PA State Income Tax Rate 2021

2021 Tax Highlights

We have summarized the major changes, as of this date, which will affect your payroll tax calculations effective January 1, 2021. Check our website, www.hfco.com, for periodic updates.

Federal Income Tax (Individual)

The federal individual tax rates remain the same for 2021. Some of the tax bracket amounts have changed slightly after inflation adjustments. (See schedule 1 for tax brackets, rates, and standard deductions)

Pennsylvania Individual Tax

The Pennsylvania individual income tax withholding rate remains at 3.07% for 2021.

Philadelphia Income Inequality Initiative

Effective January 1, 2015, all Philadelphia employers must provide notice to their employees and non-payroll workers of the federal Earned Income Tax Credit (“EITC”) program. This notice should be sent at the same time as the form W-2, 1099, or another comparable form.

Philadelphia School Income Tax

Effective July 1, 2021, the school income tax rate is also changing. As of July 1, 2021, the rate for residents will be 3.8398% (previously 3.8712%).

Social Security Tax

The social security wage base for 2021 will increase to $142,800.

Social Security Tax is broken into two sections, Social Security and Medicare. The following is each section’s rate and base for 2021:

Social SecurityMedicare
Rate – Employer6.2%1.45%
Rate – Employee6.2%1.45%
Base$142,800Unlimited
Maximum Employer Portion$8,853.60Unlimited
Maximum Employee Portion$8,853.60Unlimited

An employer must withhold additional Medicare tax from wages it pays to an individual in excess of $200,000 in a calendar year, without regard to the individual’s filing status or wages paid by another employer. The rate on the additional Medicare Tax is 0.9% and is only paid by the employee. This information is subject to change based on the policies of the new federal administration.

As a reminder, 2020 year-end PA W-2 information is due by Jan. 31, 2021, and may be filed via multi-import file upload in e-TIDES at www.etides.state.pa.us. This includes W-2 Transmittals (REV-1667), employee wage statements, and 1099R forms. Electronic filing is now a mandatory requirement if filing 10 or more W-2s.

The PA Department of Revenue has expanded the W-2/1099 filing options to include corrections to originally filed W-2/1099 information using the EFW2C or CSV correction format. Corrected W-2/1099 information can only be submitted for original filings done through e-TIDES. If you upload a correction file, you may be required to file an amended REV-1667 Annual Withholding Reconciliation Statement (Transmittal).

If you have any questions regarding electronic filing, please visit the department’s Business Tax e-Services Center at www.revenue.state.pa.us or call 717-787-7635.

Employers that file 250 or more federal W-2 forms are required to file electronically; however, all employers are encouraged to file electronically regardless of the number of W-2 forms they file.

Federal Unemployment Tax

The FUTA tax rate decreased to 6.0% beginning July 1, 2011. The maximum state credit is 5.4% for a net tax of 0.6% (.006) on the first $7,000 of wages per employee. New Jersey’s maximum state credit is 5.4% for a net tax of 0.6% (.006) for 2021.

Pennsylvania Unemployment 

The maximum taxable wages for employer Pennsylvania Unemployment remain at $10,000 per employee. The surcharge on employer contributions remains at 5.4% (.054). The employer additional contribution remains at 0.50% (.005). The additional employer interest factor tax remains at 0.0% for 2021. The unemployment tax rate for employees remains at 0.06% (.0006). This 0.06% tax does not have a wage limit. Effective January 1, 2017, these contributions must be paid electronically if the total liability owed is $5,000 or greater. The base week amount is $116.

401(k) Limits

The maximum employee contributions remain at $19,500 for 2021. Please note that this contribution is limited to the lesser of $19,500 or the percentage of wages specified in your 401(k) Plan document. The maximum employee contributions for employees age 50 or older remains at $26,000 for 2020. The contribution is limited to the lesser of $26,000 or the percentage of wages specified in your 401(k) Plan document.

QuickBooks

Please note that if you have payroll with QuickBooks and you keep current with all the payroll updates, QuickBooks makes the changes automatically; however, double-checking with the rates here is encouraged.

Affordable Care Act (ACA)

In 2016 the federal government required the filing of new forms relating to the Affordable Care Act. These forms: 1094B, 1095B, 1094C and 1095C must be completed by employers with 50 or more full-time employees or equivalents. If you are required to file these forms and need help, please contact one of us directly.

PA State Income Tax Rate 2020

2020 Tax Highlights

We have summarized the major changes, as of this date, which will affect your payroll tax calculations effective January 1, 2020.

Federal Income Tax (Individual)

The federal individual tax rates remain the same for 2020. Some of the tax bracket amounts have changed slightly after inflation adjustments. (See schedule 1 for tax brackets, rates and standard deductions)

Pennsylvania Individual Tax

The Pennsylvania individual income tax withholding rate remains at 3.07% for 2020.

Philadelphia Income Inequality Initiative

Effective January 1, 2015, all Philadelphia employers must provide notice to their employees and non-payroll workers of the federal Earned Income Tax Credit (“EITC”) program. This notice should be sent at the same time as the form W-2, 1099, or another comparable form.

Social Security Tax

The social security wage base for 2020 will increase to $137,700.

Social Security Tax is broken into two sections, Social Security and Medicare. The following is each section’s rate and base for 2019:

Social SecurityMedicare
Rate – Employer6.2%1.45%
Rate – Employee6.2%1.45%
Base$137,700Unlimited
Maximum Employer Portion$8,537.40Unlimited
Maximum Employee Portion$8,537.40Unlimited

An employer must withhold additional Medicare tax from wages it pays to an individual in excess of $200,000 in a calendar year, without regard to the individual’s filing status or wages paid by another employer. The rate on the additional Medicare Tax is 0.9% and is only paid by the employee. This information is subject to change based on the policies of the new federal administration.

As a reminder, 2019 year-end PA W-2 information is due by Jan. 31, 2020, and may be filed via multi-import file upload in e-TIDES at www.etides.state.pa.us. This includes W-2 Transmittals (REV-1667), employee wage statements and 1099R forms. Electronic filing is now a mandatory requirement if filing 10 or more W-2s.

The PA Department of Revenue has expanded the W-2/1099 filing options to include corrections to originally filed W-2/1099 information using the EFW2C or CSV correction format. Corrected W-2/1099 information can only be submitted for original filings done through e-TIDES. If you upload a correction file, you may be required to file an amended REV-1667 Annual Withholding Reconciliation Statement (Transmittal).

If you have any questions regarding electronic filing, please visit the department’s Business Tax e-Services Center at www.revenue.state.pa.us or call 717-787-7635.

Employers that file 250 or more federal W-2 forms are required to file electronically; however, all employers are encouraged to file electronically regardless of the number of W-2 forms they file.

Federal Unemployment Tax

The FUTA tax rate decreased to 6.0% beginning July 1, 2011. The maximum state credit is 5.4% for a net tax of 0.6% (.006) on the first $7,000 of wages per employee. Pennsylvania’s maximum state credit is 5.4% for a net tax of 0.6% (.006) for 2020.

Pennsylvania Unemployment 

The maximum taxable wages for employer Pennsylvania Unemployment remain at $10,000 per employee. The surcharge on employer contributions remains at 5.4% (.054). The employer additional contribution remains at 0.50% (.005). The additional employer interest factor tax of 1.1% was removed for 2020. The unemployment tax rate for employees remains at 0.06% (.0006). This 0.06% tax does not have a wage limit. Effective January 1, 2017, these contributions must be paid electronically if the total liability owed is $5,000 or greater. The base week amount is $116.

401(k) Limits

The maximum employee contributions increased to $19,500 for 2020. Please note that this contribution is limited to the lesser of $19,500 or the percentage of wages specified in your 401(k) Plan document. The maximum employee contributions for employees age 50 or older increased to $26,000 for 2020. The contribution is limited to the lesser of $26,000 or the percentage of wages specified in your 401(k) Plan document.

QuickBooks

Please note that if you have payroll with QuickBooks and you keep current with all the payroll updates, QuickBooks makes the changes automatically; however, double-checking with the rates here is encouraged.

Minimum Hourly Wage

AmountEffective Date
Federal$7.25July 24, 2009
Pennsylvania $7.25July 24, 2009

Affordable Care Act (ACA)

In 2016 the federal government required the filing of new forms relating to the Affordable Care Act. These forms: 1094B, 1095B, 1094C and 1095C must be completed by employers with 50 or more full-time employees or equivalents. If you are required to file these forms and need help, please contact one of us directly.

PA State Income Tax Rate 2019

2019 Tax Highlights

We have summarized the major changes, as of this date, which will affect your payroll tax calculations effective January 1, 2019.

Federal Income Tax (Individual)

The federal individual income tax rates changed for 2019 to reflect the Tax Cuts and Jobs Act new law. The personal exemption for 2019 was repealed. (See schedule 1 for tax brackets, rates and standard deductions)

Pennsylvania Individual Tax

The Pennsylvania individual income tax withholding rate remains at 3.07% for 2029.

Philadelphia Income Inequality Initiative

Effective January 1, 2015, all Philadelphia employers must provide notice to their employees and non-payroll workers of the federal Earned Income Tax Credit (“EITC”) program. This notice should be sent at the same time as the form W-2, 1099, or another comparable form.

Social Security Tax

The social security wage base for 2019 will increase to $132,900.

Social Security Tax is broken into two sections, Social Security and Medicare. The following is each section’s rate and base for 2019:

 Social Security    Medicare
Rate – Employer6.2%1.45%
Rate – Employee6.2%1.45%
Base$132,900Unlimited
Maximum Employer Portion   $8,239.80Unlimited
Maximum Employee Portion $8,239.80Unlimited

An employer must withhold additional Medicare tax from wages it pays to an individual in excess of $200,000 in a calendar year, without regard to the individual’s filing status or wages paid by another employer. The rate on the additional Medicare Tax is 0.9% and is only paid by the employee. This information is subject to change based on the policies of the new federal administration.

As a reminder, 2018 year-end PA W-2 information is due by Jan. 31, 2019, and may be filed via multi-import file upload in e-TIDES at www.etides.state.pa.us. This includes W-2 Transmittals (REV-1667), employee wage statements and 1099R forms.  Note that electronic filing is now a mandatory requirement if filing 10 or more W-2s..

Employers that file 250 or more federal W-2 forms are required to file electronically. Taxpayers who file fewer than 250 W-2 forms are also encouraged to explore electronic filing, which is fast, free and convenient, offering advantages such as error-reducing automatic calculators, instant confirmation of successful filing, faster processing and easy access to filing history.

If you have any questions regarding electronic filing, please visit the department’s Business Tax e-Services Center at www.revenue.state.pa.us or call 717-787-7635.

Federal Unemployment Tax

The FUTA tax rate decreased to 6.0% beginning July 1, 2011. The maximum state credit is 5.4% for a net tax of 0.6% (.006) on the first $7,000 of wages per employee. Pennsylvania’s maximum state credit is 5.4% for a net tax of 0.6% (.006) for 2019.

Pennsylvania Unemployment 

The maximum taxable wages for employer Pennsylvania Unemployment remain at $10,000 per employee. The surcharge on employer contributions remains at 5.4% (.054). The employer additional contribution remains at 0.50% (.005). The additional employer interest factor tax remains at 1.1% (.011). The unemployment tax rate for employees remains at 0.06% (.0006). This 0.06% tax does not have a wage limit. Effective January 1, 2017, these contributions must be paid electronically if the total liability owed is $5,000 or greater. The base week amount is $116.

401(k) Limits

The maximum employee contributions increased to $19,000 for 2019. Please note that this contribution is limited to the lesser of $19,000 or the percentage of wages specified in your 401(k) Plan document. The maximum employee contributions for employees age 50 or older increased to $25,000 for 2019. The contribution is limited to the lesser of $25,000 or the percentage of wages specified in your 401(k) Plan document.

QuickBooks

Please note that if you have payroll with QuickBooks and you keep current with all the payroll updates, QuickBooks makes the changes automatically; however, double-checking with the rates here is encouraged.

Minimum Hourly Wage

 Amount    Effective Date
Federal$7.25July 24, 2009
Pennsylvania    $7.25July 24, 2009

Affordable Care Act (ACA)

In 2016 the federal government required the filing of new forms relating to the Affordable Care Act. These forms: 1094B, 1095B, 1094C and 1095C must be completed by employers with 50 or more full-time employees or equivalents. If you are required to file these forms and need help, please contact one of us directly.

If you have any questions, please contact:

Fred Schutz,
Director-Tax Department
P: 856-722-5300, ext. 201
E:fred.schutz@hfco.com
Teri Niedermayer
Senior Accounting Tech
P: 856-722-5300, ext. 516
E:teri.niedermayer@hfco.com
Brian Vinciguerra
Small Business Manager
P: 856-722-5300, ext. 501
E:brian.vinciguerra@hfco.com

Additional Resources

The information contained herein is general in nature and is based on authorities that are subject to change. It is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Haefele, Flanagan & Co., PC to the reader. This material may not be applicable to, or suitable for, the specific circumstances or needs, and may require consideration of non-tax and other tax factors. Contact Haefele, Flanagan & Co., PC prior to taking any action based upon this information. Haefele, Flanagan & Co., PC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information obtained herein.