Pennsylvania Employer Payroll — PA-W3 Reconciliation, UC-2, Act 32 LEIT & LST

Register the employer with all required Pennsylvania tax authorities before the first payroll. A PA employer must obtain a PA Employer Withholding Account number from the PA Department of Revenue (PA DOR) via the PA Online Business Entity Registration (myPATH portal), register for Unemployment Compensation (UC) with the PA Department of Labor & Industry (L&I), and register with the appropriate Act 32 Tax Collection District (TCD) tax officer (Berkheimer, Keystone Collections, Jordan Tax Service, etc.) for the worksite county. If operating in Pittsburgh, also register for the Pittsburgh Payroll Expense Tax with the City of Pittsburgh Department of Finance.

For each new hire, collect the federal Form W-4, Pennsylvania Form REV-419 (Employee's Nonwithholding Application Certificate, if the employee claims exemption from PA SIT withholding), and — critically — the Act 32 Residency Certification Form CLGS-32-6. The CLGS-32-6 captures the employee's home PSD code and resident LEIT rate, plus the worksite PSD code and non-resident LEIT rate. These codes are looked up at munstats.pa.gov. The employer must also complete Pennsylvania new-hire reporting within 20 days of hire by submitting the new hire to the PA New Hire Reporting Program (via the PA DOR portal or TALX/National Directory of New Hires).

On each payroll, compute and withhold three layers of tax for each PA employee: (1) Pennsylvania state income tax (PA SIT) at the flat 3.07% rate on gross compensation; (2) Act 32 LEIT at the higher of the employee's resident PSD rate or the worksite non-resident PSD rate, applied to the LEIT base — which excludes §125 cafeteria plan pre-tax deductions but includes §401(k) pre-tax deferrals (PA does not conform to the federal §401(k) exclusion); and (3) LST flat deduction if the worksite municipality imposes it. Code the LEIT withholding to the employee's resident PSD for remittance routing.

At the end of each calendar quarter, remit three sets of payroll taxes: (1) Pennsylvania state income tax withholding to PA DOR via myPATH (semi-weekly, monthly, or quarterly deposit schedule depending on withholding volume — employers withholding $1,000+ per quarter must remit monthly or semi-weekly; smaller employers remit quarterly by the last day of the month following the quarter end); (2) Pennsylvania Unemployment Compensation contributions to PA L&I on Form UC-2/UC-2A, due the last day of the month following quarter end; and (3) Act 32 LEIT withholding to the applicable TCD tax officer, due 30 days after quarter end (Apr 30, Jul 31, Oct 31, Jan 31).

By January 31, issue W-2s to all employees. By February 28 (for most TCD tax officers) or January 31 (for some), file the Act 32 annual employer reconciliation with each TCD tax officer, listing per-employee PSD code, gross compensation, and LEIT withheld. By January 31, file the PA state annual withholding reconciliation (REV-1667 W-2 transmittal) with PA DOR via myPATH, attaching electronic W-2 files. The W-2 must reflect PA SIT in Box 16, LEIT in Box 19 (with PSD code in Box 20), and LST amounts if applicable — if an employee had multiple work PSDs, multiple lines are required in Boxes 18–20.