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lapoore
lapoore
June 21, 2022
Question

State Local Taxes Not being withheld from employee Paycheck

  • June 21, 2022
  • 3 replies
  • 0 views

I have tried everything and chatted with Quickbooks and posted to the Facebook page and have no luck getting my client's files correct.  Here is the issue...they are a Maryland Employer with Pennsylvania Employee's.  They have always withheld the PA employee's PA taxes and PA Local taxes from their paycheck.  I have a client that has payroll through their QBO Account and last March when somethings changed in the payroll on QBO's end, the PA Local tax just stopped coming out of the employee's paycheck (in fact at that point we were even unable to change anything to do with any of the employee's information - that has since been corrected).  I have not to this day been able to get this corrected in the file.  We have their PA employee set up correctly and there is spot for the PA Local taxes to come out of the check but nothing is coming out.  

 

Roll forward to the Intuit transition to the QBO Payroll...One of my Employers who is in the same boat as the above employer had this happen to their PA employee.  It was working correctly in Intuit payroll but now that they are in QBO Payroll, no PA Local taxes are coming out.  

 

I keep hearing from the "experts" or "tech" people that these employers don't need to withhold the taxes that is why you can't.  This is not turn...while we are not required to withhold PA Taxes because the Employer is a Maryland Employer.  However, MD and PA have a reciprocal agreement. What that means is that if you live in PA and work in a reciprocal state, your employer withholds and remits the income tax for your resident state.  Because of the reciprocal agreement your pay taxes to your state of residency. If this wasn't true then why would QBO allow for the PA withholdings to come out and there is actually a place to check that the employee has given the employer a Certificate of Nonresidence.  

 

Why don't these people (the experts and tech people) that you chat with know what this is?

 

How do I get this fixed for my 2 employers so that the taxes come out of their paycheck?

Maybe you can direct me to someone who knows how to fix this issue.  I think that it has gone on long enough with my one Employer - over a Year!

 

I would appreciate any help that you could give so I can get this behind me and make my PA employees happy. 

Laurie

3 replies

M
Mich_S
June 21, 2022

I can see you've been through a lot fixing this issue about PA local taxes not being withheld in QuickBooks Online Payroll, @lapoore.

 

Let's review your employees' profiles and make sure to select the local taxes box so QuickBooks deducts the PA Local Taxes from your employees' paychecks. To do so, follow these steps:

 

  1. Open the Payroll menu. Then, go to Employees.
  2. Locate and select your employee's name from the list.
  3. Go to the Tax withholding section and click on Edit.
  4. Put a checkmark for the Local taxes box.
  5. Once done, click on Save.

See the photos below for reference:

 

 

 

For more information about handling PA Local Taxes, feel free to read this module: PA Local Services Tax (LST).

 

You can also learn more about how to run, print, and customize payroll reports in QuickBooks Online Payroll.

 

Loop me in if you need extra help with payroll or with any QuickBooks-related. I'm always here to assist you at any time of the day. Take the best care!

lapoore
lapooreAuthor
June 21, 2022

I do have the employee set up correctly.  Always has been... see below

Ami_D
Ami_D
June 23, 2022

Hi there @lapoore ! I just wanted to check in and let you know that we haven't forgotten about this! My colleagues and I are doing some extra research on this this morning and will reply here again when we have more information. Thanks for hanging in there with us. 

    lapoore
    lapooreAuthor
    June 23, 2022

    Thanks, I hope that someone can come up with the fix soon.

    Ami_D
    Ami_D
    June 23, 2022

    @lapoore Alright! I got a response back from our product team on this. It looks like, for right now, state local taxes for PA are not withheld in QBO Payroll. Our team is looking into ways to add this ability in the future, but for now, PA local taxes must be withheld manually. 

     

    I've shared this conversation with them to use as a reference when working on future updates. 

    Please don't hesitate to reply again if you have other questions. I'm happy to provide any information I have or pass along any other feedback to the team. 

    J
    jnomi7
    June 1, 2024

    I know this thread is 2 years old but I'm kind of crossing my fingers here. I just migrated to QuickBooks online and i am having the same PA LST tax problem. I was able to have it set up fine in my QuickBooks desktop, tracked fine, accrued in the payroll liabilities screen. When i migrated my data, it took my already created LST tax and imported it to a deduction and it's withholding each paycheck but QBO isn't recognizing it as a tax liability. It is also weird because the employee generated PA Local Tax category doesn't even appear as an option on my 2 PA employee paychecks. I tried to merge my Local account with the QBO generated account, did not work. Support is no help. In desktop you had all these options when setting it up and how to track it and now they took any payroll liability adjustment freedoms away. I'm worried about W2s at the end of the year and its not going to show up on there. I'm current doubling all my work, entering everything on QBO so my bosses have access and can see what they want but I'm also keeping my desktop version going because come January, I don't want to be in a pickle. 

     

    So, sorry for ranting but I guess my question is......have you figured out a solution to this yet?

    lapoore
    lapooreAuthor
    June 1, 2024

    Nope I have not. I basically am doing the same thing as you. I have as a deduction. As for the W2 I create a pdf and put in the local tax info manually so the employee has it and I always use a spreadsheet to upload the W2s to the PA Local Bureau so there is never an issue with the W2s. And I figure the IRS doesn’t need the Pa local info. It is very frustrating. Oh and I have another client that has just one PA employee so I just figure up what the tax would have been for the quarter and prepare a voucher and the employee pays it themselves. Good luck 

    J
    jnomi7
    June 1, 2024

    I actually think I figure out their problem. LST is the tax payer is pay for working in a PA county, Local EIT is what residence pay. That’s why if their work place is in PA it will work, employers a required to withhold that. Out of state employers are not required to withhold the EIT. QB reciprocity agreement is only making sure PA residence working in Maryland are paying PA income tax. I put the link at the bottom, baffles me I talked to all these intuit experts and had a whole team looking into it and in the last two years, at least, I haven’t seen anymore mention that LST and EIT are two different taxes. 

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