Local Tax Overview - sfpayroll.org

1 Local Tax Overview Delaware, Michigan, New Jersey & New York Table of Contents General Local Tax Guidelines .. 1. How Are Local Taxes Calculated? .. 2. Delaware Guidelines .. 3. Michigan Guidelines .. 4. New Jersey Guidelines .. 5. New York Guidelines .. 6. Metropolitan Commuter Transportation Mobility Tax .. 7. Local Tax Quick Reference .. 8. i Revised 4/11/2012. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals General Local Tax Guidelines If an employer is located in a jurisdiction that imposes a Local income tax, all employees that work in this location are required to pay this tax.

2 In some localities, if employees live in a jurisdiction that also imposes a Local tax, the employee will be able to apply the amount paid for the worked-in tax to the lived-in tax jurisdiction. Generally, employers are required to withhold worked-in taxes. If employees are required to pay lived in taxes, it is the employer's option to withhold the additional lived-in taxes. Employers may obtain an Employer Identification Number (EIN). from the employee's lived-in locality and withhold lived-in taxes. The employer is then accepting all responsibility for the deposits and filings to the resident locality.

3 If employers do not withhold the lived-in taxes, it is the employee's responsibility to pay the lived-in taxes to the resident locality. 1. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals How Are Local Taxes Calculated? Method 1 Local taxes are most often calculated as a percent of an employee's taxable wages. There are usually no limits on the amount to be withheld for Local taxes as there are for Social Security or FUTA\SUI\SDI. (Kentucky is an exception, with 9 locals that have limits).

4 Method 2 Some localities, such as New York City, use the same factors as FIT and SIT to calculate Local tax. These factors can be: Gross Pay Marital Status Number of Exemptions Pay Frequency Method 3 Localities, such as Greenwood Village, Colorado, require both employer and employee to pay a flat dollar amount per month, after an employee earns a minimum amount in any given month. This is an example of a flat dollar amount tax. Method 4 Many localities in Pennsylvania impose a Local Services Tax (LST), formerly known as the Occupational Privilege Tax (OPT) or Emergency Municipal Services Tax (EMST).

5 This tax is calculated at a fixed dollar amount per year withheld from each payroll period throughout the year and applies only in the municipality where the employee works. 2. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals Delaware Guidelines There is currently only one Local tax in Delaware for Wilmington, and it is a worked- in and lived-in Local tax. Employees that work in Wilmington are subject to Wilmington Local tax. Residents of Wilmington are also subject to this tax.

6 The table below describes the employer's responsibility for Local taxes in Delaware: If an employer is and employees live then the employer must withhold the located in Wilmington in Wilmington Wilmington tax must withhold the located in Wilmington outside of Wilmington Wilmington tax must withhold the located in Wilmington outside of Delaware Wilmington tax located in Delaware must withhold the in Wilmington other than Wilmington Wilmington tax Can apply for an ID in the lived in jurisdiction and withhold the lived in tax.

7 Is located outside of or in Wilmington Delaware Can choose not to withhold the lived in tax and make employees responsible for the tax. The Wilmington web site has an address coding guide which lists all the addresses and streets within the corporate limits of the city of Wilmington. The address to this guide is For more information on Wilmington visit: Regulations: 3. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals Michigan Guidelines The Local taxes in Michigan are both worked-in and lived-in.

8 Employers, however, are required to withhold taxes for the locality in which wages are earned. If an employee lives in a jurisdiction that also imposes a Local tax, the employer can choose to withhold that tax as a courtesy to the employee or choose not to withhold that tax, making the employee responsible for paying that resident tax. If an employee works and lives in different localities, then both jurisdictions will allow a credit. The following table further describes employer responsibility in Michigan: If an the employee Example Total Rate(s).

9 Employee will pay Withheld Lives and works in the full rate to the Works in Albion Pays to Albion the same city lived-in city. and Lives in Albion of the worked-in Works in Battle Creek Battle Creek Lives in a different city rate and of the but Lives in Jackson city than the lived-in city rate to ( of Battle Creek's worked-in city the lived-in city Jackson rate and of (possible exception). Jackson's rate) Total = Flint of the worked-in Lived-in city tax city rate and the Works in Flint but rate is greater difference to the Lives in Saginaw Saginaw than the worked-in lived-in city to equal ( of Flint's rate, subtract that from ( - paid to city tax rate the FULL lived-in city Flint).)

10 Rate. Saginaw's rate). Total = of the worked-in Saginaw Worked-in city tax Works in Saginaw but tax rate to the rate is greater Lives in Flint worked-in city and at than the lived-in ( of Saginaw's rate Flint least to the lived-in tax rate and of Flint's rate) Total = city. For a listing of Local web sites in Michigan, visit: 4. APA Meeting, May 17, 2012 Delaware, Michigan, New Jersey, & New York Locals New Jersey Guidelines The city of Newark has a Local tax, paid by the employer, which is based on wages earned within the city.