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

May 01, 2019
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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.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

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

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