Employers To Withhold Local Taxes In January

PITTSBURGH (KDKA) — Have you heard about a state law that’s going to reduce your take-home pay come January?

It’s news to a lot of people, as KDKA Money Editor Jon Delano found out.

A law passed in 2008 requires all employers in 2012 to withhold the local municipal and school earned income taxes that many workers now pay on their own.

Right now, companies are only required to withhold the local taxes of residents of the municipality in which the company is located.

Sheila Payne lives in Ingram but works in Pittsburgh.

“I haven’t heard anything about that, but that sounds like a good plan to me so I don’t have to worry about it in the future,” says Payne.

That’s part of the idea, says Mary Abbott, who chairs the new tax district that administers this withholding in part of Allegheny County.

“This is actually an improvement for them because it is required that their employer as of January 1st will withhold their earned income tax,” says Abbott.

Delano: “So they won’t need to file these quarterly reports?”

Abbott: “That’s correct. That’s correct.”

Of course, it will reduce the money in your paycheck.

And part of your tax dollars will pay for-profit tax collection companies doing what your tax collector once did.

“In our district, the cost of collection is 1.8 percent. Mt. Lebanon’s current cost of collection is 1.5 percent, so there is a small increase in the cost of collection.”

But business advocates like SMC Business Councils say the biggest burden falls on employers, especially small business.

“It’s going to increase the administrative work on getting this set up,” says Bill Snyder of SMC Business Councils. “It’s going to be huge to set this up for the employers the first time because you’ve got to get all your employees.”

While this law may pose some challenges for employers, here’s another wrinkle.

While your employer is taking your money out of your paycheck, they don’t have to turn it in to the government except on a quarterly basis. That means they get to use your money in the meantime.

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  • ramona barnhart

    i think its a bunch of bs put people like my husband and i further behind on our bills. its time to make people who owes the goverment to start paying their dang back taxes. especially if they owe millions of dollars. quit slapping them on the dang gone wrist.

  • Eric Miller

    This story is being very poorly reported! Mr. Delano is making it sound like Earned Income Tax is something new. Those of us who file our quarterly or yearly returns have been paying EIT our entire careers. A portion goes to the municipality where you live and a portion goes to your local school district. The current collection system is old and forces workers to file a seperate return and remit payment. The new system will be more efficient for employers as well as employees and will ensure a higher collection rate. Let’s face it, there are many dishonest people out there who never file this return and the current system makes it almost impossible to track down delinquents. Mr. Delano, I suggest doing a follow up story and investigate the current collection rates…i.e. how many folks currently don’t pay their EIT and get away with it.
    Your comment about employers using that money while holding it is misleading! It’s being held to make the quarterly payments, it’s not going anywhere. Interest rates are about .03 percent right now, so no one is making a bunch of money there. Also, by moving from local collectors to larger collection firms, the collection rates go up and we get more out of our fees that we are paying to have the taxes collected.
    Your facts are a little muddy all the way around here.

  • weisser wolf

    The reral story here should have been the CONSTITUTIONALITY of this tax! Also, just as with the Federal “Income Tax”, why are employers acting as tax collectors for the government?!?!?! I don’t know when this tax started but the first time it was even mentioned in Harrisburg, the citizenry should have marched there with pitchforks…

  • weisser wolf

    Notice too how the tone of the story is pitched as one of conveinience, now that the worker “won’t have to bother with those pesky old taxes” themselves, they can have their employer do them for them!!

  • Dave

    Anyone who works pays Earned Income Tax, so this is nothing new. It is NOT a new tax. The only thing changing is now the employer, no matter how small the business, is responsible for taking the tax out of your check and sending it to Jordan Tax Services, who will then submit the tax to the appropriate municipality. This is an action being done by the state. Its intent is to make certain that those tax avaders who are on their honor to pay quarterly EIT and haven’t, will have to do so. Again, it is NOT a new tax. You will NOT be paying anymore. The only thing changing is the manner in which you’re paying. Most people already have EIT deducted out of their paychecks, but for those who do not, they will no longer have the option of paying their municipality quarterly. Instead, the employer will deduct the tax out of the employee’s paycheck.

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