Beginning January 1, 2018, Act 43 of 2017 created a withholding requirement for payors of Pennsylvania-source non-employee compensation and business income to non-resident individuals (or disregarded entities with a non-resident owner). Essentially, Pennsylvania corporations and not-for-profits will now be required to withhold income tax from non-resident non-employees or single-member LLCs owned by a non-resident.
In addition, lessees of Pennsylvania real estate making “lease payments” to non-resident lessors in the course of a trade or business are also required to withhold personal income tax on such payments. Residential rental payments are exempt from the withholding requirement. Withholding of tax is required for payments of $5,000 or more annually and is optional on payments of less than $5,000.
Payors and lessees are required to withhold and remit the income taxes as required by law. The 1099-MISC forms will need to be filed with the Pennsylvania Department of Revenue in January 2019 with boxes 16 and 17 completed, along with the Annual Withholding Statement (PA Form Rev-1667).
The 1099-MISC income subject to the new withholding provisions of Act 43 of 2017 will not be subject to assessment for a failure to withhold on payments made prior to July 1, 2018. Details regarding the new tax withholding requirement can be found on the PA Department of Revenue’s website at www.revenue.pa.gov.
If you are a Pennsylvania business owner with questions on the new 1099-MISC withholding tax requirements, contact our office.
See Also:
Do I Really Need to File 1099s?
Employee or Contractor? It Pays to Know the Difference
Associate Partner
Kim has developed a primary focus on providing accounting, tax, and advisory services to the professional service area, including law firms and medical practices.
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