Form Pa 40 C PDF Details

Pennsylvania state tax form Pa 40 C is the business income and receipts tax return. This form is for businesses that have taxable income from Pennsylvania sources. The due date for this form is the same as your personal income tax return, April 15th. There are a few optional schedules that can be filed with this form, depending on your business' specific situation. Make sure you consult with a tax professional to determine which schedules are right for you. Filing this form on time is crucial, as penalties and interest can be costly.

Here is the data relating to the PDF you were in search of to complete. It will show you how long it should take to complete form pa 40 c, exactly what fields you need to fill in, and so forth.

QuestionAnswer
Form NameForm Pa 40 C
Form Length8 pages
Fillable?Yes
Fillable fields120
Avg. time to fill out26 min 4 sec
Other namesfillable pa 40, pa 40 schedule c, pa tax form schedule c, pa schedule c

Form Preview Example

Owner’s Social Security number
Product or service t
C. Federal Employer Identification Number

IMPORTANT: FILL IN FORM MUST BE DOWNLOADED ONTO YOUR COMPUTER PRIOR TO COMPLETING

 

PA SCHEDULE C

2003110059

 

Profit or Loss from

 

 

START

Business or Profession

 

 

(Sole Proprietorship)

 

 

HERE

PA-40 C (EX) 09-20 (FI)

20___

 

PA Department of Revenue

Include with Form PA-40 or PA-41

Name of owner as shown on PA tax return:

OFFICIAL USE ONLY

A. Main business activity t

 

 

 

 

 

B. Business name t

 

 

 

 

 

D. Business address (number and street)

 

 

 

C

City, State and ZIP Code

<![endif]>t

 

 

 

 

 

 

 

E. Method(s) used to value closing inventory. Fill in the appropriate oval:

Sales Tax License Number (if applicable)

(1)

Cost (2)

Lower of cost or market

 

 

 

 

 

 

 

 

(3) Other (if other, attach explanation)

F.Accounting method. Fill in the appropriate oval:

(1)

Cash (2)

Accrual (3)

Other (specify)

t

Yes No

Federal NAICS Code

G.Was there any change in determining quantities, costs, or valuations . . . . . . . . . . . . . . . . . .

between opening and closing inventory? If “Yes,” submit explanation.

H.Did you deduct expenses for an office in your home? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I.If the business is out of existence, fill in this oval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SECTION I

INCOME

 

 

 

 

 

 

 

 

1.

a. Gross receipts or sales

1a.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

b. Returns and allowances

1b.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c. Balance (subtract Line 1b from Line 1a)

. .

. . .

.

. . . . . . . . . . . . . . . . . .

. . . . .

1c.

 

 

 

 

 

 

 

 

 

 

 

 

 

2.

Cost of goods sold and/or operations (Schedule C-1, Line 8) . .

. .

. . .

.

. . . . . . . . . . . . . . . . . .

. . . . .

 

2.

 

 

 

 

 

 

 

 

 

 

 

 

 

3.

Gross profit (subtract Line 2 from Line 1c)

. .

. . .

.

. . . . . . . . . . . . . . . . . .

. . . . .

 

3.

 

4. Other Income (submit statement). Include interest from accounts receivable, business checking

 

 

 

 

 

 

4.

 

 

accounts and other business accounts. Also include sales of operational assets

. . . . .

 

 

5.

Total income (add Lines 3 and 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .t

 

5.

 

 

 

 

 

 

 

 

 

 

 

 

SECTION II

DEDUCTIONS

 

 

 

 

 

 

 

 

6.

Advertising

. . . . . . . . . . . . . . . . . .

 

 

28.

Supplies (not included on Schedule C-1)

. . . .

 

7.

. . . . . . . .Amortization

. . . . . . . . . . . . . . . . . .

 

 

29.

. .Taxes

. . . . . . .

. . .

. . . .

 

8.

. . . . . . . . . .Bad debts from sales or services

 

 

30.

. .Telephone

. . . . . . .

. . .

. . . .

 

9.

. . . . . . .Bank charges

. . . . . . . . . . . . . . . . . .

 

 

31.

. .Travel and entertainment

. . . . . . .

. . .

. . . .

 

10.

Car and truck expenses

. . . . . . . . . . . . . . . . .

 

 

32.

. .Utilities

. . . . . . .

. . .

. . . .

 

11.

. . . . . . .Commissions

. . . . . . . . . . . . . . . . . .

 

 

33.

. .Wages

. . . . . . .

. . .

. . . .

 

12.

Cost depletion but not percentage depletion .

 

 

34.

. . . . . . . . .IDCs (1/3 current expensing)

. . . .

 

13.

a.

. . . . . . . . . . . . . . .Regular depreciation

 

 

35.

. .IDCs (amortization)

. . . . . . .

. . .

. . . .

 

13.

b.

Section 179 expense

 

 

36.

Start-up costs (direct expense)

 

 

 

 

. . . .

 

14.

Dues and publications

 

 

 

37.

Other expenses (specify):

 

 

 

 

. . . . . . . . . . . . . . . . . .

 

 

 

 

 

 

15.

Employee benefit programs other than on Line 23

 

 

 

 

a

 

 

 

 

 

 

 

 

. . . . . . .

. . .

. . . .

 

16.

Freight (not included on Schedule C-1)

 

 

 

 

b

 

 

 

 

 

 

 

 

. . . . . . .

. . .

. . . .

 

17.

Insurance

 

 

 

 

 

c

 

 

 

 

. . . . . . . . . . . . . . . . . .

 

 

 

 

 

 

 

 

18.

Interest on business indebtedness

 

 

 

 

. . . . . . .

. . .

. . . .

 

 

 

 

 

d

 

 

 

 

 

 

 

 

 

 

 

 

19.

Laundry and cleaning

 

 

 

 

 

. . . . . . .

. . .

. . . .

 

 

 

 

 

 

e

 

 

 

 

. . . . . . . . . . . . . . . . . .

 

 

 

 

 

 

 

 

20.

Legal and professional services

 

 

 

 

. . . . . . .

. . .

. . . .

 

 

 

 

 

f

 

 

 

 

 

 

 

 

 

 

 

 

21.

Management fees

 

 

 

 

 

. . . . . . .

. . .

. . . .

 

 

 

 

 

 

 

 

 

 

. . . . . . . . . . . . . . . . . .

 

 

 

 

g

 

 

 

 

22.

Office supplies

 

 

 

 

 

. . . . . . .

. . .

. . . .

 

 

 

 

 

 

 

 

 

 

. . . . . . . . . . . . . . . . . .

 

 

 

 

h

 

 

 

 

23.

Pension and profit-sharing plans for employees

 

 

 

 

. . . . . . .

. . .

. . . .

 

 

 

 

 

 

 

 

 

 

 

 

 

i

 

 

 

 

24.

Postage

 

 

 

 

 

. . . . . . .

. . .

. . . .

 

 

 

 

 

 

 

 

 

 

. . . . . . . . . . . . . . . . . .

 

 

 

 

j

 

 

 

 

25.

Rent on business property

 

 

 

 

. . . . . . .

. . .

. . . .

 

 

 

 

 

 

 

 

 

 

 

37.

Total other expenses . . . .

 

 

 

 

26.

Repairs

 

 

 

. . . . . . .

. . .

. . . .

 

 

 

 

 

 

 

 

. . . . . . . . . . . . . . . . . .

 

 

38.

Total expenses. (add Lines 6 through 37)

 

 

27.

Subcontractor fees

 

 

 

. . . .

 

 

 

 

 

 

. . . . . . . . . . . . . . . . . .

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39.

Net profit or loss (subtract Line 38 from Line 5). If a net loss, fill in the oval. Enter the result on your PA tax return

Loss

39.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIDE 1

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PA SCHEDULE C

2003210057

 

 

Profit or Loss from

 

 

 

 

 

 

 

 

Business or Profession

 

 

 

 

(Sole Proprietorship)

 

 

 

 

PA-40 C (EX) 09-20 (FI)

20___

 

 

 

PA Department of Revenue

 

OFFICIAL USE ONLY

Name of owner as shown on PA tax return:

 

 

Social Security Number

START

SCHEDULE C-1 - Cost of Goods Sold and/or Operations

1.

Inventory at beginning of year (if different from last year’s closing inventory, include explanation) . . . .

 

 

 

 

2.

a. Purchases

2a.

 

 

 

 

 

 

b. Cost of items withdrawn for personal use

2b.

 

 

c. Balance (subtract Line 2b from Line 2a)

 

 

 

. . . . .

. . . . . . . . . . . . . . . . . . . . . .

3.

Cost of labor (do not include salary paid to yourself or subcontractor fees)

4.

Materials and supplies

. . . . .

. . . . . . . . . . . . . . . . . . . . . . . .

5.

Other costs (include schedule)

. . . . .

. . . . . . . . . . . . . . . . . . . . . . . .

6.

Add Lines 1, 2c, 3, 4 and 5

. . . . .

. . . . . . . . . . . . . . . . . . . . . . . .

7.

Inventory at end of year

. . . . .

. . . . . . . . . . . . . . . . . . . . . . . .

8.

Cost of goods sold and/or operations (subtract Line 7 from Line 6) Enter here and on Section I, Line 2 .t

 

 

 

 

1.

2c.

3.

4.

5.

6.

7.

8.

SCHEDULE C- 2 - Depreciation

PA PIT law does not permit any of the bonus depreciation elections added to the Internal Revenue Code (IRC). PA PIT law limits IRC Section 179 current expensing to the expensing allowed at the time you placed the asset into service or in effect under the IRC of 1986 as amended Jan. 1, 1997. For each asset, you must also report straight-line depreciation, unless not using an optional accelerated depreciation method. You need straight-line depreciation to take advantage of Pennsylvania’s Depreciation and Basis Adjustment rule when you sell the asset. See the PA Personal Income Tax Guide - Net Gains or Losses from the Sale, Exchange or Disposition of Property for the Depreciation and Basis Adjustment rule.

1.

Total Section 179 depreciation (do not include in items below) .

. . . . . . . . . . . . . . . . . . .

. . . . . . . . . t

1.

 

 

 

 

 

 

 

2.

Less: Section 179 depreciation included in Schedule C-1

. . . . . . . . . . . . . . . . . . .

. . . . . . . . . t

2.

 

 

 

 

 

 

3.

Balance (subtract Line 2 from Line 1). Enter here and on Section II, Line 13b

. . . . . . . . . t

3.

 

 

 

 

 

 

 

 

 

 

Description of property

Date acquired

Cost or other basis

Depreciation allowed or

Method of calcu-

Life

Depreciation for this year

 

 

 

 

allowable in prior years

lating depreciation

or rate

 

 

(a)

(b)

(c)

(d)

(e)

(f)

(g)

 

 

MM/DD/YY

4.Other depreciation:

Buildings . . . . . . . . . . . .

Furniture and fixtures . . .

Transportation equipment

Machinery and other equipment

Other (specify) . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . .

5.

Totals (add all Line 4 amounts)

 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

6.

Any depreciation included in Schedule C-1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. .

6.

7.

Balance (subtract Line 6 from Line 5). Enter here and on Section II, Line 13a

. t

7.

 

 

SIDE 2

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PA-40 C IN (EX) 09-20

Instructions for PA-40 Schedule C

Profit or Loss from Business or Profession (Sole Proprietorship)

 

 

 

OVERVIEW

 

Maintain separate books and records for PA PIT purposes

 

 

 

 

and file PA Schedule C. Even if you have no differences

 

 

 

 

 

 

Use PA Schedule C to report income or loss from a business

between your federal and Pennsylvania expenses, you must

 

you operate or a profession you practice as a sole proprietor.

complete and include PA Schedule C to report your income

 

Your activity qualifies as a business if your primary purpose

for Pennsylvania personal income tax purposes.

 

 

 

 

for engaging in the activity is income or profit, you conduct

 

 

 

 

 

 

your activity with continuity and regularity and you satisfy

IMPORTANT DIFFERENCES BETWEEN

 

 

 

the “Commercial Enterprise” test. Certain rental activity may

 

 

 

FEDERAL AND PENNSYLVANIA RULES

 

 

 

be business income and not rental income. If you are a sole

 

 

 

 

 

 

 

 

 

member of an LLC, complete PA Schedule C.

You may use any accounting method for PA purposes, as

 

 

 

For additional information regarding the definition of a business

long as you apply your accounting methods consistently.

 

 

 

PA law does not have material participation rules. Report

 

 

 

or profession, and for Pennsylvania’s requirements for report-

 

 

 

all transactions that are directly related to your business

 

ing income and expenses, refer to the PA Personal Income Tax

 

or profession on your PA Schedule C.

 

 

 

 

Guide – Net Income or (Loss) from the Operation of a Busi-

 

 

 

 

 

 

 

 

 

 

ness, Profession or Farm section for additional information.

If you own or operate more than one business, you must

 

 

 

 

 

 

 

NOTE: Pennsylvania determines income and (loss)

submit a separate PA Schedule C for each business operation.

 

 

 

 

 

 

 

 

 

 

 

under accepted accounting principles, systems or

The following federal schedules and instructions do not

 

 

 

practices that are acceptable by standards of the accounting

 

apply for PA Schedule C:

 

 

 

 

profession and consistent with regulations of the department.

 

 

 

 

 

 

 

 

 

 

● You may use any accounting method for PA purposes,

SCHEDULE A

 

 

 

 

You may not deduct nonbusiness-related personal interest,

 

 

as long as you apply your accounting methods consis-

 

 

taxes and casualty losses on any PA PIT return.

 

 

 

 

 

tently, it clearly reflects income and is not inconsistent

 

 

 

 

 

 

 

 

 

 

 

 

with Pennsylvania law or regulations of the department.

SCHEDULE E

 

 

 

 

● PA law does not contain provisions for statutory employ-

Report rental and royalty income on PA Schedule E, unless

 

engaged in the business of making your property or rights

 

 

ees. Federal statutory employees may be required to

 

 

available in a public market place with intention to realize a

 

 

report PA taxable income on Line 1a, PA-40, and use

 

 

profit.

 

 

 

 

 

PA Schedule UE to deduct expenses. However, you

 

 

 

 

 

 

 

 

 

 

 

 

may use PA Schedule C to provide the type and amount

SCHEDULE F

 

 

 

 

 

of expenses that are included as Miscellaneous

 

 

 

 

 

Report farming activity on PA Schedule F.

 

 

 

 

 

Expenses on PA Schedule UE when there are similar

 

 

 

 

 

SCHEDULE SE

 

 

 

 

 

types of expenses for your occupation or position. In

 

 

 

 

 

such cases, the business will report the business name

Do not report self-employment taxes to Pennsylvania.

 

 

 

 

and activity as “Schedule UE Miscellaneous Expenses”

FORM 4562

 

 

 

 

 

with zero amounts reported as Gross receipts or sales

 

 

 

 

 

If using bonus depreciation, do not use Form 4562. Use

 

 

and Total income. You must also include “See PA

 

 

Schedule C-2 on Side 2 of this schedule. The maximum

 

 

Schedule C for expenses” on Section III, Line 16 of PA

 

 

deduction PA income tax law permits under IRC Section 179

 

 

Schedule UE. If using PA Schedule C to report PA

 

 

is $25,000. If you have income or loss from more than one

 

 

Schedule UE expense types and amounts, you must

 

 

business, profession or farm, you may not deduct more than

 

 

follow PA Schedule UE rules for allowable and unallow-

 

 

$25,000 for all business activities.

 

 

 

 

 

able expenses. See the PA Personal Income Tax Guide

 

 

 

 

 

 

 

 

 

 

 

 

– Gross Compensation section for more information.

FORM 4684

 

 

 

 

● Unless a loss results from an activity where a net profit

Report gain or (loss) from all business activity on PA Schedule

 

C. Include a casualty or theft loss of business property (or

 

 

has not been realized in at least two years of a five

 

 

gain, if insurance proceeds exceed the basis of the property

 

 

consecutive-year

period, an owner may deduct all

 

 

lost or taken) on Line 4 of PA Schedule C. You may refer to

 

 

losses from a business or profession in the taxable year

 

 

the federal schedule for an explanation of gain or (loss)

 

 

realized. Report all transactions directly related to your

 

 

items, but do not submit the federal schedule.

 

 

 

 

 

business or profession on PA Schedule C.

 

 

 

 

 

 

 

 

 

 

 

● Do not use the installment method for sales of inventory

FORM 4797

 

 

 

 

 

if you sell such inventory in the regular and ordinary

Report other sales, exchanges and involuntary conversions

 

 

course of a business or profession. Include interest on

of business property on Line 4 of PA Schedule C if the prop-

 

 

such sales in gross receipts.

erty sold was replaced. Refer to the federal schedule for an

 

 

 

 

 

 

 

 

 

www.revenue.pa.gov

 

PA-40 C

1

 

 

 

 

 

 

 

 

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explanation of gain/loss items, but do not submit the federal

any differences in depreciation related to differences in basis

schedule.

of assets, amount of allowable Section 179 expense, or

FORM 8271

method of depreciation for federal or PA purposes; and any

other reductions in federal expenses allowed at 100 percent

Do not report or deduct any transactions related to tax

for PA personal income tax purposes.

shelters.

 

 

FORM 8594

Examples of items that Pennsylvania requires as reductions

in federal income or expenses include: income taxes based

Report the acquisition or disposition of business assets on

upon gross or net income; any differences in depreciation

Line 4 of PA Schedule C. Refer to the federal schedule for

related to differences in basis of assets, amount of allowable

an explanation for gain/loss items, but do not submit the

Section 179 expense, or method of depreciation for federal

federal schedule.

or PA purposes; recognition of cancellation of debt income;

 

 

 

FORM 8824

recognition of income from IRC Section 481(a) spread

Do not report a like-kind exchange on PA Schedule C. PA

adjustments; payments for owner pension, profit-sharing

law does not have like-kind exchange provisions. You must

plans, deferred, or welfare benefit plans; percentage deple-

include the gain or loss from a sale, exchange or disposition

tion; direct expensing of organizational expenses or syndi-

of a business asset on Line 4 of PA Schedule C if the trans-

cation fees; losses from the sale of property where PA basis

action was a normal business transaction. You must report

is different than federal basis; and any other income or

any gain or loss from the sale of a nonbusiness asset or

expenses where there is a specialized federal treatment that

property or the sale of a business or segment thereof on PA

is not specifically addressed or allowed by PA personal

Schedule D if the property sold was not replaced.

income tax law that might involve additional expensing,

FORM 8829

expensing verses capitalization, carry back or carry forward

of losses, income recognition, or other special treatments.

Include your allowable expenses for the business use of

Other differences between Pennsylvania and federal income

your home on Line 37 of PA Schedule C. Refer to the federal

schedule for an explanation of this expense, but do not sub-

tax include the following:

mit the federal schedule. Pennsylvania does not recognize

IDCs. Special rules apply for the direct expensing of intan-

the federal safe harbor method for determining the allowable

gible drilling & development costs (IDCs). Up to one-third of

deduction for business use of a residence for Pennsylvania

the amount of IDCs incurred in tax years beginning after

Personal Income Tax purposes. All home office expenses

Dec. 31, 2013 may be directly expensed, with the remaining

must be determined by using actual costs incurred.

amount amortized over 10 years. Taxpayers may also elect

 

 

 

to amortize the full amount of the IDCs over 10 years. The

 

OTHER PENNSYLVANIA AND FEDERAL

 

election to expense any IDCs is made by including an

 

 

amount on Line 34 of PA Schedule C. Amortization of the

 

INCOME TAX DIFFERENCES

 

 

 

IDCs must be reported separately on Line 35 of PA Schedule

 

 

 

PA income from the operation of business generally differs

C. IDCs incurred prior to Jan. 1, 2014 must be amortized

over the life of the well.

from the income determined for federal income tax purposes.

 

 

Further, Pennsylvania will no longer accept a PA Schedule

Qualified Joint Ventures. Pennsylvania is not a community

C-F Reconciliation for the purpose of adjusting the federal

property state. Therefore, for PA personal income tax

business income to PA business income. Therefore, the

purposes, a taxpayer and the taxpayer’s spouse must each

items which were previously included as additions to PA

report on a separate PA Schedule C their share of income

income or expense on the PA Schedule C-F Reconciliation

from a business entity they own that is considered a qualified

should be included with the specific line of income or

joint venture for federal income tax purposes.

expense on the PA Schedule C. In addition, those items

 

 

which Pennsylvania does not require be reported as income

LINE INSTRUCTIONS

 

or does not allow as expense in determining net business

 

 

 

 

income, which are allowed in the determination of net federal

IDENTIFICATION INFORMATION

business income, should not be included in the specific

Complete each line.

business income or expenses on PA Schedule C.

OWNER'S NAME

 

 

 

Examples of items that Pennsylvania requires as additions

Enter the name of the business owner. If you are married

to income include: any advance receipts for goods or serv-

and you jointly owned the business with your spouse, you

ices; working capital interest or dividend income including

must complete separate PA Schedule C’s. If you and your

federal-exempt interest and dividend income from obliga-

spouse have separate business activities, complete separate

tions of other states; gains from the sale of business assets

PA Schedule(s) C.

where the property is replaced by similar property; gains

SALES TAX LICENSE NUMBER

from like-kind exchanges; gains from involuntary conver-

Enter your Pennsylvania Sales Tax License Number if you

sions (such as those from IRC Section 1033); and gains

have one. Otherwise, leave this space blank.

from the sale of property where PA basis is different than

 

 

federal basis.

FEDERAL NAICS CODE

Examples of items that Pennsylvania allows as additions to

Provide your Federal NAICS Code as identified on your

Federal Schedule C.

expenses that require a reduction for federal tax purposes

 

 

include: meals, travel and entertainment expense deduction

SOCIAL SECURITY NUMBER (SSN)

of 100 percent by Pennsylvania for the expenses incurred;

Enter the SSN of the business owner.

 

 

 

 

 

2

PA-40 C

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LINE A

 

LINE 1a

 

 

 

MAIN BUSINESS ACTIVITY

Describe the business or professional activity that provided your principal source of income for Line 1. Use the same description you use for your Federal Schedule C. Enter the principal business or professional code you use on your Federal Schedule C.

LINE B

BUSINESS NAME

Enter the name of the business as you registered with the IRS.

LINE C

TAXPAYER IDENTIFICATION NUMBERS

Enter the Federal Employer Identification Number (FEIN) assigned to the business. If you do not have an FEIN for your federal Schedule C, leave this space blank.

LINE D

BUSINESS ADDRESS

Enter the complete address of the business.

GROSS RECEIPTS OR SALES

Include all amounts you received in operating your business or profession. PA law does not contain provisions for statutory employees. A statutory employee reports his or her PA tax- able income on Line 1a, PA-40, and uses PA Schedule UE to deduct his or her allowable employee business expenses.

INSTALLMENT SALES

You may use the installment method for sales of inventory. Include interest on such sales in gross receipts.

LAND AND BUILDINGS

For PA purposes, you may not include the sales of land and buildings on PA Schedule C unless the property sold is replaced. When the property sold is not replaced, the department deems such sales as dispositions of a segment of a business to be reflected on PA Schedule D.

LINE 1b

RETURNS AND ALLOWANCES

This amount is the same for both Pennsylvania and federal purposes. If you report a different amount for Pennsylvania, submit an explanation.

LINE E

LINE 2

CLOSING INVENTORY VALUATION

Fill in the appropriate oval. Submit an explanation if necessary.

LINE F

ACCOUNTING METHOD

Fill in the oval for the accounting method you use for this business. Submit an explanation if necessary.

LINE G

INVENTORY CHANGES

Check “Yes” or “No” for this question. Submit an explanation if necessary.

COST OF GOODS SOLD

This amount is the same for Pennsylvania and federal pur- poses. If you report a different amount for Pennsylvania, submit an explanation.

LINE 4

OTHER INCOME

Enter gross proceeds you may have to report elsewhere on your federal tax return, including but not limited to:

The sale of business assets when you reinvest the proceeds in business operations;

The gain (loss) on replacing business property, including land or buildings used in operating your business or profession; and

 

LINE H

● Interest and dividend income from short-term invest-

 

 

 

OFFICE IN-HOME

ments to generate working capital.

 

 

 

 

 

Check “Yes” if you deduct expenses for an office in-home.

Submit a statement explaining the amount you enter. See

Check “No” if you do not deduct expenses for an office

various sections of the PA Personal Income Tax Guide for

in-home.

explanations of allocable interest, dividends and gains to

 

 

 

business or professions. Include other income you enter on

 

LINE I

 

Line 6, Federal Schedule C, but not refunds of federal taxes

 

 

 

and credits you did not deduct for PA purposes.

 

 

OUT OF BUSINESS

 

 

 

 

 

SECTION II

 

 

If the business is out-of-existence at the end of the tax year

 

 

for which you are filing, fill in the oval.

 

 

 

DEDUCTIONS

 

 

 

 

 

 

 

 

SECTION I

 

Use generally accepted accounting principles and practices

 

 

 

to maintain your books and records and report your expenses

 

 

 

INCOME

from your business or professional activity. PA law does not

Use generally accepted accounting principles and practices

impose dollar or percentage limitations on allowable expenses.

to maintain your books and records, and report your income

You may deduct 100 percent of the PA allowable business

from your business or professional activity.

or professional expenses incurred during the taxable year.

 

 

 

 

 

 

 

www.revenue.pa.gov

PA-40 C

3

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NOTE: You may have incurred other expenses for entertainment facilities (boat, resort, ranch, etc.), living accommodations (except for employees on business) or vacations for yourself, your employees or their families. Reduce your total business expenses in Section II by the

total of these personal expenses.

Generally, you may usually use your federal Schedule C expenses for PA PIT purposes. See the other Pennsylvania and federal income tax differences explanation beginning on Page 1 of the instructions for more information.

You may not use federal amounts after making certain elec- tions to accelerate or defer expenses or spread expenses over more than one taxable year. These instructions explain those expense categories where PA PIT rules and federal rules differ.

LINE 7

AMORTIZATION

Pennsylvania generally follows federal rules. You have the option to use any amortization method allowable under gen- erally accepted accounting principles and practices. Include the amortization of any start-up costs in excess of $5,000 on this line. Do not include the amortization of IDCs on this line. See line 35 for IDC amortization.

LINE 10

CAR AND TRUCK EXPENSES

You may deduct 100 percent of your actual vehicle expenses or you may use the federal standard mileage rate. If you use the federal standard mileage rate, you may not deduct any actual operating expenses, including depreciation and lease costs. Follow the Federal Schedule C rules for these expenses. If you use your car or truck for both business and personal travel, you may only deduct the business portion of your expenses.

LINE 13b

SECTION 179 EXPENSE

PA PIT law limits IRC Section 179 current expensing to the expensing allowed at the time you placed the asset into serv- ice or in effect under the IRC of 1986 as amended to Jan. 1, 1997. The maximum deduction that PA Income Tax law permits under IRC Section 179 is $25,000. Pennsylvania follows the federal definitions for listed property. If you use Section 179 for federal purposes, you must use Section 179 for Pennsylvania personal income tax purposes. See Infor- mational Notice, Personal Income Tax 2012-05 for additional information.

LINE 14

DUES AND PUBLICATIONS

You may deduct dues and publications, but only to the extent directly used for ordinary business purposes. You must exclude any personal use of such expenses.

LINE 15

EMPLOYEE BENEFIT PROGRAMS OTHER THAN ON LINE 23

You may not deduct any payments you make for your own personal coverage. Pennsylvania does not allow any personal expenses on any PA tax return.

LINE 17

INSURANCE

You may deduct life insurance on yourself or your spouse only if the business is the beneficiary (not your spouse, other family members or other persons). The business must use the insurance proceeds to continue business operations. If deducting insurance premiums, the proceeds are business income on Line 4 of Section I.

 

 

LINE 13a

 

 

 

 

 

 

 

 

LINE 18

 

REGULAR DEPRECIATION

 

 

INTEREST ON BUSINESS INDEBTEDNESS

Use any depreciation method permissible under generally

Deduct interest on business debt only. If you personally

accepted accounting principles and practices as long as you

borrow money to acquire a business interest or to improve

consistently apply the method.

your business, you may not deduct the interest on any PA

 

 

NOTE: PA PIT law does not permit any of the bonus

 

 

schedule or PA tax return.

 

 

depreciation elections added to the Internal Revenue

 

 

 

 

 

 

 

 

 

 

Code.

 

 

 

 

LINE 20

 

 

 

 

 

 

 

For each asset, you must also report straight-line deprecia-

LEGAL AND PROFESSIONAL SERVICES

tion, unless not using an optional accelerated depreciation

Only deduct those expenses you incur in operating your

method. You need straight-line depreciation to take advan-

business or profession. You may not deduct any personal

tage of Pennsylvania’s Depreciation and Basis Adjustment

expenses. You may include business accounting and tax

rule when you sell the asset. See the PA Personal Income

return preparation expenses, but not the costs for personal

Tax Guide – Net Gains or Losses from the Sale, Exchange

accounting and tax returns.

or Disposition of Property section for the Depreciation and

 

 

 

Basis Adjustment rule.

 

 

 

 

LINE 21

 

Pennsylvania Law requires that taxpayers use straight-line

 

 

 

 

 

depreciation if an asset’s basis for determining Pennsylvania

MANAGEMENT FEES

depreciation is different from its basis for federal income tax

Include any management fees paid in conjunction with the

purposes.

operation of the business to any related or non-related entity.

 

 

 

 

 

 

 

 

4 PA-40 C

 

www.revenue.pa.gov

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LINE 23

 

LINE 33

 

 

 

PENSION AND PROFIT-SHARING PLANS FOR EMPLOYEES

Only deduct those expenses directly related to pension and profit-sharing plans for employees. You may not deduct any pension or profit-sharing expenses for your own personal retirement benefits.

WAGES

Do not reduce your wage expense for any federal credits you claim. Add back any wage expense excluded in order to claim a federal credit. Do not deduct the costs of your own participation.

 

 

 

 

 

 

 

 

 

 

 

LINE 34

 

 

 

 

 

LINE 25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IDCS (1/3 CURRENT EXPENSING)

RENT ON BUSINESS PROPERTY

 

 

 

 

 

 

If the business includes an amount on this line, it elects to

Only deduct those expenditures you incurred in the operation

directly expense up to one-third of the amount of Intangible

of your business or profession.

 

 

 

 

 

 

 

 

Drilling and Development Costs (IDCs) incurred for the tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

year for any tax year beginning after Dec. 31, 2013. See

 

 

 

LINE 27

 

 

 

 

 

 

 

 

 

 

 

Informational Notice, Personal Income Tax 2013-04 for

SUBCONTRACTOR FEES

 

 

 

 

additional information.

 

 

 

 

 

 

 

 

Deduct subcontractor fees that were not included in your

 

 

 

 

 

 

LINE 35

 

calculation of cost of labor from Line 3 of Schedule C-1. Also

 

 

 

include any fees paid to payees not included as employees

IDCS (AMORTIZATION)

to whom regular wages were paid.

 

 

 

 

 

 

 

 

Report the amortization expense of IDCs incurred for all tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

years on this line. IDCs incurred in tax years beginning prior

 

 

 

LINE 29

 

 

 

 

 

 

 

 

 

 

 

to Jan. 1, 2014 must be amortized over the life of the well.

TAXES

 

 

 

 

 

 

IDCs incurred in tax years beginning after Dec. 31, 2013

 

 

 

 

 

 

may be amortized over 10 years (120 months).

Deduct tax expenses other than taxes based on income. You

 

 

 

 

may not deduct taxes based on net income, federal income

 

 

 

 

 

 

LINE 36

 

taxes or the one-half of self-employment taxes the IRS

 

 

 

allows. Do not deduct taxes paid to other states or foreign

START-UP COSTS (DIRECT EXPENSE)

countries based on income. Do not deduct estate, inheri-

Up to $5,000 of start-up costs may be directly expensed in

tance, legacy, succession or gift taxes. Assessments for

the first year in which the business begins operations for tax

betterments and improvements are not allowed. Business

years beginning after Dec. 31, 2013. The department will

privilege taxes and/or gross receipts taxes are acceptable

follow IRC Section 195(b)(1)(A) regarding business start-up

deductions.

 

 

 

 

 

 

 

 

 

 

 

 

costs where expenses over $5,000 must be amortized over

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

180 months and any amount of expenses over $50,000

 

 

 

 

LINE 31

 

 

 

 

 

 

 

 

 

 

 

 

requires a direct reduction in the direct expense amount. For

TRAVEL AND ENTERTAINMENT

 

 

 

 

tax years prior to Jan. 1, 2014, start-up costs are required

 

 

 

 

to be amortized over 180 months. Record only the direct

PA law does not follow federal law. Deduct 100 percent of

expense amount of start-up costs on Line 36 of PA Schedule

your actual travel and entertainment expenses. You may

C. Report the amortization of any start-up costs on Line 7 of

never deduct the personal portion of your travel and enter-

PA Schedule C.

tainment expenses, whether for yourself, your spouse, your

 

 

 

 

dependents or any other person. You must calculate your

 

 

 

 

 

 

LINE 37

 

expenses using actual expense amounts. You may not use

 

 

 

federal per-diem rates when determining your Pennsylvania

OTHER EXPENSES

expenses.

 

 

 

 

 

 

 

 

 

 

 

 

Deduct any other costs of doing business or providing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

professional services if such costs are permitted under

 

 

 

LINE 32

 

 

 

 

 

 

 

 

 

 

 

generally accepted accounting principles and practices.

 

 

 

 

 

 

 

 

 

UTILITIES

 

 

 

 

 

 

Itemize the additional expenses you claim, and enter the

Certain utilities, which are not subject to sales and use tax

total on Line 37, Total other expenses. You may deduct:

when purchased exclusively for residential use, become

 

100 percent of the PA sales tax paid on a depreciable

subject to sales and use tax when used for commercial

 

 

business asset. However, on disposition, your Penn-

purposes. If you are including electricity, natural gas, fuel oil,

 

 

sylvania basis and federal basis for that asset will be

or kerosene in your calculation of the business use of your

 

 

different.

home, you should report use tax due on the prorated expense

 

Expenses using the capitalization rules established by

amount. The use tax on these utilities should be paid via a

 

 

 

your trade, profession, or industry, under its generally

PA-1, Use Tax Return, or if you are required to file a sales

 

 

 

 

accepted accounting principles and practices. Once

tax return, as part of that return. If you have a regular recur-

 

 

 

 

elected, use this method consistently.

ring use tax liability on utilities, you should register for a use

 

 

 

 

 

 

tax

account

using

the

Online

PA-100

at

 

● 100 percent of expenses incurred for removing barriers

www.pa100.state.pa.us.

 

 

 

 

 

 

 

to individuals with disabilities and the elderly. This is not

 

 

 

 

 

 

 

 

 

 

 

 

www.revenue.pa.gov

 

 

 

 

 

 

 

PA-40 C 5

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a credit but a direct expense in arriving at the net income or loss.

Home office expenses. Pennsylvania generally follows the federal rules for determining the portion of the expenses for a home office. Pennsylvania does not follow the federal safe harbor rules for determining the allowable expense amount. See Line 32, Utilities, for additional information.

Any other expenses allowed under generally accepted accounting principles or financial accounting standards board rules but are not allowable or limited under federal rules. Itemize these expenses.

LINE 38

TOTAL EXPENSES

Add Lines 6 through 37.

LINE 39

NET PROFIT OR LOSS

Subtract Line 38 from Line 5. In calculating net profit or loss from your business or profession, report your entire loss in this taxable year.

SCHEDULE C-1

COST OF GOODS SOLD AND/OR OPERATIONS Generally, if you engaged in a trade or business in which the production, purchase or sale of merchandise was an income-producing factor, you must consider inventories at the beginning and end of your tax year.

In determining inventory value, use the cost, lower of cost or market or other method allowable under generally accepted accounting principles and practices. If you change methods of valuing inventory, restate the value at the beginning of the year based on the changed method, and include an expla- nation. There is no provision under PA PIT law similar to IRC Section 481(a) that permits taxpayers to spread the income effect of a change in method over a specified period. PA PIT rules also do not permit valuing inventory using uniform capitalization rules under IRC section 263 A (a) and (b) and inventories calculated using this method for federal purposes must be recalculated for PA PIT purposes.

SCHEDULE C-2

DEPRECIATION

Complete this schedule if you are using a depreciation method other than federal depreciation reported on your fed- eral Schedule C. See the instructions for Line 13 on Page 4.

6 PA-40 C

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