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Nonresident Withholding Guidance

Pennsylvania Personal Income Tax law provides for a withholding obligation for certain payors of Pennsylvania-source income and lessees of Pennsylvania real estate to nonresidents.

Anyone that makes the following payments is required to withhold from such payments an amount equal to the tax rate specified per 72 P.S. § 7302 (currently 3.07%):

  • Payments of Pennsylvania source non-employee compensation or business income to a nonresident individual or disregarded entity that has a nonresident member, if they are required to report the payments on a 1099-MISC or 1099-NEC for federal income tax purposes.
  • Lease payments for Pennsylvania real estate made from a lessee in the course of a trade or business to a to a nonresident lessor.

NOTE: Withholding is optional for payors or lessees paying less than $5,000 annually. However, if you are unsure of the total amount of payments that will be made during the year, the department encourages you to withhold and remit income tax from all payments made.

Governmental payors, including the Pennsylvania State System of Higher Education and its institutions, are exempt from the requirement of withholding on non-employee compensation and business income.

Non-Employee Compensation

Typically, a payment is considered “non-employee compensation” if it is made to: (i) someone who is not your employee; and (ii) for services in the course of your trade or business.

Lease Payments

A lease payment includes, but is not limited to, rents, royalties, bonus payments, damage rents and other payments made pursuant to a lease.

A lessor includes only individuals, estates and trusts.

Payor/Lessee Responsibilities

  1. Registering - Any payor/lessee required to withhold must apply for a 1099-MISC/NEC withholding account by completing a PA-100 Pennsylvania Enterprise Registration Form electronically at www.pa100.state.pa.us. If you already have an employer withholding account and you do not want to report the 1099-MISC/NEC separately, you do not have to complete a new registration. However, if you want to report the 1099-MISC/NEC separately, you must register for a 1099-MISC/NEC withholding account.
  2. Withholding and Remittance Requirements - Payors and lessees are required to withhold and remit taxes on income according to the following schedule:
  • Semi-Weekly – If total withholding is $5,000 or greater per quarter ($20,000 per year), such payors are required to make withholding deposits on the following Wednesday for any payments made on Wednesday, Thursday or Friday; and on Friday for any payments made on Saturday, Sunday, Monday or Tuesday.
  • Semi-Monthly - If total withholding is $1,000 to $4,999.99 per quarter, the taxes are due within three banking days of the close of the semi-monthly period.
  • Monthly – If total withholding is $300 to $999 per quarter, the taxes are due the 15th day of the following month.
  • Quarterly – If total withholding is under $300 per quarter, the taxes are due the last day of April, July, October and January.

The (REV-1716) Period Ending and Administrative Due Dates for the Remittance of Employer Withholding and filing of Quarterly Returns and W-2 Forms can be located on the Department of Revenue website by searching under Employer Withholding Forms.

Withholding tax payments, quarterly returns, and annual reconciliations must be submitted electronically to the department through e-TIDES, the department’s online business tax filing system. All payments of $1,000 or more must be remitted by Electronic Funds Transfer (EFT). Electronic payments can be made through e-TIDES at  www.etides.state.pa.us.

  1. Annual Filing Requirements - The Annual Withholding Statement (REV-1667), along with the individual 1099-MISC/NEC forms, must be filed electronically with the department through e-TIDES by January 31 of the ensuing tax year.
  2. Issuing 1099-MISC/NEC - Payors or lessees are required to file a Federal Form 1099-MISC/NEC with the department and are required to provide a copy to the payee or lessor by January 31 of the ensuing tax year.
  3. Corrected 1099-MISC/NEC - File a corrected Federal Form 1099-MISC/NEC if it is issued to a payee or lessor and the amounts related to income from sources within Pennsylvania changes for nonresident recipients or the total amount changes for resident recipients.

Payee/Lessor Responsibilities

Payees and lessors having tax withheld who receive a copy of the Federal Form 1099-MISC/NEC from the lessees are required to file a copy thereof with their Pennsylvania tax return.