Pennsylvania provides small business tax incentives to encourage entrepreneurship and business development. The state has a 3.07% individual income tax rate, as well as an 8.49% corporate tax rate.
Understanding the cost of apportionment in the state can help you accurately report earnings to the IRS and local government.
Corporations
- Filing Requirements. All corporations doing business in Pennsylvania pay corporate net income tax. Furthermore, businesses that elect federal subchapter S status are considered Pennsylvania S corporations. As such, they are subject to the 7.49% corporate net income tax for built-in gains. Shareholders also pay tax at the personal income tax rate of 3.07%.
- Allocation & apportionment. Pennsylvania uses the three-factor apportionment rule when it sources receipts from the performance of services to the state.
Partnerships
Filing Requirements. Partners or members of LLCs taxed as a partnership or S Corporation are taxed at the personal income tax rate. As mentioned above, this is 3.07%.
Employees & individual filers
Both residents and non resident must file a Pennsylvania Income Tax Return (PA-40). This applies as soon as you earn $1 or more in the state; additionally, it applies if no tax is due (for instance, when an employee receives compensation where tax is withheld). Significantly, this also applies to minors in the state.
Residents are taxed on all taxable income, regardless of where it’s earned. However, non residents only pay tax for income that is received from one of these eight classes:
- Compensation.
- Net income (loss) from the operation of a business, profession, or farm.
- Net gains (loss) from the sale, exchange, or disposition of property.
- Net income (loss) from rents, royalties, copyrights, and patents.
- Interest.
- Dividends.
- Estate or trust income.
- Gambling or lottery winnings.
Ensuring Accurate Tax Filing
An expert CPA can help you keep a handle on different laws and tax implications.
Fusion CPA has a team of certified public accountants who are highly skilled in handling multi state taxes. We’re positioned to help you take the stress out of tax season, so you can focus on what really matters.
To see how we can help you with a proactive tax strategy to save you time and money, schedule A Discovery Call with one of our CPAs.
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