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I moved to PA last year, which the state i came from did not have local taxes. I have always filed taxes myself, but I am completely confused about the local tax process to be honest. As my W2 seems to just show the total taxes paid and doesn't breakdown by counties
My scenario is the below:
~Jan - Feb - I was still living out of state and worked at the former company - w2 recieved
~March - Jun - Moved/lived in PA and started at a new company and received a W2
~July to current - Moved/lived to a different county within PA and continued to work at the new company - same w2
I received a local tax form the other day for the 1st county i was living in from March - Jun in PA. I am assuming i will need to complete this form and the form for the 2nd county? The good news is i updated my PSD codes when i switched between counties so i think i will be in good shape.
However.. from reading the form it seems you are supposed to enter in all your income? I'd assume my w2 from when i lived/worked out of state would not be included and i would only include the income from when i lived in that specific county even though it shows the total for all 10 months on my w2?
Ex. Made 10k jan - feb (Exclude since i didnt live or work in PA) & Made 40k from March - December while living/working in PA
4 months - (March - Jun - COUNTY 1) and 6 months (July - December - COUNTY 2)... So i would only include 16k (4 x 4) for County 1 and 24k (4 x 6) for county 2?
Does rental property income also need included?
Note: I have called a few CPAs and all are currently booked through new clients in the area. I am hoping to find one, but trying to understand the process if i can't
It's been a few years since I've done any of the local returns in PA (thankfully). Total pain in the butt that PA should have done away with but they continue to make it more complicated under the guise of "simplification".
The localities are permitted to levy an earned income tax, so your rental income shouldn't be included. If the rental is in PA, check the locality for other taxes (gross receipts, business privilege, etc.)
For the localities where you lived and worked, there should be a spot on the form to enter exempt income. Assuming there is, you should enter your total earned income and then put the income earned outside the locality on the exempt income line to get to your taxable income.
The withholding should cover the liability. If it doesn't, check with your employer as to why they withheld at a lower rate.
It's been a few years since I've done any of the local returns in PA (thankfully). Total pain in the butt that PA should have done away with but they continue to make it more complicated under the guise of "simplification".
The localities are permitted to levy an earned income tax, so your rental income shouldn't be included. If the rental is in PA, check the locality for other taxes (gross receipts, business privilege, etc.)
For the localities where you lived and worked, there should be a spot on the form to enter exempt income. Assuming there is, you should enter your total earned income and then put the income earned outside the locality on the exempt income line to get to your taxable income.
The withholding should cover the liability. If it doesn't, check with your employer as to why they withheld at a lower rate.
Good luck.
Appreciate the help! The actual form is below. I am still researching, but it sounds the approach would likely be the below
1. Obtain/Complete the form for both counties within PA - Enter the different PSD Code at the top
2. Enter the total amount from all W2s (including the out of state W2)
3. Check the box on the front of the doc that i moved within the year
4. Show the three different addresses on the back under the moved section
5. Do not include rental income or the sale (profit) of a property
* Is this because under line 1 on the back it shows the breakdown between taxable earned income and non-taxable earned income, which things like rent, interest, dividends, etc... should not be entered onto the form?
Assuming because at a local level they cannot tax those items
1. Obtain/Complete the form for both counties within PA - Enter the different PSD Code at the top
2. Enter the total amount from all W2s (including the out of state W2)
3. Check the box on the front of the doc that i moved within the year
4. Show the three different addresses on the back under the moved section
5. Do not include rental income or the sale (profit) of a property
* Is this because under line 1 on the back it shows the breakdown between taxable earned income and non-taxable earned income, which things like rent, interest, dividends, etc... should not be entered onto the form?
Assuming because at a local level they cannot tax those items
The worksheet seems to only accommodate having lived and worked the entire year in PA, that's not your situation.
Instead of the worksheet, I would attach a statement stating the wages earned in January/February are nontaxable since you weren't a resident.
I would then attach a statement in the format of the worksheet where you prorate your W-2 from the PA company between the 2 localities using a denominator of 10 instead of 12 and take it from there.
Rental income is generally nontaxable income because it isn't "earned" (generally your personal labor is a major factor in generating the income). Capital gain is not earned income.
You may have to write a letter or 2 as follow-up, Berkheimer is a contractor so they tend to over analyze things (why not, the local governments are paying them) but eventually they'll get it right.
The worksheet seems to only accommodate having lived and worked the entire year in PA, that's not your situation.
Instead of the worksheet, I would attach a statement stating the wages earned in January/February are nontaxable since you weren't a resident.
I would then attach a statement in the format of the worksheet where you prorate your W-2 from the PA company between the 2 localities using a denominator of 10 instead of 12 and take it from there.
Rental income is generally nontaxable income because it isn't "earned" (generally your personal labor is a major factor in generating the income). Capital gain is not earned income.
You may have to write a letter or 2 as follow-up, Berkheimer is a contractor so they tend to over analyze things (why not, the local governments are paying them) but eventually they'll get it right.
Really appreciate the help! Yes - the local forms are sure a pain in the butt as you first noted
At least with the federal/state there seems to be tons of info already online. Finding answers to these basic questions (local tax questions) has been very challenging even online. Everyone i know personally has lived in the same county so they aren't sure either. Wish Turbotax provided the local level option too
Really appreciate the help! Yes - the local forms are sure a pain in the butt as you first noted
At least with the federal/state there seems to be tons of info already online. Finding answers to these basic questions (local tax questions) has been very challenging even online. Everyone i know personally has lived in the same county so they aren't sure either. Wish Turbotax provided the local level option too
It was a challenge to find a payroll company that would handle processing payroll checks with these local taxes, doesn't surprise me that TurboTax wouldn't touch it.
You can reach out to Berkheimer yourself, they're not too bad about helping over the phone. It's not like you're trying to game the system, you just need to file pieces of paper that tell them that what your employer withheld is what you owed.
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