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Determine the residency status of a local EIT return

You need to file a resident return when the taxpayer lives in a taxing municipality, regardless of the municipality they work in. Form W-2 withholding uses the greater of the following: the nonresident tax rate of the working city, or the resident tax rate of the city in which the taxpayer resides. The return, however, should use the resident city tax rate.
If the taxpayer works in a different municipality and the nonresident tax rate where the taxpayer works is greater than the resident tax rate of where the taxpayer lives, UltraTax CS automatically reduces the withholdings from the W-2 to match the tax calculated using the lower resident tax rate. A statement will print with the Local EIT Not Required statements to show the calculated reduction.
When the taxpayer lives out of the state of Pennsylvania but works in a taxing municipality within the state, you need to file a nonresident return with the work city. If the taxpayer lives in a non-taxing city in Pennsylvania and works in a taxing city, you also need to file a nonresident return with the work city. Use the nonresident tax rate of the taxing city on the return.
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