Dear Client:

Withholding on Non-Employee Compensation and Business Income

Beginning January 1, 2018, anyone that pays Pennsylvania-source non-employee compensation or business income to a non-resident individual, or disregarded entity that has a non-resident member, and is required to file a Federal Form 1099-MISC with the Department of Revenue based upon the above-stated rules is required to withhold from such payments an amount equal to the current tax rate of 3.07%. Withholding is optional for payors paying a payee less than $5,000 annually. If you are unsure of the total amount of payments that will be made to a payee, the Department of Revenue encourages you to withhold and remit income tax from all payments to the payee.

Generally, a payment is considered “non-employee compensation” if it is made to: (i) someone who is not your employee; and (ii) for services in the course of your trade or business.

Withholding on Certain Lease Payments

Anyone leasing Pennsylvania real estate who makes a lease payment in the course of their trade or business to a non-resident lessor is required to withhold from such payments an amount equal to the current tax rate of 3.07%. Withholding is optional for lessees paying a non-resident lessor less than $5,000 annually. If you are unsure of the total amount for payments that will be made to a non-resident lessor, the Department of Revenue encourages you to withhold and remit income tax from all payments to the non-resident lessor.

A lessor includes only individuals, estates and trusts.

A lease payment includes, but is not limited to, rents, royalties, bonus payments, damage rents and other payments made pursuant to a lease.

As always, please contact us if we can help you with this new requirement!

Very truly yours,
Buckno Lisicky & Company