Form Pa-40 C - Pa Schedule C - Profit Or Loss From Business Or Profession (Sole Proprietorship) Page 3
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6PA Schedule C
Profit or Loss from Business or
Profession (Sole Proprietorship)
PA-40 C (09–13) (FI)
PA DEPARTMENT OF REVENUE
Schedule A.
Overview
You may not deduct nonbusiness-related personal
Use PA Schedule C to report income or loss from a business
interest, taxes and casualty losses on any PA PIT return.
you operate or a profession you practice as a sole proprietor.
Schedule E.
Report rental and royalty income on PA Schedule E,
Your activity qualifies as a business if your primary purpose for
unless engaged in the business of making your property or rights
engaging in the activity is income or profit, you conduct your
available in a public market place with intention to realize a
activity with continuity and regularity and you satisfy the
profit.
“Commercial Enterprise” test. Certain rental activity may be
Schedule F.
Report farming activity on PA Schedule F.
business income and not rental income. If you are a sole
member of an LLC, complete PA Schedule C.
Schedule SE.
Do not report self-employment taxes to
For additional information regarding the definition of a busi-
Pennsylvania.
ness or profession, and for Pennsylvania’s requirements for
Form 4562.
If using bonus depreciation, do not use Form 4562.
reporting income and expenses, go to the department's web-
Use Schedule C-2 on Side 2 of this schedule. The maximum
site at and link to the PA PIT Guide.
deduction PA income tax law permits under IRC Section 179
If your business had expenses of $5,000 or less, you may be
is $25,000. If you have income or loss from more than one
able to use PA Schedule C-EZ instead of PA Schedule C.
business, profession or farm, you may not deduct more than
$25,000 for all business activities.
Note: Pennsylvania determines income and (loss) under gen-
erally accepted accounting principles, systems or practices that
Form 4684.
Report gain or (loss) from all business activity on
are acceptable by standards of the accounting profession and
PA Schedule C. Include a casualty or theft loss of business
consistent with regulations of the department.
property (or gain, if insurance proceeds exceed the basis of
Pennsylvania allows a taxpayer to use federal tax accounting
the property lost or taken) on Line 4 of PA Schedule C. You
rules to determine income or (loss) to the extent consistent
may refer to the federal schedule for an explanation of gain or
with department regulations and to the extent federal tax
(loss) items, but do not submit the federal schedule.
accounting rules clearly reflect income.
Form 4797.
Report other sales, exchanges and involuntary
•
You may use any accounting method for PA purposes, as
conversions of business property on Line 4 of PA Schedule C if
long as you apply your accounting methods consistently.
the property sold was replaced. Refer to the federal schedule
•
PA law does not contain provisions for statutory employees.
for an explanation of 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 8271.
Do not report or deduct any transactions related
to deduct expenses. See Chapter 7 of the PA PIT Guide for
to tax shelters.
more information.
•
Form 8594.
An owner may deduct all losses from a business or profession
Report the acquisition or disposition of business
in the taxable year realized. Report all transactions directly
assets on Line 4 of PA Schedule C. Refer to the federal schedule
related to your business or profession on PA Schedule C.
for an explanation for gain/loss items, but do not submit the
•
federal schedule.
Do not use the installment method for sales of inventory if
you sell such inventory in the regular and ordinary course
Form 8824.
Do not report a like-kind exchange on PA
of a business or profession. Include interest on such sales
Schedule C, unless it is a normal and recognized transaction
in gross receipts.
in your business or profession in accordance with APB 29. PA
Maintain separate books and records for PA PIT purposes
law does not have like-kind exchange provisions. You must
and file PA Schedule C. If you wish to take advantage of
include the gain or loss from a sale, exchange or disposition of
Pennsylvania reporting differences that decrease your federal
a business asset on Line 4 of PA Schedule C if the transaction
profit, complete PA Schedule C.
was a normal business transaction. You must report any gain
Important Differences between Federal and
or loss from the sale of a nonbusiness asset or property or the
Pennsylvania Rules
sale of a business or segment thereof on PA Schedule D if the
You may use any accounting method for PA purposes, as long
property sold was not replaced.
as you apply your accounting methods consistently. PA law does
Form 8829.
Include your allowable expenses for the business
not have material participation rules. Report all transactions
use of your home on Line 34 of PA Schedule C. Refer to the
that are directly related to your business or profession on your
federal schedule for an explanation of this expense, but do not
PA Schedule C.
submit the federal schedule. Pennsylvania does not recognize
If you own or operate more than one business, you must
the federal safe harbor method for determining the allowable
submit a separate PA Schedule C for each business operation.
deduction for business use of a residence for Pennsylvania
The following federal schedules and instructions do not apply
Personal Income Tax purposes. All home office expenses must
for PA Schedule C:
be determined by using actual costs incurred.
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