Business Consultants & Certified Public Accountants

July 2018 starts the penalty phase of new PA 1099-MISC rules

Earlier this year we announced the changes that the Pennsylvania Department of Revenue was making with Form 1099-MISC reporting through our newsletter and our website (see February blog post below).  This change applies to businesses operating in PA who pay non-employee compensation or business income to individuals or entities outside PA or to disregarded entities (such as LLCs) who have a non-PA resident member.   (Think about those to whom you issue a 1099-MISC with Box 7 payments.)  This change also applies to lease payments made in the course of a trade or business to a non-PA resident lessor who is an individual, trust, or an estate by a lessee of PA real estate.  (Think about those to whom you issue a 1099-MISC with Box 1 payments.)

We wanted to take this time to remind you that if the above scenario applies to you, you should be withholding 3.07% PA tax on payments to these individuals or entities.  Although PA had not been assessing penalties for failure to file for the first two quarters of this year*, PA will start assessing penalties beginning with the third quarter.  If you need help better understanding the impact on your company/entity, please don’t hesitate to reach out to your PBGW accountant or go the PA Department of Revenue website.  (*If the 3.07% tax was withheld in the first or second quarter, you were/are required to make timely deposits and reporting.)

It’s important to note that although the due date for Form 1099-MISC filing isn’t until January 31, 2019, you need to take action on this immediately if you haven’t already.  Our blog post from February gives some helpful reminders on how to stay on top of these vendor payments throughout the year.  You can find the official guidance on Act 43 here.