Understanding What a PSD Code Is and Its Importance for Tax Filing

If you’re filing local taxes in Pennsylvania for the first time, it will likely also be the first time you encounter PSD codes. These codes are vital in ensuring your local Earned Income Tax (EIT) is allocated correctly, so it’s important to understand what they mean.

In this post, we’ll explain what PSD codes are, why they matter, how to find and use them, and best practices for managing them. 

What Is a PSD Code?

A PSD code (political subdivision code) is a six-digit identifier assigned to every municipality in Pennsylvania​. Each city, borough, or township in the state has a unique PSD code. 

Are PSD Codes Only Used in Pennsylvania?

Yes. PSD codes are unique to Pennsylvania’s local tax system. No other state requires PSD codes for local tax withholding, so you won't encounter this if you’re outside PA. 

These codes were created as part of Pennsylvania’s Act 32 (a law passed in 2008 and effective in 2012) to standardize and streamline the collection of local earned income taxes​. 

PSD codes are used to help employers allocate the correct amount of local Earned Income Tax (EIT) to the proper tax jurisdictions​

Essentially, the PSD code for your address tells your employer (and tax collectors) which local taxing authorities should receive your local income tax.

PSD codes are derived from home addresses and correspond to a combination of local tax jurisdictions. 

The six digits encode the following information about your residence location​:

• First two digits: The Tax Collection District (TCD), usually your county​. Pennsylvania is divided into 69 TCDs (generally one per county, with a few exceptions)​. This part of the code identifies which county or tax district your taxes will be sent to.
• First four digits: The School District code for your area​. Combined with the TCD, the first four digits represent the specific school district you reside in.
• All six digits: The full PSD code, which pinpoints your municipality (city, borough, or township) within that school district​. 

With PSD codes, tax authorities can accurately link a taxpayer or employee to the correct local jurisdictions for tax collection​. 

It ensures your local EIT withholding and tax returns are tagged with the right location information, avoiding confusion between similarly named towns or districts.

A PSD code is unique to Pennsylvania (no other state uses this system) and is based on your address. 

Employers have each new employee complete a Residency Certification Form (also known as a Certificate of Residency) at hire to determine the correct PSD code and corresponding tax rate​. 

PSD Codes: Their Importance and Challenges

Because PSD codes tie each taxpayer to specific local jurisdictions, they are crucial for accurate tax filing and proper distribution of local EIT. 

Why PSD Codes Matter

When an employer withholds local earned income tax from your paycheck, they must allocate those dollars to the correct city/township and school district. The PSD code is the mechanism that makes this possible so that each taxing authority receives its fair share of the revenue​.

If the PSD code is wrong, your tax payment could be credited to the wrong locality, causing funding mismatches and potential headaches for you and the tax authorities.

From an employer’s perspective, PSD codes are an essential tool for determining the correct local tax rates for their employees. 

Pennsylvania mandates that employers withhold local EIT for all employees (as part of Act 32), and they must withhold the higher of the resident rate vs. non-resident (work location) rate for each employee​. 

To do this, employers rely on both the employee’s resident PSD code and work location PSD code to look up the applicable tax rates. 

PSD Codes: Common Challenges

Despite their importance, managing PSD codes can pose difficulties, especially for businesses and payroll departments dealing with multiple jurisdictions. 

Pennsylvania has over 2,500 municipalities and nearly 500 school districts that levy local taxes​, making it one of the most complex states for local tax compliance. 

An employer with workers residing in many different areas must track each employee’s PSD code and local tax rate—a potentially daunting task. 

Before Act 32’s reforms, there were over 500 local tax collectors, and the system was costly and confusing​.

Act 32 reduced the number of collectors to 69 Tax Collection Districts and introduced PSD codes to bring uniformity. 

However, employers still face the challenge of correctly assigning and updating PSD codes for each employee, particularly if employees move or if the business operates in multiple locations.

A small mistake in a PSD code can lead to tax filing errors.

These errors include:

• The wrong tax rate being applied
• Taxes being sent to the wrong jurisdiction
• An employee’s local tax return not matching what was withheld on their W-2

For the employee, an incorrect PSD on their W-2 could trigger a notice from the local tax collector because the tax paid wasn’t credited to their actual residence. 

Finding and Using PSD Codes

So, how do you find the right PSD code, and how is it used in practice? 

Fortunately, Pennsylvania provides resources to look up PSD codes by address. The Department of Community & Economic Development (DCED) maintains a statewide list of all PSD codes​. 

This list (available on the DCED Municipal Statistics website) includes every municipality’s six-digit code, organized by county and school district. 

Local tax collection bureaus also provide lookup tools. 

For employees, your Form W-2 can be a quick source of your PSD code. Starting in 2018, Pennsylvania employers are required to print the employee’s work location PSD code in Box 20 of the W-2 (the “Locality Name” box)​. 

If you look at Box 20 on your W-2 form, you should see a six-digit number corresponding to the PSD code of the city/town where you work.

If your employer is a “statewide” filer that sends all local taxes to a single collector, the code may be formatted with an extra suffix (e.g., 123456-78), but the first six digits are the work PSD code​.

If you live and work in different jurisdictions, your work PSD code (in Box 20) might be different from your resident PSD code, but it’s the one your employer used for withholding. Your resident PSD code will be on file from the Residency Certification Form you filled out.

Best Practices for PSD Code Management

Managing PSD codes correctly is critical for employers, payroll professionals, and even employees. 

Here are some best practices to ensure accuracy and compliance in dealing with PSD codes:

• Verify each employee’s PSD code: Don’t just guess the code based on a mailing address—use official lookup tools. Verifying the code upfront (and whenever an employee moves) will prevent problems later. 
• Maintain organized records: Keep a spreadsheet or use your payroll system to track each employee’s residence PSD code, work location PSD code, and the applicable EIT rates. Having this information readily accessible ensures the data is accurate when payroll is processed or quarterly returns are prepared. 
• Ensure the correct PSD codes appear on all tax forms: Using the wrong code on a form can lead to misallocated taxes or even filing rejections. It’s much easier to get it right the first time than to fix it later, so be diligent about using the correct codes everywhere they’re required.
• Ask questions: Speak with tax professionals or local tax collectors if you have questions. If you’re unsure about how to handle a complex scenario (such as an employee who lives in one state but works in Pennsylvania or an employee who works remotely), reach out for guidance. 
• Stay informed: While the PSD code list doesn’t change often (only if municipalities merge or split, which is rare, or new tax collection arrangements are made), the requirements around them can evolve. Keep an ear out for announcements from DCED or your local tax collector about any updates. 

Bonus Tip: Make use of modern tools to simplify PSD code management. For instance, Symmetry offers a local tax finder tool​ that can instantly provide the correct PSD code and local tax rate when you input an address.

Summary: Understanding PSD Codes

Pennsylvania’s system may seem intricate, but it ensures every community gets the tax revenue it’s due.

If you’re an employer or payroll provider dealing with PSD codes, following the guidelines and best practices above will save you time and prevent errors. And if you’re an employee, now you know what that peculiar six-digit code on your paperwork means

Ready to make tax filing easier? 

Get a demo of Symmetry’s payroll tax-filing solutions to see how modern tools can simplify managing PSD codes and local taxes. 

PSD Codes: Frequently Asked Questions

Here are some more questions and answers related to PSD Codes:

Do you want to keep learning about local tax codes?

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