As a follow up to Information Notice 2017-01 issued in January 2018, the Pennsylvania Department of Revenue recently issued new 1099-MISC Withholding Tax Requirements. These instructions contain reporting and payment instructions for payers responsible for reporting payment data relating to 1099-MISC reporting to the state of Pennsylvania.
Beginning on January 1, 2018, anyone making the following payments must withhold at the statutory rate of 3.07%:
- Payments of PA-source non-employee compensation or business income to a no-resident individual or disregarded entity that has a non-resident member and is reported on a 1099-MISC;
- A lessee of PA real estate who makes a lease payment in the course of trade or business to a non-resident lessor.
Withholding is optional for payors and lessees paying less than $5,000 annually: reporting is mandatory at and over the $5,000 threshold. Governmental payors are exempt from the withholding requirement as it relates to non-employee compensation and business income.
Please note that a failure to withhold on 1099-MISC income under Act 43 of 2017 will not be subject to assessment if that withholding period ended prior to July 1, 2018. However, taxes withheld during this period must be filed and remitted as required by law. Additionally, the PA Department of Revenue expects that payors/lessors who have filing obligations relating to the 1099-MISC, with boxes 16 and 17 completed, will be filed timely with the Department by January 2019.
Any payor or lessee with filing and payment requirements must file and pay electronically. In order to do so, they must apply for a 1099-MISC withholding account by completing PA-100 (PA Enterprise Registration Form) electronically at https://www.pa100.state.pa.us. Filers with an existing employer withholding account may use their existing account and do not need a separate 1099-MISC withholding account.
To review these new instructions in full, please click here.
About the Author
Paul Ogawa is a Junior Regulatory Counsel at Sovos Compliance. As part of the Regulatory Analysis team, his main areas of focus are state and federal tax withholding, the Affordable Care Act (ACA), and Canadian tax information reporting. Prior to Sovos, Paul worked as a litigation attorney in Boston area law firms, representing clients in insurance subrogation claims, family law matters, and employment disputes. Paul is a member of the Massachusetts Bar, earned his B.A. from Brandeis University and his J.D. from the Suffolk University Law School.More Content by Paul Ogawa