Would a Maryland employer need to deduct Pennsylvania earned income tax and local services tax from a Pennsylvania resident’s pay?

by Eric S. MacCollum, CPA | May 01, 2019

Pennsylvania residents are subject to local earned income taxes (EIT) and local services taxes (LST). If a Pennsylvania resident works in Hunt Valley, Md., would the employer need to deduct Pennsylvania local EIT and LST from the employee’s pay? Should the employer not deduct any EIT or LST and tell the employee that they will need to remit it on their own? Would we consider it a courtesy withholding?

A Pennsylvania resident working in Maryland would be subject to the local EIT, but not the LST. The EIT is based on where you reside, while the LST is based on where you work. An employer would not be required to withhold the EIT; however, it may choose to do so as a courtesy. If the tax is not being withheld from pay, it is recommended that the Pennsylvania resident make estimated tax payments on a quarterly basis.

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Answered by: Eric S. MacCollum, CPA, is a principal with Hudak and Company in Lemoyne, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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