Pa Schedule C (Form Pa-40 C) - Profit Or Loss From Business Or Profession Page 6
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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
federal income taxes or the one-half of self-employment taxes
and acknowledged publicly by the recipient. Personal
the IRS allows. Do not deduct taxes paid to other states or
charitable contributions are not allowed.
foreign countries based on income. Do not deduct estate,
•
Expenses using the capitalization rules established by your
inheritance, legacy, succession or gift taxes. Assessments for
trade, profession, or industry, under its generally accepted
betterments and improvements are not allowed. Business
accounting principles and practices. Once elected, use this
privilege taxes and/or gross receipts taxes are acceptable
method consistently.
deductions.
•
100 percent of expenses incurred for removing barriers to
Line 31.
Travel and entertainment. PA law does not follow
individuals with disabilities and the elderly. This is not a
federal law. Deduct 100 percent of your allowable travel and
credit but a direct expense in arriving at the net income
entertainment expenses. You may never deduct the personal
portion of your travel and entertainment expenses, whether for
or loss.
yourself, your spouse, your dependents or any other person.
•
Home office expenses. Pennsylvania generally follows the
Line 32.
Utilities. Certain utilities, which are not subject to
federal rules for a home office.
sales and use tax when purchased exclusively for residential
•
Any other expenses allowed under generally accepted
use, become subject to sales and use tax when used for com-
accounting principles or financial accounting standards
mercial purposes. If you are including electricity, natural gas,
board rules but are not allowable or limited under federal
fuel oil, or kerosene in your calculation of the business use of
rules. Itemize these expenses.
your home, you should report use tax due on the prorated
expense amount on Line 25 of the PA-40 or on the sales tax
Line 38.
Total expenses. Add Lines 6 through 37.
returns you file with the department.
Line 39.
Other business credits. If you claimed one or
Line 33.
Wages. Do not reduce your wage expense for any
more of these credits, reduce total expenses by costs to qualify
federal credits you claim. Add back any wage expense excluded
for the credit:
in order to claim a federal credit. Do not deduct the costs of
•
PA Employment Incentive Payments Credit
your own participation.
•
PA Job Creation Tax Credit
Line 34.
.
IDCs (1/3 current expensing)
If the business
includes an amount on this line, it elects to directly expense
•
PA Research and Development Tax Credit
up to one-third of the amount of Intangible Drilling and
If you did not claim one of these business credits, enter zero
Development Costs (IDCs) incurred for the tax year for any
on Line 39.
tax year beginning after December 31, 2013.
See the
Information Notice, Personal Income Tax 2013-04 for addi-
Line 40.
Total Adjusted Expenses. Reduce Line 38 by
tional information.
Line 39.
Line 35.
.
IDCs (amortization)
Report the amortization
Line 41.
Net profit or loss. Subtract Line 40 from Line 5. In
expense of IDCs incurred for all tax years on this line. IDCs
calculating net profit or loss from your business or profession,
incurred in tax years beginning prior to January 1, 2014 must
report your entire loss in this taxable year.
be amortized over the life of the well. IDCs incurred in tax
Schedule C-1 – Cost of goods sold and/or
years beginning after December 31, 2013 may be amortized
operations
over 10 years (120 months).
Generally, if you engaged in a trade or business in which the
Line 36.
Start-up costs (direct expense). Up to $5,000
production, purchase or sale of merchandise was an income-
of start-up costs may be directly expensed in the first year in
producing factor, you must consider inventories at the beginning
which the business begins operations for tax years beginning
after December 31, 2013. The department will follow IRC
and end of your tax year.
Section 195(b)(1)(A) regarding business start-up costs where
In determining inventory value, use the cost, lower of cost or
expenses over $5,000 must be amortized over 180 months
market or other method allowable under generally accepted
and any amount of expenses over $50,000 requires a direct
accounting principles and practices. If you change methods of
reduction in the direct expense amount. For tax years prior to
valuing inventory, restate the value at the beginning of the
January 1, 2104, start-up costs are required to be amortized
year based on the changed method, and include an explana-
over 180 months. Record only the direct expense amount of
tion. There is no provision under PA PIT law similar to IRC
start-up costs on Line 36 of PA Schedule C. Report the amor-
Section 481(a) that permits taxpayers to spread the income
tization of any start-up costs on Line 7 of PA Schedule C.
effect of a change in method over a specified period. PA PIT
Line 37.
Other expenses. Deduct any other costs of doing
rules also do not permit valuing inventory using uniform capi-
business or providing professional services if such costs are
talization rules under IRC section 263 A (a) and (b) and inven-
permitted under generally accepted accounting principles and
tories calculated using this method for federal purposes must
practices. Itemize the additional expenses you claim, and enter
be recalculated for PA PIT purposes.
the total on Line 37, Total other expenses. You may deduct:
•
Schedule C-2 – Depreciation
100 percent of the PA sales tax paid on a depreciable
business asset. However, on disposition, your Pennsylvania
Complete this schedule if you are using a depreciation method
basis and federal basis for that asset will be different.
other than federal depreciation reported on your Federal
•
Charitable contributions made from your business account
Schedule C. See the instructions for Line 13 on Page 3.
PAGE 4
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