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Notice to Pennsylvania Employers Responsible for Personal Income Tax Withholding

Effective January 1, 2004, Pennsylvania’s personal income tax rate increased from 2.8% to 3.07%. For employer withholding purposes, the increase applies to all compensation paid or made available after December 31, 2003, even if the compensation was earned for a period prior to the payment date. An employer who failed to withhold at the higher tax rate for compensation paid on or after January 1, 2004, is required to withhold the difference from later compensation payments ("catch-up" withholding).

In order to allow employers to adjust their withholding for the change in the tax rate, the Department is allowing employers a grace period in which to collect and remit catch-up withholding without incurring interest and penalties. No interest will be imposed on catch-up withholding that is collected on or before March 31, 2004, and remitted no later than the employer’s first scheduled remittance date thereafter (Semi-Monthly employers – 4/5/04; Monthly employers – 4/15/04; and Quarterly employers – 4/30/04). Any catch-up withholding remitted thereafter will be subject to applicable interest and penalties.

Any employer with questions regarding this Notice may contact the Department’s Taxpayer Service & Information Center at (717) 787-1064; TT # 1-800-447-3020 (services for taxpayers with special hearing and speaking needs).