As a sole proprietor in Virginia doing remote contract work for a Pennsylvania nonprofit, am I exempt from 1099-MISC withholding?

May 31, 2019

askacpaiconI am a sole proprietor in Virginia who will be doing mostly remote contract work for a Pennsylvania nonprofit. The contract total will be over $5,000 plus expenses. I have provided the client with my W-9, and they now want me to complete REV-1832, 1099-MISC Withholding Exemption Certificate. Being in a reciprocal state, am I exempt? If not, what needs to happen next?

There is a box under “Exemption Reason” on the PA 1099-MISC Withholding Exemption Certificate (Form REV-1832) for “Not Subject to PA Income Tax.” There is also a box for “Payee is a nonresident with no PA-source income.”
  
A Virginia resident who is not traveling to Pennsylvania to perform services (i.e., doing mostly remote contract work) would not be subject to the new Pennsylvania tax withholding on payments made to nonresidents.
  
The reciprocity agreement applies only to wage or salary income, not self-employment income. So, independent contractors who are nonresidents but spend work days in Pennsylvania would still be required to use a method of allocation and apportionment prescribed by the regulations under Pennsylvania Statutes Title 72 P.S. Section 7310. 

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

Answered by: Paula A. Rummell, CPA, is tax senior manager with H2R CPA in Pittsburgh.

Pennsylvania CPA Journal

Read the latest from the Pennsylvania CPA Journal online or via the mobile app and digital edition.

Read More

CPA Now

Get the latest info on professional trends, management, and leadership skills on CPA Now.

Read More

Premier Sponsors

Platinum Sponsors

Gallagher Bollinger Logo
CPACharge


Silver Sponsors

Paychex logo
Capstan Logo
epsa USA


Bronze Sponsors

sage-logo_bright_green_rgb_2018_28469
TaxConnex_logo_TM_tagline2019
botkeeper1
Fox School of Business, Temple University


Interested in becoming a sponsor? View packages >