Local Taxes

The term “local taxes” describes any tax below state level that is imposed by a city, county, school district, transit district, or any other government unit. When an employer does business in a location with local taxes, the employer may be required to:

withhold local income taxes from employees living or working within a taxing jurisdiction
withhold local occupational fees from employees’ wages for the privilege of working within the taxing jurisdiction, or
pay local taxes on total payroll (payroll expense taxes).

Local taxes for these states are supported in the application:

Alabama	Maryland	Ohio
Colorado	Michigan	Oregon
Delaware	Missouri	Pennsylvania
Indiana	New Jersey
Kentucky	New York

Employees’ wages may be subject to local taxes based on where they live, where they work, or both. In some states, employees’ wages are subject to multiple local taxes.

Alabama

The following fields may display for Alabama locals:

Tax Rate
Percent of Earnings Taxed
Do not withhold tax (wages are reported on tax statements)

Colorado

The following fields may display for Colorado locals:

Tax Rate
Percent of Earnings Taxed
Employee has a waiver from another employer for Tax Year: YYYY

Delaware
Wilmington City

The following fields may display for Wilmington City:

Tax Rate
Percent of Earning Taxed
Do not withhold tax (wages are reported on tax statements)
Other Withholding Choices
- Additional Tax Amount
- Additional Tax Percent
- Override Tax Amount
- Override Tax Percent

Indiana

The following fields may display for Indiana locals:

Form WH-4 Line 5 – Total Personal, Dependent, Over Age 65, and/or Blindness Exemptions
Form WH-4 Line 6 – Total Additional Exemptions for Each Qualifying Dependent
Tax Rate
Percent of Earning Taxed
Residency
Do not withhold tax (wages are reported on tax statements)
Other Withholding Choices
- Additional Tax Amount
- Additional Tax Percent
- Override Tax Amount
- Override Tax Percent

Kentucky

The following fields may display for Kentucky locals:

Tax Rate
Percent of Earning Taxed
Do not withhold tax (wages are reported on tax statements)

Michigan

The following fields may display for Michigan locals:

Total Number of Exemptions Claimed
Tax Rate
Percent of Earning Taxed
Residency
Do not withhold tax (wages are reported on tax statements)

Missouri

The following fields may display for Missouri locals:

Tax Rate
Percent of Earnings Taxed
Do not withhold tax (wages are reported on tax statements)

New York
Filing Status

Select the filing status for the selected local from the Filing Status drop-down menu. Valid options:

Single
Lives here/works in different NY local

The following fields may display for New York City local:

Filing Status
Total Number of Allowances
Percent of Earning Taxed
Resident Only (non-resident not available for this regulation)
Do not withhold tax (wages are reported on tax statements)
Other Withholding Choices
- Additional Tax Amount
- Additional Tax Percent
- Override Tax Amount
- Override Tax Percent

The following fields may display for Yonkers local:

Filing Status
Total Number of Allowances
Percent of Earning Taxed
Residency
Do not withhold tax (wages are reported on tax statements)
Other Withholding Choices
- Additional Tax Amount
- Additional Tax Percent
- Override Tax Amount
- Override Tax Percent

New York MTA Transit Tax

This is an employer paid tax used for reporting purposes only. The following fields display for New York MTA Transit Tax local:

Tax Rate
Percent of Earnings Taxed

Ohio
Local Tax Information

Select the local tax information status for the selected local from the Local Tax Information drop-down menu. The default is Employment.

The following fields may display when Employment is selected:
- Tax Rate (system defined)
- Percent of Earnings Taxed
  
  If a resident local is set up for the worker, the Withhold [residence tax] residence tax at this rate field displays.

The following fields display when Residence is selected:
- Tax Rate (system defined)
- Apply Residence Tax when [worker name] works in a locality without an employment tax
- Percent of Earnings Taxed
- Residence Tax Rate
- Additional Tax Amount
The following fields display when Employment/Residence is selected:

Tax Rate (system defined)
Percent of Earnings Taxed
Apply Residence Tax when [worker name] works in a locality without an employment tax
Percent of Earnings Taxed
Residence Tax Rate

Additional Tax Amount

When the Local Tax Information for Ohio is either Residence or Employment/Residence, you cannot select Residence or Employment/Residence for another Ohio local. Employment is the only option is available.
When the Local Tax Information for Ohio is changed from Residence or Employment/Residence to Employment, all other locals set up or added to the worker include the Residence or Employment/Resident option.
To calculate Columbus residence tax correctly, a residence rate must be entered for each local the employee works in.

Oregon Locals

Oregon locals are employer paid taxes based on public transit areas and transit boundaries. This is used for reporting purposes only. The following fields may display for Oregon locals:

Tax Rate
Percent of Earnings Taxed

Pennsylvania

Local Earned Income Taxes (EIT) for employees who work in Pennsylvania are determined by a combination of where the employee lives and works. If the employee's local taxes are not set up correctly, the wages and withholding may be incorrect.

Pennsylvania Act 32 legislation changed EIT taxes to be based on a combination of where the employee works and where he lives, instead of just where he lives. The one exception to this is for employees that live or work in Philadelphia.

Under the rules of Act 32, wages and withholding are reported to the local where the employee works but withholding is calculated at the higher of the work local rate or the live local rate. The employee's live local is reported with the work local wages and withholding each quarter. Setting up an employee with the correct combination of local live and work taxes is critical to correct withholding.

Clients should have each of their employees fill out the Local Earned Income Tax Residency Certification form (DCED-CLGS-06) and keep it up to date and on file.

Use the following table to help understand how to set up each employee for PA EIT locals:

If the employee...

Employee Setup

works in one PA local and lives in a different PA local

Set up the work local as Works here/lives in a different PA local.
set up the live local as Lives here/works in a different PA local.

lives and works in the same PA local

Set up one local as Works and lives in this local.

works in a PA local and lives out of state

Set up one local as Works here/lives out of state.

The resident (live) local may also be required based on that state’s regulations.

lives in a PA local and works out of state

The employee can choose to withhold the resident PA local. If this is the case, set up the local using Lives here / works out of state.

The non-resident (work) local may also be required based on that state’s regulations.

works in more than one PA local

The employer determines which is the predominant work local. Based on this and where the employee lives, set up the predominant local and, if needed, the live local, choosing the appropriate radio button for each.

Only one work local can be set up. The other work locals should not be set up.

works part of the time in Philadelphia and part of the time in another PA local

Set up the Philadelphia local as non-resident for the percentage of time worked. Set up the PA work local choosing the appropriate radio button. If the employee lives in a PA local other than the work local, set up the PA live local, choosing the appropriate radio button.

The employee works part of the time in Philadelphia and part of the time in another PA local where they also live.

In this case, set up the Philadelphia non-resident local for the percentage of time worked and set up the PA work local as Works and lives in this local.

The employee works part of the time in Philadelphia, part of the time in one PA local and they live in another PA local. In this case, set up the Philadelphia non-resident local for the percentage of time worked, the PA work local as Works here / lives in a different PA local and the PA live local as Lives here / works in a different PA local.

lives in Philadelphia

Set up the Philadelphia local as resident and the local they work in as the non-resident. Do not set up a work local.

works 100% of their time in Philadelphia and lives in another PA local

set up the Philadelphia local as a non- resident. Do not set up a live local unless they live in Lancaster county.

ACT 32 Locals - Earned Income Tax (EIT)
PA Work/Live Status

Select the local tax information status for the selected local from the PA Work/Live Status drop-down menu. Valid options:

Works here/lives in different PA local
Lives here/works in different PA local

The following fields may display for ACT 32 Locals:

PA Work/Live Status
Tax Rate (system defined)
Percent of Earning Taxed
Do not withhold tax (wages are reported on tax statements)
Other Withholding Choices
- Additional Tax Amount
- Additional Tax Percent
- Override Tax Amount
- Override Tax Percent

Philadelphia

Select the residency status for Philadelphia. Valid options:

Resident
Non-resident

The following fields may display for Philadelphia Locals:

Residency
Tax Rate (system defined)
Percent of Earning Taxed
Other Withholding Choices
- Additional Tax Amount
- Additional Tax Percent

Non Act 32 Locals-
Local Services Tax (LST) and Pittsburgh special taxes

All employees must be set up for these taxes based on work location. The taxes are withheld and paid solely on where the employee works. If an employee works in multiple locations, the employer determines which is the predominant work local.

The following fields may display for non-ACT 32 Locals:

Residency
Tax Rate (system defined)
Percent of Earning Taxed
Do not withhold tax (wages are reported on tax statements)
Other Withholding Choices
- Additional Tax Amount
- Additional Tax Percent
- Override Tax Amount
- Override Tax Percent

Calculating Local Tax

There are five basic methods used to calculate local tax:

a flat dollar amount when the month-to-date taxable compensation reaches a defined limit
a percentage of taxable compensation based on the employee’s residence or non-residence status after an exemption allowance has been subtracted
a percentage of state income tax
a percentage of taxable compensation with a maximum tax limit, or
a flat dollar amount not to exceed a maximum amount.

Check with your state for local tax information.