1099-MISC Withholding for Pennsylvania Businesses

Ruling Affects Nonresidents Working for Pa. Businesses

Issue 

New 1099-MISC withholding obligation for Pennsylvania businesses began Jan. 1, 2018, as a result of Act 43 of 2017. The additional administrative burden and compliance costs to businesses is significant, and taxpayers have had limited time to comply with the new requirement. Moreover, the guidance to businesses and practitioners to date has been murky.

In late January the PICPA wrote to the Department of Revenue (DOR) requesting a delay in the requirement.

It is important to note that while the new reporting requirement is cumbersome and complicated, there were other, much more onerous options on the budget table last year during negotiations.

One such option would have made the tax appeals process virtually off-limits to all CPAs. Through the efforts of the PICPA and other business organizations, we were able to keep the worst proposals from the final package.

In response to PICPA’s request to the DOR, the department has agreed to take the following actions:

• 1099-MISC income that is subject to the withholding provisions of Act 43 of 2017 will not be subject to assessment for a failure to withhold for a period ending prior to July 1, 2018. However, when tax is withheld, it must be filed and remitted as required by law.
• DOR expects that payors/lessors will timely file the related 1099-MISC, with boxes 16 and 17 completed, with the department in January 2019.

Understanding the New 1099 Requirement

For more information, contact the PICPA Government Relations Team at governmentrelations@picpa.org or (717) 232-1821.