Form Pa-40 C - Pa Schedule C - Profit Or Loss From Business Or Profession (Sole Proprietorship) Page 3

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PA Schedule C
Profit or Loss from Business or
Profession (Sole Proprietorship)
PA-40 C (09–12) (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
“Commercial Enterprise” test. Certain rental activity may be
profit.
business income and not rental income. If you are a sole
Schedule F.
Report farming activity on PA Schedule F.
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
reporting income and expenses, go to the department's web-
Form 4562.
If using bonus depreciation, do not use Form 4562.
site at and link to the PA PIT Guide.
Use Schedule C-2 on Side 2 of this schedule. The maximum
If your business had expenses of $5,000 or less, you may be
deduction PA income tax law permits under IRC Section 179
able to use PA Schedule C-EZ instead of PA Schedule C.
is $25,000. If you have income or loss from more than one
Note: Pennsylvania determines income and (loss) under gen-
business, profession or farm, you may not deduct more than
erally accepted accounting principles, systems or practices that
$25,000 for all business activities.
are acceptable by standards of the accounting profession and
Form 4684.
Report gain or (loss) from all business activity on
consistent with regulations of the department.
PA Schedule C. Include a casualty or theft loss of business
Pennsylvania allows a taxpayer to use federal tax accounting
property (or gain, if insurance proceeds exceed the basis of
rules to determine income or (loss) to the extent consistent
the property lost or taken) on Line 4 of PA Schedule C. You
with department regulations and to the extent federal tax
may refer to the federal schedule for an explanation of gain or
accounting rules clearly reflect income.
(loss) items, but do not submit the federal schedule.
You may use any accounting method for PA purposes, as
long as you apply your accounting methods consistently.
Form 4797.
Report other sales, exchanges and involuntary
PA law does not contain provisions for statutory employees.
conversions of business property on Line 4 of PA Schedule C if
Federal statutory employees may be required to report PA
the property sold was replaced. Refer to the federal schedule
taxable income on Line 1a, PA-40, and use PA Schedule UE
for an explanation of gain/loss items, but do not submit the
to deduct expenses. See Chapter 7 of the PA PIT Guide for
federal schedule.
more information.
Form 8271.
Do not report or deduct any transactions related
An owner may deduct all losses from a business or profession
in the taxable year realized. Report all transactions directly
to tax shelters.
related to your business or profession on PA Schedule C.
Form 8594.
Report the acquisition or disposition of business
Do not use the installment method for sales of inventory if
assets on Line 4 of PA Schedule C. Refer to the federal schedule
you sell such inventory in the regular and ordinary course
for an explanation for gain/loss items, but do not submit the
of a business or profession. Include interest on such sales
federal schedule.
in gross receipts.
Form 8824.
Do not report a like-kind exchange on PA
Maintain separate books and records for PA PIT purposes
and file PA Schedule C. If you wish to take advantage of
Schedule C, unless it is a normal and recognized transaction
Pennsylvania reporting differences that decrease your federal
in your business or profession in accordance with APB 29. PA
profit, complete PA Schedule C.
law does not have like-kind exchange provisions. You must
Important Differences between Federal and
include the gain or loss from a sale, exchange or disposition of
Pennsylvania Rules
a business asset on Line 4 of PA Schedule C if the transaction
You may use any accounting method for PA purposes, as long
was a normal business transaction. You must report any gain
as you apply your accounting methods consistently. PA law does
or loss from the sale of a nonbusiness asset or property or the
not have material participation rules. Report all transactions
sale of a business or segment thereof on PA Schedule D if the
that are directly related to your business or profession on your
property sold was not replaced.
PA Schedule C.
Form 8829.
Include your allowable expenses for the business
If you own or operate more than one business, you must
submit a separate PA Schedule C for each business operation.
use of your home on Line 34 of PA Schedule C. Refer to the
federal schedule for an explanation of this expense, but do not
The following federal schedules and instructions do not apply
for PA Schedule C:
submit the federal schedule.
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