The state of Pennsylvania recently passed Act 43 into law requiring all independent contractors (ICs) who reside outside of the state of PA—but receive a 1099 for work they did inside PA—to pay extra state withholding tax of 3.07 percent. By law, any contracting company that contracts ICs to work in PA must make sure the extra 3.07 percent withholding is applied to any contractor that resides outside of PA.
What’s the impact?
If you’re an Openforce client using IC Pay to manage and distribute settlements for independent contractors, the platform is already set up to help address these new requirements.
Here’s how it works and what you need to do in order to comply:
- Create a new pay type that applies the extra 3.07 percent to all of their PA commissions.
This means you’ll have one pay type without the extra 3.07 percent and a duplicate pay time with all of the same commissions, but also has the extra 3.07 percent withholding.
- Submit commissions as usual, but report PA commissions under the new pay type.
We’ll take care of the details. So, for contractors that performed work in PA, Openforce will confirm their address on file. If the address is outside of PA, we will apply the extra 3.07 percent withholding on their commission.
Unsure if PA’s Act 43 impacts your business? Check out these helpful links for more information:
- PA Department of Revenue Act 43 of 2017
- PA Department of Revenue New 1099-MISC withholding requirement
- Pennsylvania new nonresident withholding requirements
Are you an Openforce client that falls into this category, but have yet to apply the new PA pay type?
Please reach out to your Settlement Specialist or email
CustomerSupport@oforce.com for immediate setup today.