2017 RATES FOR PAYROLL DEDUCTIONS

Federal ratesFollow Federal Tax Chart

Social Security rateEmployee Share – 6.2% on gross wages to $127,200

Employer Share –6.2% on gross wages to $127,200

Medicare rateEmployee Share - 1.45% on all gross wages

Employer Share - 1.45% on all gross wages

PA State rate3.07%

Local rateRates vary and should be determined per Act 32

(See below for more information regarding Act 32)

Local Services Tax (LST) rateRates are determined based on the employer’s location.

The annual tax amount is either $10 or $52.

PA Unemployment Compensation .07% tax (.0007) on employee wages

Business Mileage Rate:

The mileage rate for 2017 will decrease from 54to 53.5 cents per mile.

Medicare Tax:

The Additional Medicare Tax of 0.9% that went into effective January 1, 2013 remains in effect for 2017. Employers will be responsible for withholding an additional 0.9% Medicare tax on an employee’s wages and compensation paid in excess of $200,000 in the calendar year.

Local Wage Tax:

As you are already aware, a Pennsylvania state law (Act 32 of 2008) mandating some changes in local tax collection was effective January 1, 2012. The primary provision of Act 32 was to consolidate tax offices within the state so that there will typically be only one office per county. Act 32 also required that all employers use a uniform 6-digit political subdivision (PSD) code to represent the resident and work municipality of each employee. Another mandated change of Act 32 that went into effect January 1, 2012 is the withholding requirement. Under Act 32, employers are required to withhold the higher of the employee’s resident earned income tax amount (rate of total resident EIT where they reside) versus the employee’s municipal non-resident earned income tax amount (rate of non-resident EIT where they are employed). In most cases, the employee’s resident rate where they live will be higher than the non-resident rate where they are employed. PSD codes and withholding rates can be obtained by calling your local tax office or visiting the following website:

A requirement under Act 32 is that you are to enter the 2-digit number that represents the Tax Collection District (TCD) where you submitted the EIT withholdings in Box 20 “Locality name” of the W-2 forms. For EIT withholdings reported to Franklin County Area Tax Bureau, that number would be “28”.

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2017 RATES FOR PAYROLL DEDUCTIONS (CONTINUED)

Federal Unemployment Compensation Taxes (FUTA):

The FUTA tax liability will remain at0.6%for 2017. However, there are some states known as “credit reduction” states that will be required to pay additional FUTA tax when filing their Annual Form 940 each year. “Credit reduction” states are states that have borrowed money from the federal government to pay unemployment benefits but have not paid those loans back. For 2016, Pennsylvania, Maryland, Virginia and West Virginia are NOT “credit reduction” states that will be required to pay an additional tax on their FUTA taxable wages when filing their Annual Form 940. There is an additional schedule included with the Annual Form 940 to be used to calculate the additional FUTA tax owed for the “credit reduction” states. The additional FUTA tax required to be paid with the Annual Form 940 each year will continue every year until these “credit reduction” states eliminate their outstanding debt to the federal government.

Pennsylvania Unemployment Compensation Taxes:

Pennsylvania Unemployment Compensation Taxes vary with every employer. The PA Unemployment Contribution (UC) rate notices are usually mailed on or before December 31st. If you have not received your rate notice, you can obtain your contribution rate online( or by calling the PA Unemployment Help Desk (866-403-6163).

The wage limit for 2017 has been raised from $9,500 to $9,750.

Credit weeks are used to determine how many weeks of unemployment benefits an individual may receive and are reported on your UC tax and wage report. A credit week is any calendar week in which an employee earns $116 or more. Only one credit week may be reported for each calendar week.

Minimum Wage:

The minimum wage remains at $7.25.

Tipped Employees:

The minimum wage for tipped employees in Pennsylvania will remain at the current $2.83 per hour. However, the employer must make up the difference if the employee’s tips and the $2.83 per hour do not meet the regular minimum wage in effect for non-tipped employees. The tipped wage applies only if an employee receives over $30 in tips for a given month. If an employee does not make more than $30 per month in tips, the employer must pay the regular minimum wage. The minimum wage for tipped employees varies with each state. If you are an employer with tipped employees and are located in another state, please call our office at 717-267-2100 for the appropriate rates.

If you have any questions on any of the above items,

please call our office at (717) 267-2100.