Local Earned Income Tax Return Form - Berkheimer (Page 2 of 2) in pdf

I301-2

7/99

LINE 3: TAXABLE EARNINGS: Subtract line 2 from line 1.

LINE 4: NET LOSS FROM BUSINESS

DOCUMENTATION REQUIRED: Federal schedules C, F, E (non-passive), or 1065 K-1 must be enclosed (photocopies are accepted).

RULE: A taxpayer may offset a business loss against wages, and other compensation (W-2 earnings -- line 1). This offset is allowed based on the PA

Supreme Court decision in the O'Reilly vs. Fox Chapel School District Case decided March 16, 1989. "Pass-through" income from an S-Corporation

(Federal form 1120S K-1) is NOT taxable (Scott vs. Hempfield, 1994). A taxpayer may not offset a loss from one business entity against a net profit

from another business entity, Aronson vs. City of Pittsburgh, 485 A. 2d 890 (1985). All allowable business losses must be reported on line 4.

LINE 5: SUBTOTAL: Subtract line 4 from line 3. If less than zero, enter zero.

LINE 6: NET PROFITS FROM BUSINESS

DOCUMENTATION REQUIRED: 1099(s), Federal schedules C, F, E (non-passive), or 1065 K-1 must be enclosed (photocopies are accepted).

The net profits of a business, trade, profession, or other activity shall be computed by subtracting from gross receipts the cost of goods sold and all ordinary

and necessary expenses of doing business. Generally, a business deduction which is not permitted by the Federal Government for income tax purposes

will not be allowed. Not all self-employed income is includable as taxable earnings: Rentals from real estate and from personal property leased with the

real estate is not included, unless reportable on Schedule C, or if the taxpayer is in the business of renting real estate. Gain or loss from the sale of capital

assets is not included in the computation of net profits.

LINE 7: TOTAL EARNED INCOME subject to tax: Add lines 5 and 6.

LINE 8: TAX LIABILITY: Multiply line 7 by tax rate printed on the tax return. For example, if 1% use .01, if 1/2% use .005.

LINE 9: QUARTERLY ESTIMATED PAYMENTS: List any quarterly estimated payments made to date for appropriate filing year.

LINE 10: EARNED INCOME TAX WITHHELD: You may claim credit for local tax withheld as shown on your W-2 form, but only up to the rate of tax printed

on line 8 of the tax return. Do not claim entire amount of tax withheld if it is greater than the tax rate for your resident taxing jurisdiction.

LINE 11: PRIOR YEAR CREDIT: State the amount of tax overpaid as listed on your previous year's return to be applied to current tax liability.

LINE 12: MISCELLANEOUS CREDITS

CREDIT FOR TAXES TO PHILADELPHIA: You may use any wage tax paid to Philadelphia as a credit on wages, salaries and commissions, etc., or

net profits earned outside Philadelphia. You are not liable for duplicate payment of a Wage Tax to your resident district. However, your Philadelphia

credit cannot exceed total Tax Liability (Line 8). You must complete the Local Earned Income Tax Return. A COPY OF YOUR W-2 AND/OR

VERIFICATION OF TAXES PAID MUST BE ENCLOSED WITH THE FORM OR CREDIT WILL BE DISALLOWED. No refunds or credits will

be allowed for any overpayment made to Philadelphia. On line 12 of the tax return, enter the amount of Philadelphia wage tax paid.

CREDIT FOR TAXES PAID TO PITTSBURGH: If you work in the City of Pittsburgh and the Pittsburgh Earned Income Tax was withheld by your

employer for the City of Pittsburgh, you must apply for a refund directly from the City. Earned Income Taxes are due to the municipality/school district

in which you reside, not where you work.

To obtain refund forms from the City of Pittsburgh, you may call 412-255-2512. The City tax office will supply you with the proper forms to be filed

with them for a refund. Before these taxes can be filed with the City, they must be signed by the tax collector in your municipality/school district verifying

that taxes for the year in question have been paid to the proper taxing authority. You may come into our office to have this form signed or mail it with

a self-addressed, stamped envelope. We will return it to you as soon as possible.

CREDIT FOR TAXES PAID TO DELAWARE OR NEW YORK: You may take credit based upon the gross earnings taxed in Delaware or New York

and in Pennsylvania which is in excess of the current Pennsylvania state personal income tax rate. THIS CREDIT WILL BE DISALLOWED IF THE

NEW YORK OR DELAWARE STATE TAX RETURN AND YOUR W-2 FORM SHOWING STATE INCOME TAX WITHHELD IS NOT

PROVIDED.

EXAMPLE: Taxpayer earned wages of $10,000.00 in Delaware and had to pay that state $290.00 income tax. Assuming the current Pennsylvania state

tax rate is 2.8% for the tax year in question, since the $290.00 exceeds 2.8% (PA Tax) amount of $280.00 by $10.00, the $10.00 may be credited against

your local income tax.

Gross Income .......................................................... (1)$10,000.00

Local Tax 1% .........................................................

x .01

................................................................................... (2) 100.00

Tax paid to Delaware ............................................ (3) 290.00

PA Income Tax (2.8% x $10,000.00) ........... (4) 280.00

Credit to be used against Local Tax

(subtract line 4 from line 3) On Line 12 of the tax return, enter this amount

or the amount on Line 2 of worksheet, whichever is less

(5)

10.00

If all your wages or gross earnings are subject to Delaware or New York State Income Tax (not PA), use the above example to complete your tax obligation

on Worksheet located on the reverse side of the tax return.

If you had earned income NOT taxed by Delaware or New York, this income would be subject to the earned income tax effective in your district and must

be shown separately on the Local Earned Income Tax Return. You may not use any tax paid to another state as credit on earnings outside the other state.

CREDIT FOR TAXES PAID TO RECIPROCAL STATES: No credits are given for state income taxes paid to states which reciprocate with the

Commonwealth of Pennsylvania. These states are: Maryland, New Jersey, Ohio, Virginia, West Virginia, and Indiana.

CREDIT FOR TAXES PAID TO ALL OTHER STATES: You may take credit based upon the gross earnings taxed in all other states and in Pennsylvania

which is in excess of Pennsylvania state personal income tax rate. THIS CREDIT WILL BE DISALLOWED IF THE FOREIGN STATE RETURN AND

YOUR W-2 FORM SHOWING STATE INCOME TAX WITHHELD IS NOT PROVIDED.

LINE 13: TOTAL: Enter the total of lines 9+10+11+12.

LINE 14: OVERPAYMENT OF TAX: If you have an overpayment of taxes in excess of $1.00, you may elect to receive a refund or take same as credit against

the next year's tax liability. A 1099 will be issued to the Federal Government for any credit or refund in excess of $10.00. Refunds: If you fail to check

either box under line 14 to indicate either a credit or a refund, a cash refund will be issued to you. If you elect to take a credit against next years liability,

a Federal 1099 for the amount of the credit given for the next tax year will be issued to you and to the Federal Government.

LINE 15: AMOUNT OF TAX DUE: If tax (line 8) is larger than your credits (line 13), enter amount of tax due. If less than $1.00, ENTER ZERO.

LINE 16: INTEREST AND PENALTIES: If for any reason the tax is not paid when due, interest at the rate of six percent per annum on the amount of said tax,

and an additional penalty of one-half of one percent of the amount of the unpaid tax for each month or fraction thereof during which the tax remains unpaid,

shall be added and collected. A late filing fee will be charged for any return received after the due date.

LINE 17: TOTAL AMOUNT DUE: The total of lines 15 + 16. OMIT IF LESS THAN $1.00.

LINE 18: Write each account total on line 18.

BOX 19: Write total amount of enclosed check in box 19.

NOTE: All accounts are subject to audit and review. Failure to properly complete, sign and date this return may subject the taxpayer to a fine up to $500.00 plus

costs or days in jail. Local or city copy of W-2 and/or supporting schedules must be enclosed with tax return. (Photocopies of W-2s and schedules

are accepted).