The 983L tax code you’re seeing on a Pennsylvania pay stub or W-2 is a payroll software identifier for a local earned income tax withholding. The “L” marks it as a local tax rather than a state or federal one, and the digits point to a specific taxing jurisdiction — the municipality and school district that are supposed to receive the money withheld from your paycheck. The code itself is generated by payroll systems to route the withholding to the correct local tax collector. What you actually need to understand is the local earned income tax sitting behind it, because that’s the tax you file a return for every April.
The Local Tax Behind the Code
Pennsylvania is one of the few states where municipalities, boroughs, townships, and school districts levy their own income tax on wages and net profits from self-employment. The authority comes from the Local Tax Enabling Act.1Pennsylvania General Assembly. Local Tax Enabling Act The combined rate between a municipality and its overlapping school district usually falls somewhere between about 0.5% and 3%, depending on your address.
Withholding follows a resident-versus-workplace rule. Your employer compares the local tax rate where you live against the nonresident rate where you work and withholds at whichever is higher.2Berkheimer. Act 32 FAQ Your resident municipality and school district always get their full share first. If the workplace rate is higher, the workplace jurisdiction keeps only the difference; if your home rate is higher, the workplace jurisdiction gets nothing extra.
So if you live in a borough with a combined 1.4% rate and commute to a city with a 1% nonresident rate, your employer withholds 1.4% and sends all of it to the collector for your home jurisdiction. Nonresidents of Pennsylvania who work inside the state have their employer withhold the workplace jurisdiction’s nonresident rate and owe no resident rate to any Pennsylvania municipality.
PSD Codes and Confirming Yours Is Right
Every municipality and school district pairing in Pennsylvania has a unique six-digit Political Subdivision code, or PSD code. The first two digits identify the county or Tax Collection District, and the remaining digits identify the specific school district and municipality.3Keystone Collections Group. Is the PSD Code Different From the Department of Revenues School Code and the DCEDs Municipal Code That code determines which local governments actually receive the dollars withheld from your paycheck.
To check yours, use the Department of Community and Economic Development’s address lookup, which returns your municipality, school district, PSD code, and current local earned income tax rate.4Pennsylvania Department of Community and Economic Development. Find Local Withholding Rates by Address If the PSD code on file with your employer is wrong, your payments route to the wrong jurisdiction, and you’ll likely have to sort it out when you file.
When you start a job or move, you fill out a Residency Certification Form documenting your home address, PSD code, and the local rate at both your residence and workplace.5Pennsylvania Department of Community and Economic Development. PSD Codes and EIT Rates Update that form promptly whenever your address changes, because your home address drives the entire withholding calculation.
Reading the Local Lines on Your W-2
Your W-2 carries the information you need to check what was withheld and where it went. Box 18 shows your local taxable wages. Box 19 shows the local tax withheld. Box 20 identifies the local jurisdiction by name or code. Compare the jurisdiction in Box 20 against the PSD code you confirmed through the DCED lookup. If they don’t match, or the rate implied by Boxes 18 and 19 isn’t the rate for your actual address, the discrepancy needs to be resolved before you file.
What Local Earned Income Tax Doesn’t Apply To
The local earned income tax targets active earnings: wages, salaries, commissions, and net profits from self-employment. Several income types are outside its scope entirely:6Keystone Collections Group. Is Any Income Exempt From Local Earned Income Tax (EIT)
- Social Security benefits, fully exempt regardless of amount
- Unemployment compensation
- Military pay
- Interest and dividends
Retirees whose only income is Social Security and pensions often owe no local earned income tax at all. Self-employed individuals, on the other hand, pay the local rate on their net profits just as employees pay it on wages.
One boundary worth flagging: Philadelphia runs its own separate wage tax system. If you work in Philadelphia, the general Act 32 withholding framework and the standard part-year tools don’t apply to that income the same way.
Filing Your Local Return
The local earned income tax return is due April 15, the same day as your federal and state returns. If April 15 lands on a weekend, the deadline moves to the next business day. A federal or state extension buys you more time to file, but you should still submit the local form by April 15 with an estimated payment if you expect to owe.7Pennsylvania Department of Community and Economic Development. Taxpayer Annual Local Earned Income Tax Return
Returns go to the designated collector for your Tax Collection District, which in most of the state is either Keystone Collections Group or Berkheimer. Most collectors offer online filing with instant confirmation; paper returns get mailed in with copies of your W-2s. Every taxpayer subject to the tax must file a return, even if nothing extra is owed after withholding.
Self-employed filers need to attach federal Schedule C or Schedule K-1 and keep records supporting their income and expense figures. Document any estimated payments made during the year so you get credit for them on the return.
Missing the deadline costs money. Late returns accrue a penalty of 1% per month on the unpaid tax, capped at 15% of the original balance, and interest runs on top of that at a rate set under the Local Tax Enabling Act.8Keystone Collections Group. How Is the Penalty and Interest Accrual Calculated for Earned Income and Local Service Taxes Filing on time with whatever you can pay beats not filing.
If You Moved During the Year
Move between municipalities and you owe local earned income tax to each jurisdiction based on the income you earned while living there. Four months in a township and eight in a borough means each one gets tax only on the wages tied to its share of the year.9Keystone Collections Group. If I Moved During the Year Do I Have to Pay Local Earned Income Tax
The local return has a Part-Year Resident schedule on the back where you list each address, the months you lived there, and the income earned during each period. Berkheimer publishes a Part-Year Resident worksheet that prorates the figures based on monthly residency and employment data, though it isn’t built for anyone who worked in Philadelphia.10Berkheimer. Part Year Resident Earned Income Tax Worksheet
Fixing Errors and Getting Refunds
If a wrong PSD code, a misapplied rate, or any other error turns up after you file, you’ll submit an amended return. Amended returns go in on paper; online filing isn’t offered for corrections. Check the “Amended Return” box, enter the corrected figures, sign and date it, and mail it to your designated collector with supporting documentation.
Overpayments are common when employers withhold at the wrong rate or route money to the wrong jurisdiction. A refund request generally has to be filed within three years of the original due date or one year after the actual payment, whichever is later. If the overpayment grew out of a notice of underpayment that you paid and later disputed, the window is one year from the date of that payment. Keep copies of your returns and payment records for at least three years so you can back up a claim.