Form Pa-40 C - Pa Schedule C - Profit Or Loss From Business Or Profession (Sole Proprietorship) Page 6
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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
Line 21.
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Management fees. Include any management fees
Expenses using the capitalization rules established by your
paid in conjunction with the operation of the business to any
trade, profession, or industry, under its generally accepted
related or non-related entity.
accounting principles and practices. Once elected, use this
method consistently.
Line 23.
Pension and profit-sharing plans for employees.
•
100 percent of expenses incurred for removing barriers to
Only deduct those expenses directly related to pension and
individuals with disabilities and the elderly. This is not a
profit-sharing plans for employees. You may not deduct any
pension or profit-sharing expenses for your own personal
credit but a direct expense in arriving at the net income
retirement benefits.
or loss.
•
Home office expenses. Pennsylvania generally follows the
Line 25.
Rent on business property. Only deduct those
federal rules for a home office.
expenditures you incurred in the operation of your business or
•
profession.
Any other expenses allowed under generally accepted
accounting principles or financial accounting standards
Line 27.
Subcontractor fees. Deduct subcontractor fees
board rules but are not allowable or limited under federal
that were not included in your calculation of cost of labor from
rules. Itemize these expenses.
Line 3 of Schedule C-1. Also include any fees paid to payees
not included as employees to whom regular wages were paid.
Line 35.
Total expenses. Add Lines 6 through 34.
Line 29.
Taxes. Deduct tax expenses other than taxes based
Line 36.
Other business credits. If you claimed one or
on income. You may not deduct taxes based on net income,
more of these credits, reduce total expenses by costs to qualify
federal income taxes or the one-half of self-employment taxes
for the credit:
the IRS allows. Do not deduct taxes paid to other states or
•
PA Employment Incentive Payments Credit
foreign countries based on income. Do not deduct estate,
•
PA Job Creation Tax Credit
inheritance, legacy, succession or gift taxes. Assessments for
•
betterments and improvements are not allowed. Business
PA Research and Development Tax Credit
privilege taxes and/or gross receipts taxes are acceptable
If you did not claim one of these business credits, enter zero
deductions.
on Line 36.
Line 31.
Travel and entertainment. PA law does not follow
Line 37.
Total Adjusted Expenses. Reduce Line 35 by
federal law. Deduct 100 percent of your allowable travel and
Line 36.
entertainment expenses. You may never deduct the personal
Line 38.
Net profit or loss. Subtract Line 37 from Line 5. In
portion of your travel and entertainment expenses, whether for
calculating net profit or loss from your business or profession,
yourself, your spouse, your dependents or any other person.
report your entire loss in this taxable year.
Line 32.
Utilities. Certain utilities, which are not subject to
Schedule C-1 – Cost of goods sold and/or
sales and use tax when purchased exclusively for residential
operations
use, become subject to sales and use tax when used for com-
Generally, if you engaged in a trade or business in which the
mercial purposes. If you are including electricity, natural gas,
production, purchase or sale of merchandise was an income-
fuel oil, or kerosene in your calculation of the business use of
producing factor, you must consider inventories at the beginning
your home, you should report use tax due on the prorated
and end of your tax year.
expense amount on Line 25 of the PA-40 or on the sales tax
returns you file with the department.
In determining inventory value, use the cost, lower of cost or
Line 33.
Wages. Do not reduce your wage expense for any
market or other method allowable under generally accepted
federal credits you claim. Add back any wage expense excluded
accounting principles and practices. If you change methods of
in order to claim a federal credit. Do not deduct the costs of
valuing inventory, restate the value at the beginning of the
your own participation.
year based on the changed method, and include an explana-
tion. There is no provision under PA PIT law similar to IRC
Line 34.
Other expenses. Deduct any other costs of doing
Section 481(a) that permits taxpayers to spread the income
business or providing professional services if such costs are
effect of a change in method over a specified period. PA PIT
permitted under generally accepted accounting principles and
rules also do not permit valuing inventory using uniform cap-
practices. Itemize the additional expenses you claim, and enter
italization rules under IRC section 263 A (a) and (b) and inven-
the total on Line 34, Total other expenses. You may deduct:
tories calculated using this method for federal purposes must
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100 percent of the PA sales tax paid on a depreciable
be recalculated for PA PIT purposes.
business asset. However, on disposition, your Pennsylvania
Schedule C-2 – Depreciation
basis and federal basis for that asset will be different.
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Complete this schedule if you are using a depreciation method
Charitable contributions made from your business account
and acknowledged publicly by the recipient. Personal
other than federal depreciation reported on your Federal
charitable contributions are not allowed.
Schedule C. See the instructions for Line 13 on Page 3.
PAGE 4
RETURN TO SIDE ONE
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