Lehigh County PA Chooses Berkheimer as EIT Collector

The incredibly long saga of earned income tax (EIT -- a local tax collected by school districts and municipalities) collection reform in Pennsylvania is about to take a major step forward. Under Act 32, almost all counties in the state of Pennsylvania must appoint a common EIT collector by September 15, 2010. Currently, the tax is collected by either municipalities or school districts themselves, although some have appointed outside collectors.

These tax collectors would be effective for 2012, although 2011 is allowed.

The Lehigh Valley is one of the worst areas in the state of PA for the balkanization of our tax collection. There are 63 municipalities in Lehigh and Northampton counties alone, plus more than a dozen school districts. This results in incredibly inefficient tax collection practices. I am sure much revenue is lost even from people who want to comply with the tax, let alone people who want to cheat. There are so many steps in the process that must go exactly right that mistakes are very common.

The surprising news is that the outside tax collectors who have been slowly consolidating power in each county may not be the ones getting the contracts. The most populous municipalities of Lehigh County, for example, have contracted with Keystone Collections (Allentown City, Lower Macungie Township, and Whitehall Township). All three used to collect their own taxes, but came to the conclusion (correct, I think) that having their own employees collect the taxes was incredibly expensive and inefficient. (I understand Allentown City used to have 17(!) people handle this task.)

However, when it came down to appointing the county-wide tax collector for 2012, Lehigh County went with Berkheimer Associates, another large tax collection bureau. That's OK with me; Berkheimer has been making an effort to allow electronic filing which is helpful.

Bucks County, however, where 35 of 48 municipalities and school districts are now using Berkheimer, decided to go with Keystone Collections.

And Northampton County, where Berkheimer has offices, is apparently seriously considering Keystone Collections as well, even though they are from the opposite end of the state in Irwin near Pittsburgh. They are supposed to make their choice on 9/9/10.

I am getting really curious how this will all work out. Although I was in favor of statewide collection, the county-wide collection is the largest leap forward since the tax was adopted back in 1965. I am hopeful that with all of this lead time that a smooth transition will take place. As a CPA who assists clients with payroll and payroll taxes, anything to lessen the chance for error is appreciated. And as a taxpayer, I want every dollar that is due to be collected -- no more, no less -- for the least cost.

Stay tuned.

Lehigh County PA Chooses Berkheimer as EIT Collector