Why Will More Taxes Be Taken Out of Your Paycheck?

Come Jan. 1, your paycheck will be a little lighter even though no one raised the tax rate.

How could that happen?

There's a new tax collection system in town.

Basically, your local earned-income tax will be automatically deducted from your paycheck by your employer. This replaces the current system whereby it is incumbent on residents to estimate their earned-income tax and send in a check or online payment quarterly.

Residents of Pine and Richland will be paying the same 1 percent rate for the earned-income tax; it simply will be collected differently.

The problem is a lot of people don't know about the change.

"There's a lot of information out there and there's a lot of confusion out there," attorney Patrick C. Manning of Goehring Rutter & Boehm said Wednesday night at the Richland Board of Supervisors meeting. The law firm serves as the township's solicitor.

"There's a misconception that it's raising taxes," he said.

Whose idea was this anyway?

The change is the result of Act 32, which was passed in 2008 by the Pennsylvania Legislature.

Manning explained that the state is divided into Tax Collection Districts -- TCDs -- that usually line up with county lines. Allegheny County has four districts -- North, Central [Pittsburgh], Southwest and Southeast.

Each TCD has a tax officer, which is Keystone Collections Group for the North district in which Richland and Pine fall.

As of Jan. 1, employers will withhold taxes from employees' paychecks and send that money to Keystone, which then distributes the funds to the municipalities.

With the current system, 560 taxing authorities collect nearly $1.9 billion for more than 2,900 different local taxing jurisdictions, according to an informational You Tube video prepared by Keystone.

"It is hard to believe, but that's more taxing jurisdiction than all other states combined," the video states.

With Act 32 that "fragmented system will now be streamlined down to 69 countywide Tax Collection Districts [TCD] and regulations will be strictly enforced to provide standardization in the local tax collection process," the video explains.

Businesses must maintain a certificate of residency for each employee so the tax officer knows where to send the money that is collected. Some businesses already have distributed the forms to employees.

An extremely important piece of information on the form is the six-digit PSD code, which is short for Political Subdivision.

For Richland, the PSD code is 711002.

For Pine, the PSD code is 711001.

The number is made up of three parts. The 71 notes the Allegheny North TCD; the 10 delineates Pine-Richland School District; and the last two numbers identify the municipality to which the tax money will be sent.

Two Tax Collectors at One time

To make things a bit confusing, two entities will collect taxes at the beginning of the year.

Pine residents need to know ...

"The Township of Pine Earned Income Tax Office will continue to collect the earned income tax for all tax years prior to 2012," according to Pine Township's website. 

"That means you will still send the fourth quarter 2011 estimated tax payment [for individuals] and employer’s quarterly return [for businesses] to this office by January 31, 2012.   Individuals will also still send their 2011 annual tax return to this office by April 15, 2012."

Pine Township also urges taxpayers to contact their tax office if they have a delinquent tax obligation, or have not filed a tax return for a prior year. The tax office can be reached at 724-625-1636, ext. 118. 

"You are strongly encouraged to clear up any outstanding delinquencies as soon as possible to avoid additional collection costs and legal action," the website states.

Richland residents need to know ... 

The final quarterly payment for 2011 must be paid to the current tax collector, Berkheimer, by Jan. 31. In fact, all 2011 tax dealings will be handled by Berkheimer.

That happens as Keystone starts its collections  Jan. 1.

"H.A. Berkheimer Inc. will continue to collect the earned income tax for all tax years prior to 2012," Richland Township's website states.

"That means you will still send the fourth quarter 2011 estimated tax payment [for individuals] and employer’s quarterly return [for businesses] to Berkheimer’s office by January 31, 2012," the website states. "Individuals will also still send their 2011 annual tax return to Berkheimer’s office by April 15, 2012."