Pennsylvania Payroll Deduction Guidelines
The federal government administers the federal payroll deductions that employers are required to make from employees' paychecks. Each state has a state labor department that administers state wage and hour laws, which generally includes authorized deductions from wages. The state revenue agency administers payroll tax withholding laws. Pennsylvania has its own payroll deduction policies that employers must follow.
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Authorized Deductions
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The Commonwealth of Pennsylvania's official publication of rules and regulations, The Pennsylvania Code, cites the deductions Pennsylvania employers can make from employee wages. Permissible deductions include payments to and recovery of overpayments made under an authorized employee welfare and pension plan, and deductions made in writing by the employee or under an employment contract, such as stock option or stock purchase plan, employer-operated thrift plans and payments into employee personal savings accounts. Deductions can also be made for charitable purposes. Also permissible are statutory deductions such as federal or local income tax repayment of employer loans, purchase or replacement of goods and services made to the employee, and labor organization dues.
Restriction
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The employer can make an authorized deduction from wages, except if it results in the employee's pay falling below the state minimum wage. In 2011, Pennsylvania's minimum wage is the same as the federal minimum wage: $7.25 per hour.
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Tax Withholding
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Pennsylvania employers are required to withhold federal income tax, Social Security tax, Medicare tax and state income tax from employees' paychecks. The employer withholds federal income tax according to the employee's W-4 data and Internal Revenue Service Circular E's tax withholding tables. The employer also withholds Social Security tax at 4.2 percent (in 2011) of gross income, up to $106,800 for the year; and Medicare tax at 1.45 percent of all gross income. The employer pays and reports these three taxes to the IRS. The employer withholds Pennsylvania income tax at a flat percentage of gross compensation: 3.07 percent in 2011. The employer does not withhold Pennsylvania income tax for employees who work in Pennsylvania but live in Maryland, Indiana, Ohio, New Jersey, Virginia or West Virginia, since Pennsylvania has a reciprocal agreement with these states. The employer pays and reports state income tax withholding to the Pennsylvania Department of Revenue.
Wage Garnishment
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Pennsylvania is among the few states that do not permit ordinary wage garnishments, such as those initiated by creditors. However, garnishment for child support and back taxes are permitted. The IRS and the Pennsylvania Department of Revenue do not need a court order to garnish wages for federal and state taxes.
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