The Employer’s responsibility for withholding the earned income tax is based on the location of the business.  If a business is located in a jurisdiction (school district or municipality) that has an earned income tax, the employer is required to withhold this tax. The employer is required to submit the withholdings to the officer that collects for that jurisdiction.
 
An employer who is engaged in a business activity within and outside the approving subdivision (municipality or school district) shall withhold from resident and non-resident employees who work for such employers within the approving Subdivision even though the payroll records and place of payment are not in the approving Subdivision.

Every employer within one of our member municipalities who employs one or more persons, other than domestics, on a salary, wage, commission or other compensation basis shall within fifteen (15) days of becoming an employer, register with CapTax. 

Yes.  Employers must file a W-2 or Withholding Tax Statement by February 28th of the succeeding year for every employee who earned any taxable salary, wages, commissions or other compensation, setting for the employee’s name, address, social security number, amount of taxable compensation, and the amount of tax deducted from each employee.

Yes.  Legible photocopies will be accepted.

Employers are required to file year-end W-2 information electronically (in lieu of paper forms) when the number of W-2s to be submitted equals or exceeds the number of like returns required to be reported to the Social Security Administration (SSA) electronically.  The current threshold for this requirement is 250 W-2’s. 

CapTax follows the specifications and requirements for reporting W-2 information to the SSA with a few slight modifications, as follows.  For the current tax year, the relevant SSA reference publication is SSA Pub. EFW2. 

Electronic filers of W-2 information must follow these directions/ specifications when reporting to CapTax:

1)    The following records must be included on electronic reports to CapTax.  The fields that must be completed within each required record are also shown by their position numbers.  All other fields within required records must be included but do not have to be completed.  Additional records may be included/completed but they will not be read.

                        EFW2 Records 

                        Record    Record Positions
                        RA           1-11 & 38-171
                        RE           1-25 & 40-173
                        RS           1-149 & 308-330
                        RF           1-16

2)    The EIN field in the “RE” record must be the employer number that is used to transmit Earned Income Tax withholdings to CapTax (this may be different from the Federal EIN).

3)    Local tax information (i.e. local wages, local tax withheld and municipality of residency code) must be placed in the records and fields as designated for such in the SSA booklet.  In SSA’s (EFW2) booklet, the local tax fields are contained in the Code “RS” records.  The fields reserved for local income tax information are identified as “Taxing Entity Code”, “Local Taxable Wages”, and “Local Income Tax Withheld”.  The money amount fields must be unsigned, right-justified and zero-filled.

The political subdivision code should be placed in the SSA field identified as “Taxing Entity Code”.  The political subdivision code is a CapTax provided 4-digit numeric code used to identify the municipality in which the taxpayer lived on the last day of the tax year.  An alphabetical listing of the numeric codes for all municipalities (political subdivisions) is available online. 

4)    For electronic filings:
a)    Diskettes must be compatible with MS-DOS operating systems
b)    Files must be sequential
c)    8” diskettes are no longer accepted

5)    Employers granted a waiver from the IRS for filing W-2 information electronically will also be excluded from filing in such manner with CapTax providing they include a copy of their waiver from the IRS along with the paper filing of their W-2’s.  Employers failing to file electronically, when required, will be subject to non-filing penalties.

6)    A completed Form MAG-1 (enclosed) and a Form 512 (Employer’s EIT Reconciliation) must be submitted along with the electronic filing of The W-2’s. 
7)  Electronic filings may be submitted by email to our IT Director, Dave Gulden at:  dgulden@captax.com

8)    IMPORTANT – All electronic reports should be forwarded to our HARRISBURG Division even if withholding taxes are remitted to our Carlisle or Central Dauphin Divisions.  CD Roms and diskettes will not be returned to the employer when are CapTax is finished with them.  They will be destroyed or reformatted.

Technical questions concerning magnetic media filing with CapTax should be directed to CapTax IT Manager David Gulden at (717) 234.3217.

View the list of the tax rates of the municipalities collected by CapTax.

Yes.  Whenever an employee expects to earn, in the aggregate, less than twelve thousand dollars ($12,000.00) per fiscal year in earned income and net profits from all sources within a listed LST taxing jurisdiction, and the taxing jurisdiction opts, or is required, to provide for such an exemption, an employee may file a certificate for exemption (click here for Exemption form) with the employer directing that employer not to withhold the LST.

Note that if due to the low-income exemption, an employee may be exempt from the municipality portion of the LST, they may not be exempt from the school district portion of the LST. 

Yes.  An employee may also be exempt from withholding from the LST due to the occupation being that of a clergy person, a military disability, or a military reservist who is called to active duty during the taxable year. 

Where an employee has paid any valid LST for a prior occupation, for the same tax year, they should complete CTCB Form LST-Credit to determine the appropriate required employer withholding.  Absent such completed form, along with any required supporting documentation, the employer must withhold the entire tax. 

Each employer within a listed taxing jurisdiction, as well as those employers situated outside a listed taxing jurisdiction but who engage in business within a listed taxing jurisdiction, is charged with the duty of collecting the LST from each of his employees and making a return and payment thereof to Capital Tax Collection Bureau (CTCB). 

Failure to do so makes the employer liable for the tax as if it had been levied against the employer. 

Where an LST is levied at a combined rate of $10 or less the withholding of the entire tax amount should be withheld from the employee’s first pay, if sufficient in amount.

Where the LST is levied at a combined rate exceeding $10, withholding of the LST shall be made on a pro-rated payroll period basis for each payroll period during the calendar year.

For example, if an employer is in a taxing jurisdiction where the LST is $52 and the employee earns over $12,000 per year, the employer should withhold $1.00 per check if they pay employees on a weekly basis and $2.00 per check if they pay employees on a bi-weekly basis. 

In 2008, the Local Services Tax replaced the former Occupational Privilege Tax (OPT) and the Emergency and Municipal Services Tax (EMST), which provided direct funding to Pennsylvania municipalities for police, fire and other municipal services.  The LST is ordinarily deducted from an employee’s regular paycheck by their employer.

If you are a legal resident (registered to vote, registered for driver’s license, or use as home address) of the CapTax taxing body, and earned income from any source, you are required to report the income and pay the appropriate tax.

Taxpayers who are retired but working part time must still file a local tax return. If you received a tax form from CapTax you must still file that form.  Taxpayers who are retired fulltime will be registered accordingly and removed from CapTax’s list of taxpayers.

It depends on where you reside, since different school districts and municipalities have enacted various local taxes.  An individual taxpayer may be required to pay the following taxes, although it should be noted that CapTax may not collect all of these taxes for every municipality.

• Earned Income TaxLocal Services Tax
• Per Capita or Occupation Privilege Tax
• Mercantile and Business Privilege Tax (for business owners)
• Local & County Real Estate Tax (for property owners)

YES.  Employee contributions to an employer-sponsored deferred compensation plan are taxable in the year in which they are made, unlike the tax deferral offered at the federal level.  The Internal Revenue Service taxes deferred compensation when it is withdrawn from your account, but local taxes are imposed before the deferred amount is deposited into your retirement account.

All military pay, other than what is considered active duty, is taxable.

The law governing EIT Interests and Penalties is as follows:
(as found in PA Act 511 of 1965, Section 13, VIII,(a))

(a)    if for any reason the tax is not paid when due, interest at the rate of six percent per annum on the amount of said tax, and an additional penalty of one-half of one percent of the amount of the unpaid tax for each month
or fraction thereof during which the tax remains unpaid, shall be added and collected.  Where suit is brought for the recovery of any such tax, the person liable therefore shall, in addition, be liable for the costs of collection and interest and penalties herein imposed.

It is therefore established that the interest portion of the I & P is six percent (6.0%) per annum and the penalty portion is one-half percent (½ or .50%) per month (which also equates to six percent (6.0%) for twelve (12) whole months, or a year).  When CapTax calculates Interest and Penalties, we do so at the combined twelve percent (12%) per annum rate.  On occasion, CapTax will separately list the interest and penalties that are due.  Since both are in effect the same rate, simply divide by two (2) to determine their individual amounts.

As the word shall indicates, the application of I & P is not discretionary.  Discretionary items in the law are clearly marked by using the word “may” instead of the word “shall”.  This is often misunderstood since both the Federal and State income taxes have at least some penalties that are discretionary.

Please also note the phrase “for any reason the tax is not paid when due” in the law, which describes when I & P shall apply.  This is umbrella language that is intended to overrule individual taxpayer excuses or reasons for not paying.  Strict adherence to this rule has been CapTax policy since our inception in 1966, and suggestions or expectations that we should act differently towards any taxpayer are patently unfair to your fellow citizens.

If the Interest and Penalty charge has been applied and later reduced or removed completely, it is likely that CapTax discovered errors in your tax calculations and/or I & P charges.  This should not be confused with the belief that CapTax did not address your concerns and issues, such as you did not know about your tax obligations, did not receive notice, or do not believe the notice was timely.  It should be noted that CapTax is not required by law to send you a tax form for the taxes due.. Nonetheless CapTax makes good faith efforts to inform every identified taxpayer about their obligations in order to foster compliance with the tax law.

Interest and penalties applied for failure to make timely and/or sufficient Quarterly Payments

State tax law permits CapTax to require an individual to remit quarterly tax payments if their employer does not withhold the EIT tax.  When these quarterly or “estimated” payments are not required, all tax must be paid by the tax filing due date, which is the first business day after April 14(usually April 15) following the tax year.  When quarterly payments are required and unless circumstances dictate otherwise, one-quarter percent (1/4 or .25%) of the annual payment that is calculated or estimated to be due is payable with each quarter’s payment.  The first quarter payment is due by April 30; the 2nd quarter payment is due by July 31; and the 3rd quarter payment is due by October 31; all of which are to be paid during the same calendar year.  The 4th quarter payment is due by January 31, of the following tax year.  You will note that this payment schedule offers more taxpayer convenience than the federal or state income tax payment requirements.

There are four (4) specific instances or factors (sometimes called “Safe Harbors”) that, in some cases, abate or overrule the need to pay non-withheld taxes on a quarterly basis, even if it is required by the taxing body.  However, even when these factors apply, there will still be a certain minimum tax that needs to be paid on a timely basis even though the exact tax liability for the entire year is unknown.  Please note that there are no exceptions to these requirements based on whether taxable income was derived from farming and/or fishing.

The four (4) “Safe Harbor” factors are:

1.    If the taxpayer was not mailed a set of Form 521’s (payment coupons and instructions for quarterly payments of tax) for the tax year, no interest and penalties will apply for failure to make timely, sufficient, quarterly tax payments.  This is because a taxpayer can move into an area that requires these payments, or their circumstance changes (e.g. they have new or increased income or net profits that are not subject to withholding) and they were not required to do so in the previous year. Please note that there is no requirement that the taxpayer actually receives the mailing, only that it was mailed by CapTax or other taxing  body.   

2.    Or, taxpayers must have $200.00 or more in non-withheld tax liability in the tax year for “non-quarterly payment” interest or penalties to apply.

3.    Or, an amount equal to at least 100% of the taxpayer’s prior year local EIT liability (as adjusted for tax rate changes to the current tax year) is Paid through a combination of employer withholding or timely, direct
quarterly payments paid for the current year.

4.    Or, at least 80% of the taxpayers current year local EIT liability is paid through a combination of employer withholding or timely, direct quarterly payments for the tax year.

The local Earned Income Tax (EIT) was enacted in 1965 under Act 511, the state law that gives municipalities and school districts the legal authority to levy a tax on individual gross earned income/compensation and net profits.  The tax is based on the taxpayer’s place of residence (domicile) and NOT their place of employment. 

The EIT is separate from the Pennsylvania personal income tax (your state income tax).  CapTax collects the EIT on behalf of 66 member municipalities and school districts in Cumberland, Dauphin, Franklin and Juniata counties.

Any resident of a member municipality and/or school district who was employed during the calendar year, and/or received taxable income during the calendar year. In most cases, your employer already deducts the EIT from your regular paycheck. In case your employer did not deduct the tax, you were self-employed, or you withdrew money from a deferred compensation plan, you are responsible for filing the appropriate EIT forms and making payment on said amounts.

Earned income is salaries, wages, commissions, bonuses, incentive payments, tips, fees and other income. Net profits is income from the operation of a business, profession, or other activity, after provisions for cost and expenses have been incurred, and for which no taxes have been deducted.

Interest earnings, dividends, social security, capital gains, lottery winnings, unemployment, 3rd party sick pay, insurance proceeds, gifts, bequests, inheritances, and active military duty pay are not taxable.  Reserve military duty pay is taxable unless it is deemed to be active duty.

Any resident of a member municipality and/or school district whether for all or part of the tax year, who has taxable net profits and/or earnings must file their tax return by April 15.  If you receive a tax return from CapTax in the mail, you should file a tax return.  If you had no earned income, state the reason why on your final return.  

You must file your local tax return by April 15 of each year, the same day as your federal and state income taxes are due, for the preceding calendar year. 

If you are self-employed, or your tax is not withheld in full by your employer, you are required to pay quarterly and must pay by the following dates:

1ST QUARTER IS DUE APRIL 30th OF THE TAX YEAR
2ND QUARTER IS DUE JULY 31st OF THE TAX YEAR
3RD QUARTER IS DUE OCTOBER 31st OF THE TAX YEAR
4TH QUARTER IS DUE JANUARY 31st FOLLOWING THE TAX YEAR

With your return, you must provide a copy of your W-2 or other proof of earnings/net profits.  You may pay by personal check, cashier’s check, dedicated money order, or by credit card.  Credit card payments may be made online.  All other forms of payment may be mailed in or processed over the counter at each of our offices. 

If you are a registered resident of one of CapTax’s member municipalities and school districts, you will be mailed a CapTax Earned Income Tax return. 

You may contact CapTax at one of our conveniently located regional offices to obtain the necessary forms, or you can download the form from this website.

You must file in both municipalities.  Partial year residents should list the date they moved into or out of our jurisdiction on the reverse side of the tax return.  Your most current address should be listed under the new address on the front of the tax return.  This will ensure that all future correspondence, including refunds, are mailed to the proper address.

You will need to file a return with each tax office where you lived.  All amounts used should be prorated (wages, tax withheld, net and employee business expense, profits/losses).  The Proration Worksheet on the reverse side of the tax return must be used for all prorated tax returns.

Generally speaking, the amount of local income to be reported will be the same as the amount to be reported to the Commonwealth of Pennsylvania (normally the highest wage amount on the W-2 form).  Using the Federal Wage from Box 1 will usually result in your local tax form being incorrect, especially if you have an IRA, 401K or other deferred compensation plan. 

The local definition of taxable “compensation” is the same as the PA Department of Revenue’s definition of compensation with the exception of Active Duty Military Pay and Clergy Housing allowances.  Because not every employer does the W-2 form the same, we cannot give you specific information on completing the tax form without seeing the actual W-2 forms. 

If you prefer, we can complete the form for you.  Our office hours are generally 8 a.m. to 4:00 p.m.  Walk-in assistance is provided, but lines can be long if it is close to a filing deadline. 

No.  Each taxpayer will not be required to pay more than $52 per year in Local Services Tax.  If you paid more than $52, please complete an LST refund form found here.

Yes.  An employee may be exempt from withholding from the LST due to the occupation being that of a clergy person, a military disability, or a military reservist who is called to active duty during the taxable year. 

Yes.  If you earn less than $12,000 per year, you will be exempt from the LST if the levied LST is greater than $10/ year.  Please note that you may not be exempt from the school district portion of the LST no matter what your income. 

The LST exemption form is available by clicking here.

Yes, if you are self-employed, you must still pay the LST.  If the LST in your taxing jurisdiction is $10 or less, you must remit the LST to CapTax in a lump sum.  If the LST is more than $10, you must pay the tax on a pro-rated basis based on the number of pay periods in a calendar year. 

Yes.  Where, for a single employer, an employee works at multiple work locations located in different taxing jurisdictions, such employee is subject to the LST levied by the taxing jurisdiction of his “principle” work location.  This means that an employee that only works for one employer may still be subject to LSTs for multiple taxing jurisdictions up to a maximum of $52 for any given tax year.

In 2008, the Local Services Tax replaced the former Occupational Privilege Tax (OPT) and the Emergency and Municipal Services Tax (EMST), which provided direct funding to Pennsylvania municipalities for police, fire and other municipal services.  The LST is ordinarily deducted from an employee’s regular paycheck by their employer.

Any individual who is employed in a municipality/school district that levies a LST has to pay the tax.  This tax is determined by where you work and not where you live. 

For a list of current LST rates for municipalities collected by CapTax, click here.

If the enacted LST rate exceeds $10, the tax must be withheld on a prorated basis determined by the number of pay periods that your employer has for a calendar year. If the LST rate is $10 or less, the tax may be collected in a lump sum.

This tax is levied by the Harrisburg School District on all working, adult residents of the City of Harrisburg. 

You are considered a taxable for the purpose of the Harrisburg School District Occupation Assessment Tax if you are a Harrisburg resident, and you are 18 years old or older, and you have an occupation, for any part of the fiscal tax year starting July 1 through June 30 of the following year.

You may also be exonerated if your sole occupation during July 1 through June 30 of the following year was that of a clergyperson.

Yes.  You may be exonerated your total gross income for the calendar year is less than $5,000.00.

No, this tax is not withheld by your employer.

This tax is levied on all working, adult residents between the ages of 18 and 75 who reside in the Steelton-Highspire School District.

You are considered a taxable for the purpose of the Personal Tax if you are a Steelton-Highspire school district resident, and you are 18 years old or older, and you have an occupation, for any part of the fiscal tax year starting July 1 through June 30 of the following year.

Yes.  You may be exonerated from the tax if you have turned seventy-five (75) years of age before July 1 and high school students (18 years and over) upon filing an exoneration application with the Steelton-Highspire School District.

Yes.  Those persons who do not expect to earn more than $4,000.00 in the fiscal year (July 1 – June 30) will be permitted to file an application for exoneration of the School District’s Personal Tax. Everyone in this category is still responsible for the payment of $5.00 School Per Capita Tax and $5.00 School Residence Tax. College students with earnings of $4,000.00 or more are not eligible for

No, it is not.