Getting ready to file taxes in PA? Don’t forget the sometimes-overlooked local return
Getting ready to file your taxes before this spring’s deadline approaches? Make sure you don’t forget to think locally.
Pennsylvania is one of just 17 states that applies local earned income taxes, which can prompt headaches for filers and tax officials alike if they are overlooked. Increasing awareness has become a high priority for Centre Tax Agency, the designated collector of local earned income tax across most of Centre County.
“We’re realizing how much we need to help people know that a third level of local taxes exists,” said Valerie Reed, one of the agency’s tax specialists. “That way, it doesn’t come as a shock on tax day or a couple of years later when we send a letter saying, ‘Hey, we don’t have a tax return for this year from you.’”
With taxes due Tuesday, April 18, here’s what you need to know about local filings in Pennsylvania.
What to know about local income taxes
Centre Tax Agency serves as the designated collector for local earned income tax across Centre County’s Tax Collection District, which covers 31 municipalities in the Bald Eagle, Bellefonte, Penns Valley and State College-area school districts. It also works to help local filers understand their returns and confidently prepare their taxes each year.
Before taxes are due April 18, filers are encouraged to make sure their local earned income taxes are properly filed.
One of the most common mistakes the agency sees occurs when filings use local tax rates for the wrong municipality. Filers are urged to look up their correct tax rate by entering their address online at munstats.pa.gov/public/FindMunicipality.aspx.
Taxpayers are also encouraged to be careful when analyzing their tax documents, as taxable income can vary between the federal, state and local levels.
You should use local wage and tax information shown in boxes 18 through 20 of your W-2 forms, Centre Tax Agency says, to ensure you’re filing correctly. If local wages in box 18 vary from the state wages in box 16, check your W-2 forms again to see if any cover additional wages and withholdings, as total local wages should match state wages. If box 18 is empty, use the state wages shown in box 16, the agency advises.
Additionally, taxpayers in short-term rental hotspots like State College and Bellefonte should note income from short-term rentals is now considered taxable at the state and local levels.
“Anyone who’s using Airbnb and Vrbo, those types of things with renting out homes for less than 30 days… They’re thinking they might want to cash in on [Penn State football] weekends and not fully understanding the financial ramifications,” Reed said.
Locally taxable income includes wages from an employer, net profits from self-employment, short-term rental income, early distributions for retirement plans and non-employee compensation, among other sources. Social Security and disability benefits, distributions from retirement plans and interest are not locally taxable income sources.
As tax day approaches, Centre Tax Agency accepts filings through a paper form and the agency’s eFiling website. When you’re ready to file, be sure to include copies of your supporting documentation, including W-2 and 1099 forms.
Online tax software and tax preparation services can often overlook local tax requirements, according to Centre Tax Agency Director Jacqueline Fuge. Filings are also a challenge for those who recently moved to Pennsylvania and might not know any better, as well as those who reside in the commonwealth but work remotely for a company in a different state.
“What happens is, [filers] might not realize their local taxes aren’t taken care of when using a software package,” Fuge said. “Likewise, a tax preparer might file state and federal returns electronically and hand their packet of tax information back, and taxpayers do not always realize there’s a nice, neat packet of information that needs to be sent to our office for processing. It’s an honest mistake when they’re overlooking it, but there’s sometimes another follow-up step that taxpayers need to take.”
Those who use those tax preparation services should check their files to see if they received a local earned income tax return that must be mailed to Centre Tax Agency at 243 S. Allen St. in State College, P.O. Box 437. Be sure to include all attached documents and, if payment is required, make your check or money order payable to Centre Tax Agency.
Free tax help through Centre Tax Agency
While Centre Tax Agency does not file taxes for individuals, it does work to answer their questions and provide general assistance for local returns only. Those who need help are encouraged to visit the agency’s website, call 814-278-4709 or email centretaxagency@statecollegepa.us.
Centre Tax Agency also welcomes walk-ins for tax assistance at its office on the first floor of the State College Municipal Building at 243 S. Allen St. The office is open from 8:30 a.m. to 4:30 p.m. Monday through Friday, excluding holidays.
“We’ll guide people through the process. I’m big on education, so I always like to teach people about it,” Reed said. “Some people hear the word ‘tax’ and want to go screaming, running from the room. Locally, it’s really not that scary. We do our best to make it easy.”
Centre Tax Agency will offer appointments outside of regular office hours from 4:30 to 7 p.m. April 6 and between April 12-14 and 17-18. While anyone is welcome, those who plan on arriving during extended hours are asked to call the office at 814-278-4709 to reserve a time.
“Anyone who wants to walk in during our regular office hours can come in and sit down with someone to receive help with their local tax returns,” Reed said. “Those [extended hours] are another way we can serve taxpayers who aren’t able to come in during the normal workday.”
This story was originally published March 9, 2023 at 11:47 AM.
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