Pa Schedule C (Form Pa-40 C) - Profit Or Loss From Business Or Profession Page 3
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6PA Schedule C
Profit or Loss from Business or
Profession (Sole Proprietorship)
PA-40 C (08-14) (FI)
PA DEPARTMENT OF REVENUE
NEW THIS YEAR
Important Differences between Federal and
Pennsylvania Rules
As a result of Act 52 of 2013, up to one-third of the amount of
You may use any accounting method for PA purposes, as long
Intangible Drilling & Development Costs (IDCs) incurred in tax
as you apply your accounting methods consistently. PA law does
years beginning after December 31, 2013 may be directly
not have material participation rules. Report all transactions
expensed with the remaining amount amortized over ten
that are directly related to your business or profession on your
years. Taxpayers may also elect to amortize the full amount
PA Schedule C.
of the IDCs over 10 years. The election to expense any IDCs
is made by including an amount on Line 34 of PA Schedule C.
If you own or operate more than one business, you must
Amortization of the IDCs must be reported separately on Line
submit a separate PA Schedule C for each business operation.
35 of PA Schedule C.
The following federal schedules and instructions do not apply
Act 52 now permits the direct expensing of up to $5,000 of
for PA Schedule C:
business start-up costs. The department follows IRC Section
Schedule A.
You may not deduct nonbusiness-related personal
195(b)(1)(A). The direct expensing of any business start-up
interest, taxes and casualty losses on any PA PIT return.
costs will be reported on Line 36 of PA Schedule C.
Any
Schedule E.
Report rental and royalty income on PA Schedule E,
amount over $5,000 must be amortized over 180 months.
unless engaged in the business of making your property or rights
Amortization of start-up costs will be included with other
available in a public market place with intention to realize a
amortization on Line 7 of PA Schedule C.
profit.
Overview
Schedule F.
Report farming activity on PA Schedule F.
Use PA Schedule C to report income or loss from a business
you operate or a profession you practice as a sole proprietor.
Schedule SE.
Do not report self-employment taxes to
Your activity qualifies as a business if your primary purpose for
Pennsylvania.
engaging in the activity is income or profit, you conduct your
Form 4562.
If using bonus depreciation, do not use Form 4562.
activity with continuity and regularity and you satisfy the
Use Schedule C-2 on Side 2 of this schedule. The maximum
“Commercial Enterprise” test. Certain rental activity may be
deduction PA income tax law permits under IRC Section 179
business income and not rental income. If you are a sole
is $25,000. If you have income or loss from more than one
member of an LLC, complete PA Schedule C.
business, profession or farm, you may not deduct more than
For additional information regarding the definition of a busi-
$25,000 for all business activities.
ness or profession, and for Pennsylvania’s requirements for
Form 4684.
Report gain or (loss) from all business activity on
reporting income and expenses, go to the department's web-
PA Schedule C. Include a casualty or theft loss of business
site at and link to the PA PIT Guide.
property (or gain, if insurance proceeds exceed the basis of
If your business had expenses of $5,000 or less, you may be
the property lost or taken) on Line 4 of PA Schedule C. You
able to use PA Schedule C-EZ instead of PA Schedule C.
may refer to the federal schedule for an explanation of gain or
(loss) items, but do not submit the federal schedule.
Note: Pennsylvania determines income and (loss) under gen-
erally accepted accounting principles, systems or practices that
Form 4797.
Report other sales, exchanges and involuntary
are acceptable by standards of the accounting profession and
conversions of business property on Line 4 of PA Schedule C if
consistent with regulations of the department.
the property sold was replaced. Refer to the federal schedule
for an explanation of gain/loss items, but do not submit the
Pennsylvania allows a taxpayer to use federal tax accounting
federal schedule.
rules to determine income or (loss) to the extent consistent
with department regulations and to the extent federal tax
Form 8271.
Do not report or deduct any transactions related
accounting rules clearly reflect income.
to tax shelters.
•
You may use any accounting method for PA purposes, as
Form 8594.
Report the acquisition or disposition of business
long as you apply your accounting methods consistently.
assets on Line 4 of PA Schedule C. Refer to the federal schedule
•
PA law does not contain provisions for statutory employees.
for an explanation for gain/loss items, but do not submit the
Federal statutory employees may be required to report PA
federal schedule.
taxable income on Line 1a, PA-40, and use PA Schedule UE
Form 8824.
Do not report a like-kind exchange on PA
to deduct expenses. See Chapter 7 of the PA PIT Guide for
Schedule C, unless it is a normal and recognized transaction in
more information.
your business or profession in accordance with APB 29. PA law
•
An owner may deduct all losses from a business or profession
does not have like-kind exchange provisions. You must include
in the taxable year realized. Report all transactions directly
the gain or loss from a sale, exchange or disposition of a busi-
related to your business or profession on PA Schedule C.
ness asset on Line 4 of PA Schedule C if the transaction was a
•
Do not use the installment method for sales of inventory if
normal business transaction. You must report any gain or loss
you sell such inventory in the regular and ordinary course
from the sale of a nonbusiness asset or property or the sale of
of a business or profession. Include interest on such sales
a business or segment thereof on PA Schedule D if the prop-
in gross receipts.
erty sold was not replaced.
Form 8829.
Maintain separate books and records for PA PIT purposes
Include your allowable expenses for the business
and file PA Schedule C. If you wish to take advantage of
use of your home on Line 34 of PA Schedule C. Refer to the
Pennsylvania reporting differences that decrease your federal
federal schedule for an explanation of this expense, but do not
profit, complete PA Schedule C.
submit the federal schedule. Pennsylvania does not recognize
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