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Payroll Taxes This page is intended primarily for Pennsylvania employers although the Federal information is applicable in all states.
Local In Pennsylvania, localities (other than large municipalities) are authorized to levy up to 1% personal income tax. If the employee lives in a locality were the tax is applied or if the employer is in a locality where the tax is applied, withholdings from the employees paycheck are required. To find out if your municipality levies the tax go to the PA website: http://ctcoas01.state.pa.us/dced/mss.dyn_cnty_tax_2003.show.
State Employers in Pennsylvania are required to remit two types of taxes - Personal Income Tax (PIT) and Pennsylvania Unemployment Compensation (PAUC). The PAUC taxes encompass two parts explained below. The Pennsylvania Income Tax rate is 2.8% for 2003 and 3.07% for 2004. The tax is reported Semi monthly, monthly or quarterly based on the level of tax liability. The Pennsylvania Unemployment Compensation rate varies by employer due to claims experience. The rate is applied to the first $8,000 in wages per employee per year. In 2003 there is a withholding from employees provision at .02% (.0002). In 2004 the rate will increase to .09% (.0009). This tax, along with a wage listing, is reported and paid quarterly.
Federal Employers are required to remit four types of taxes. Three of the four are reported on the quarterly 941. The 940 is an annual form. Deposits for the 941 and 940 may be required to be made more frequently than the reporting requirements. For more information download Publication 15 from the IRS website. The 941 reports three types of taxes. Withholding taxes are based on tables provided by the IRS. Social Security is withheld from employees and also levied on the employer at a rate of 6.2% on the first $87,000 for 2003 and $87,900 for 2004. Medicare is withheld from employees and also levied on the employer at a rate of 1.45% on all wages. Deposit due dates for 941 taxes vary from next day to two weeks after month end based on the amount of tax due. The IRS determines your frequency unless the amount to be deposited is greater than $100,000 which is due the day after your payroll. The form is due on the last day of the month following the calendar quarter or the next business day. The 940, Federal Unemployment Tax (FUTA), rate is 0.8% (.008) and is applied to the first $7,000 in wages per employee per year. Therefore, the maximum charge per year per employee is $56.00. The FUTA wages and taxes are reported annually on the IRS Form 940. The taxes are due quarterly if the cumulative liability is equal to or greater than $100.00. The form is generally due on January 31st. If all of the 940 taxes and state unemployment taxes have been paid on time you get an additional 12 days. Other Due Dates For Employers W-2s (annual report of employee wages and withholdings) and the W-3 transmittal are due on February 28th or the next business day. 1099s (annual report of non-employee payments to individuals and certain other entities) and the 1096 transmittal are due on January 31st or the next business day.
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