New reporting and withholding requirements go into effect this year for Pennsylvania businesses that lease real estate from a non-resident lessor.
Act 43 of 2017 expanded the reporting requirements for taxpayers to file Form 1099-MISC with the Pennsylvania Department of Revenue. It also created an obligation to withhold Pennsylvania personal income tax on certain payments of business income in the same manner as Pennsylvania employers withhold employee compensation.
Withholding is required for payments to non-resident property owners for business income totaling $5,000 or more during a calendar year. The personal income tax rate is currently 3.07%. Withholding is optional for annual business income under $5,000.
The Commonwealth of Pennsylvania, the United States government, their agencies, instrumentalities, and any political subdivision of Pennsylvania are excluded from this withholding requirement.
Withholding tax payments, quarterly returns, and annual reconciliations must be submitted electronically to the Pennsylvania Department of Revenue through its online business tax filing system.