paychecks, though the state can also collect this tax based on information from an employee's tax return. While the Pennsylvania Department of Revenue doesn't offer the same standard deductions as federal income taxes, taxpayers write off contributions to some health savings accounts and tuition programs. 

Workers' compensation insurance

Pennsylvania state law requires most employers to provide workers' compensation insurance to cover expenses for employees who suffer work-related injuries or illnesses. Employers can get coverage through the Pennsylvania Department of Labor & Industry's State Workers' Insurance Fund (SWIF), which has an online application, or through other licensed carriers.

Exemptions from workers' compensation include:

• Short-term agricultural workers
• Domestic servants
• Railroad workers
• Federal employees

Sifting through Pennsylvania’s payroll tax laws can get complicated, especially when trying to keep track of hyper-local requirements across the state’s 69 tax collection districts. But Rippling’s payroll compliance software is here to help. 

Rippling automatically calculates your taxes and submits your tax forms and employer withholdings on your behalf. The system handles taxes at the federal and Pennsylvania state and local levels to monitor compliance and prevent infractions. What’s more, Rippling’s PEO can register and maintain your state tax accounts for you, automating even more of the payroll tax process.

Payroll tax due dates in Pennsylvania

The Pennsylvania Department of Revenue assigns different schedules for due dates for employers to submit their withholdings, depending on how much they’re paying. The table below lists the withholding amount ranges along with how often employers have to pay taxes and when those taxes are due.

Employers are also required to file quarterly W-2 for their employees. Returns for local EIT withholdings are due quarterly—on the last day of April, July, October, and January—by submitting a form available online.

How to submit payroll taxes in Pennsylvania

Once you know which payroll taxes employers are on the hook for and when those taxes are due, the next step is paying them. Before filing, to determine your local—both EIT and LST—requirements, search your work address in the DCEC portal to find your PSD code and withholding rates. 

Once you have all the information and paperwork you need, you can register for an account with the Pennsylvania Department of Revenue’s online tax platform known as myPATH (myPath.pa.gov). Here, employers can make tax payments, file returns, and monitor their filing status. Payments of more than $1,000 need to be made using an Electronic Funds Transfer (ETF). You’ll need to provide your IRS-administered Employer Identification Number (EIN) to register for withholdings. 

The state also allows employers to file and pay taxes through approved third-party vendors, including Cash App Taxes and OnLine Taxes. 

The Pennsylvania Department of Revenue allows employers to submit paper returns for less than 10 W-2 forms and Annual Withholding Reconciliation Statements (REV-1667). 

You can also file or pay by phone using Pennsylvania’s TeleFile system, by calling 1-800-748-8299, providing your EIN, eight-digit Employer Account Identification number, and information about your withholdings. 

For more information about filing and paying Pennsylvania taxes, consult the Department of Revenue’s Business Tax Services page. 

Rippling’s full-service payroll software

If you’re looking for the easiest stay on top of Pennsylvania’s tax requirements, Rippling’s payroll software can automatically calculate and file federal, state, and local taxes while managing compliance. 

FAQs about Pennsylvania payroll taxes

Are there local tax laws in Pennsylvania?

Yes. In addition to federal tax requirements, Pennsylvania employers have to pay taxes on Unemployment Compensation (UC), a local Earned Income Tax (EIT), and often a Local Services Tax (LST). The EIT and LST requirements vary across Pennsylvania’s 69 tax collection jurisdictions. The state of Pennsylvania also levies a personal income tax at a flat rate of 3.07%. 

Can your tax returns be audited in Pennsylvania?

Yes. Pennsylvania regulations allow officers across the state’s different tax collection districts to audit records of individual taxpayers and employers. According to the UC office, several thousand employers are audited annually to ensure compliance with Pennsylvania’s unemployment insurance scheme. 

How do Pennsylvania employers withhold taxes for nonresident employees?

You should withhold income taxes for any nonresident employee, unless they live in Indiana, Maryland, Ohio, New Jersey, Virginia, or West Virginia—all of which have reciprocal tax agreements with Pennsylvania. If an employee from one of these six states provides an Employee’s Nonwithholding Application Certificate (REV-419), you don’t have to withhold their income taxes.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for, tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.