Pennsylvania Form PA-40 - Individual Income Tax Return Instructions

TAX RATE

The state income tax rate for 2012 is 3.07 percent (0.0307).

ELECTRONIC FILING

The department offers three easy ways to file your tax return electronically: over the telephone with TeleFile; over the Internet with padirectfile; and through tax preparers or computer software with Fed/State e-file. TeleFile and padirectfile are available free of charge. See Page 2 for more information.

Visit the Revenue e-Services Center at www.revenue.state.pa.us to file your tax return, make payments, check the status of your return and refund and update your address.

TAX FORGIVENESS

Depending on your income and family size, you may qualify for a refund or reduction of your Pennsylvania income tax liability with the state’s Tax Forgiveness program. Read the instructions beginning on Page 34 to see if you qualify.

2012 STATE TAX CHANGES

What’s New for 2012 - There were no significant changes to the PA-40 forms and instructions for 2012. However, two new tax credits - the Opportunity Scholarship Tax Credit and the Keystone Special Development Zone Tax Credit - were added to PA Schedule OC. Additional information about these and other tax credits is available at www.revenue. state.pa.us, under Incentives, Credits and Programs.

2013 PA-40, PENNSYLVANIA PERSONAL INCOME TAX RETURN BOOKLETS

Beginning with tax year 2013 (2014 filing season), the department will no longer print and mail PA-40 booklets to taxpayers unless specifically requested to do so. The department encourages taxpayers to file electronically or use the free forms and instructions available at www.revenue.state.pa.us. The department will continue to make available, upon request, the PA-40IN, Instruction Booklet, and preprinted forms; see Forms Ordering Services on Page 3 for information on obtaining forms from the department.

COMBAT ZONE AND HAZARDOUS DUTY SERVICE

Pennsylvanians serving in combat zones or qualified hazardous duty areas have the same additional time to file their state income tax returns and make payments as they have for federal income tax purposes. The due date is automatically extended for 180 days from the last day of service or the last day of continuous hospitalization for injuries incurred in one of these areas. See Page 38 for more information.

1099-G PRINTING AND MAILING COST REDUCTIONS

In order to reduce printing and mailing costs associated with Form 1099-G - which details government payments, most commonly state tax refunds - beginning in 2013 the Department of Revenue will no longer mail 1099-Gs to any taxpayer who does not specifically request a paper copy. In 2013, 1099-Gs will be available on the department’s website for all taxpayers who received refunds of state taxes during the prior tax year and claimed itemized deductions on federal 1040 tax returns for the tax year for which the refund was issued. 1099-G information is provided to the IRS electronically each year by the department.

ELECTRONIC FILING OPTIONS

File your personal income tax return electronically using one of three methods offered by the PA Department of Revenue. TeleFile and padirectfile are available free of charge.

TELEPHONE: If you filed a tax return last year, your Social Security number (SSN) and ZIP code are all you need to file over the telephone. To find out if you can use TeleFile, visit the department's website at www.revenue.state.pa.us or order a 2012 PA Fast File booklet from one of the Forms Ordering Services on Page 3.

INTERNET : Complete your personal income tax return over the Internet and transmit the return directly to the department. With padirectfile, you can report most types of income and claim dependent children for Tax Forgiveness. To file using padirectfile, you will need your SSN and one of the following: last year’s tax liability or PA Driver’s License/Identification Card number. Visit the Revenue e-Services Center at www.revenue.state.pa.us to file.

TAX PREPARER OR APPROVED SOFTWARE : Fed/State e-file allows you to file federal and state income tax returns together or separately. It is available through tax preparers or computer software. If you meet certain qualifications, you can also obtain free software to file your tax returns. Fed/State e-file allows direct deposit of your refund, and the option to pay your PA tax due by electronic funds withdrawal or with a credit card. Visit the department’s website at www.revenue.state.pa.us for more information.

BENEFITS OF ELECTRONICALLY FILING YOUR RETURN

SAFE: Regardless of the option you choose, the department protects your information with the latest security safeguards.

EASY: The systems perform math calculations for you.

FAST: The department processes refunds in half of the time compared to a paper return.

DIRECT DEPOSIT: You can have your refund deposited directly into your checking or savings account. Direct deposit is not available with a paper PA tax return.

CONFIRMATION: Upon filing with padirectfile or TeleFile, the department immediately gives you a confirmation number as proof that you filed. When filing Fed/State e-file, the department sends an acknowledgement directly to you, your tax professional or Electronic Return Originator (ERO).

REMEMBER: When you use one of the electronic filing options, do not mail a paper copy of your tax return - keep it for your records.

You may need to submit other information such as copies of military orders (if on active duty outside Pennsylvania), Forms W-2 (if your employer withheld additional PA income tax), and tax returns you filed in other states (when requesting a PA Resident Credit). Read and follow the instructions. The department reserves the right to request an explanation or supporting information for any amount that a taxpayer reports on a Pennsylvania tax return.

MAILING ADDRESSES

If you do not have the department-provided envelope, send your return to the address that applies to you.

If you have an amount on Line 28:

PA DEPT OF REVENUE
PAYMENT ENCLOSED
1 REVENUE PLACE
HARRISBURG PA 17129-0001

If you have an amount on Line 29:

PA DEPT OF REVENUE
REFUND OR CREDIT REQUESTED
3 REVENUE PLACE
HARRISBURG PA 17129-0003

If Lines 28 and 29 are zero:

PA DEPT OF REVENUE
NO PAYMENT OR NO REFUND
2 REVENUE PLACE
HARRISBURG PA 17129-0002

CAUTION! IMPORTANT: Do not use the above addresses to send other correspondence to the department.

TAXPAYER SERVICES AND ASSISTANCE

ONLINE SERVICES

Revenue e-Services Center at www.revenue.state.pa.us

  • This is the location for all the department’s electronic filing services. Through this website you can: file returns using padirectfile; request an extension of time to file; make payments, including estimated payments; check the status of your return and refund; update your address; calculate penalty and interest; pay tax due by electronic funds withdrawal for PA personal income taxes; and find a link to pay by credit/debit card.

Online Customer Service Center at www.revenue.state.pa.us

  • If you have Internet access, you can find answers to commonly asked questions by using the department’s Online Customer Service Center. Use the Find an Answer feature to search the database of commonly asked questions. If you do not find your answer in this area, you can submit your question to a customer service representative. PA Personal Income Tax Guide (PA PIT Guide)
  • The department’s PA PIT Guide has information that explains Pennsylvania’s income tax and its differences from federal rules. You can only access the PA PIT Guide at the department’s website. You can open specific chapters of the PA PIT Guide and use the search features of Adobe Acrobat Reader™ to find additional information on PA personal income tax rules. The department offers a link for free download of the Adobe Acrobat Reader™.

TELEPHONE SERVICES

Taxpayer Service and Information Center

  • Call 717-787-8201 for PA personal income tax help during normal business hours, 7:30 a.m. to 5 p.m.

1-888-PATAXES

Touch-tone service is required for this automated 24-hour toll-free line. Call to order forms or check the status of a personal income tax account, corporation tax account or property tax/rent rebate.

Harrisburg area residents may call 717-425-2533.

FORMS ORDERING SERVICES

To obtain forms not available in this booklet, visit a Revenue district office or use one of the following services:

Internet: www.revenue.state.pa.us

Pennsylvania income tax forms, schedules, brochures, electronic filing options, and other information are available on the department’s website. If you do not have Internet access, visit your local public library.

E-mail Requests for Forms: ra-forms@pa.gov

Automated 24-hour Forms Ordering Message Service: 1-800-362-2050.

  • This line serves taxpayers without touch-tone telephone service.

Written Requests:

PA DEPARTMENT OF REVENUE
TAX FORMS SERVICE UNIT
711 GIBSON BLVD
HARRISBURG PA 17104-3218

OTHER SERVICES

Services for Taxpayers with Special Hearing and/or Speaking Needs: 1-800-447-3020 (TTY)

Free Income Tax Preparation Assistance

  • You can receive free assistance in preparing uncomplicated, non-business federal, state, and local income tax returns through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. Visit the department’s website, contact the department’s nearest district office, or call the Internal Revenue Service’s toll-free number (1-800-829-1040) for the location of assistance sites. Taxpayers with modest incomes and older residents are urged to take advantage of these services.

Language Services

  • Non-English-speaking taxpayers can receive assistance from the department through an interpretation service.

Español

  • El Departamento de lmpuestos puede ayudar los contribuyentes que no hablan inglés por medio de un servicio de traducción durante el periodo de pago de impuestos.

Federal Tax Assistance

  • Federal tax account or technical information and problem solving are available by calling: 1-800-829-1040.
  • Recorded Tele-Tax Service on federal tax topics or tax refund information is available by calling: 1-800-829-4477.
  • Federal tax forms and publications are available by calling: 1-800-829-FORM (3676).

TAXPAYERS’ RIGHTS ADVOCATE

The Pennsylvania Department of Revenue has a Taxpayers’ Rights Advocate who assists taxpayers with PA personal income tax and PA inheritance tax problems and concerns that have not been resolved through normal administrative procedures. It is the Advocate’s responsibility to ensure that the department provides equitable treatment with dignity and respect. For more information concerning taxpayers’ rights, visit the department’s website at www.revenue.state.pa.us, or request the department’s Taxpayers’ Rights Advocate brochure (REV-527) from one of the Forms Ordering Services above.

To contact the Taxpayers’ Rights Advocate:

  • Send e-mail to: pataxadvocate@pa.gov
  • Call: 717-772-9347
  • Write:

    PA DEPARTMENT OF REVENUE
    TAXPAYERS RIGHTS ADVOCATE
    LOBBY STRAWBERRY SQUARE
    PO BOX 280101
    HARRISBURG PA 17128-0101

BEFORE YOU BEGIN

Filing Due Date

You must file before midnight, Monday, April 15, 2013. The U.S. Postal Service postmark date on your envelope is proof of timely filing. You must report all taxable income received or accrued from Jan. 1, 2012, through Dec. 31, 2012. If you cannot file by the due date, request an extension of time to file. Read the instructions on Page 38. If you do not file your return by the due date, the department imposes late filing penalties and interest charges.

Who Must File a PA Tax Return?

If you are a PA resident, nonresident or a part-year PA resident, you must file a 2012 PA tax return if:

  • You received total PA gross taxable income in excess of $33 during 2012, even if no tax is due with your PA return; and/or
  • You incurred a loss from any transaction as an individual, sole proprietor, partner in a partnership or PA S corporation shareholder.

Minors. PA law does not exempt a minor from the above requirements to file a PA tax return even if claimed as a dependent on a federal return. A parent must file a return on behalf of the minor child in such circumstances.

Decedents. The executor, administrator, or other person responsible for the affairs of a decedent must file a PA tax return if the decedent met the above requirements.

Persons Not Required to File Federal Income Tax Returns. If you are not required to file a federal income tax return, you may still be required to file a PA personal income tax return because the requirements for filing a return in Pennsylvania are different than federal requirements. You must file a return in Pennsylvania if any of the situations described above apply. See Chapter 4, “Who Must File a PA Tax Return” of the PA PIT Guide found on the department’s website, for more information.

REMINDERS FOR FILING YOUR 2012 PA-40

Supporting Schedules

An acceptable return has not been filed until all schedules required by the department have been filed. Failing to provide required schedules may not only delay the processing of your return, but also subject you to late-filing penalties.

In some instances, the department will accept federal schedules - see the Schedule Instructions beginning on Page 24.

Assembling Your PA-40

Arrange your documents in the following order when submitting your 2012 PA tax return:

  • Original PA-40. Do not mail a photocopy of your PA-40 or a copy of your electronic PA tax return.
  • PA Schedule G-R. If you are claiming a resident credit for taxes paid to other states or countries, you must include this schedule immediately after the PA-40. DO NOT include any extension forms, W-2 forms or any other schedules or statements before this schedule when it is required. Otherwise, your credit may not be granted.
  • PA Schedule W-2S, or photocopies of your Form(s) W-2 (be sure the information is legible), or your actual Form(s) W-2. Use Part B of this schedule to list and total your other taxable compensation. You must submit photocopies of your Form(s) 1099-R and other statements that show other compensation and any PA tax withheld. NOTE: Do not include copies of Form(s) 1099-DIV, and 1099-INT, unless the forms show PA income tax withheld.
  • PA Schedule OC, and the required supporting documents when claiming any of the restricted tax credits that PA law allows.
  • PA Schedule(s) RK-1, PA Schedule(s) NRK-1. If you did not receive PA schedules, then submit federal Schedule( s) K-1. See Partnership, Limited Liability Company and PA S Corporation Partners, Members and Shareholders on Page 15.
  • All other required PA schedules and forms, including any additional sheets you prepared.

CAUTION! IMPORTANT: Please include your name(s), Social Security number(s), tax year, and a brief line reference to the PA-40 or PA-40 schedule for any additional sheets you include with your return.

  • All other required documents, including federal schedules (where the instructions allow the use of federal schedules), that explain the information you entered.
  • Your PA Payment Voucher (Form PA-V) and payment. See Page 23 for instructions and payment.

CAUTION! IMPORTANT: Do not staple your check or money order to your Form PA-V or your PA-40 form. If you do not have a Form PA-V, see Page 24.

Entering Information

  • Social Security Number(s) : Carefully write your SSN, and your spouse’s SSN if married, in the boxes provided on your PA-40 form. You must enter your SSN, even if using your label. Please double-check your SSN.
  • Rounding Numbers : On the PA-40 form and schedules, show money amounts in whole-dollars. Eliminate any amount less than $0.50 and increase any amount that is $0.50 or more to the next highest dollar.
  • Your Address : Use your label if it is correct. If your label is not correct, or if you do not have a label, fill in the oval on the PA-40 form indicating an Identification Label Change. Print your name and address on the form.

NOTE: If you are using a military address, please use your APO or FPO address.

Foreign Address Instructions

If you live outside of the U.S., it is important that you write your foreign address on your PA-40 according to U.S. Postal Service standards. Failure to use these standards may delay any refunds you request or correspondence necessary to complete the processing of your return. To comply with the foreign address standards, use the following rules when completing the address portion of your PA-40 form: write your name(s) in the spaces provided; write the house number with street, apartment number and street or postal delivery location in the spaces provided for the First Line of Address on your PA-40 form; write the name of the city, city and province, and/or foreign postal number (ZIP code equivalent) in the spaces provided for the Second Line of Address on your PA-40 form; write only the name of the country in the spaces provided for the City or Post Office on your PA-40 form; and DO NOT include any entries in the state or ZIP code spaces on your PA-40 form. To the right are two examples of properly completed foreign addresses as provided by the U.S. Postal Service. Providing your address in this format will better ensure that the department is able to contact you in the event we need additional information, or to send you your refund on a timely basis.

Privacy Notification

By law (42 U.S.C. §405(c)(2)(C)(i); 61 Pa. Code §117.16), the Pennsylvania Department of Revenue has the authority to use the SSN to administer the Pennsylvania personal income tax and other Commonwealth of Pennsylvania tax laws. The department uses the SSN to identify individual taxpayers and verify their incomes. The department also uses the SSN to administer tax-offset and child-support programs required by federal and Pennsylvania laws. The commonwealth may also use the SSN in exchange-of-taxinformation agreements with governmental authorities. Pennsylvania law prohibits the commonwealth from disclosing information that individuals provide on income tax returns, including the SSNs, except for official purposes.

WHEN ENTERING INFORMATION

DO:

  • Print in black ink
  • Use UPPER CASE (CAPITAL) letters
  • Print one number or letter in each box
  • Leave a blank box between whole words
  • Print your name - last, first, middle initial, and suffix on the correct lines
  • Print your correct street address
  • Print your apartment number, suite number, room number, rural route, floor, etc. on the first line
  • Print your PO Box on the second line
  • Fill in all appropriate ovals completely
  • Prepare a copy before submitting your return

DO NOT:

  • Use red pen or pencil
  • Use lower case letters or script
  • Leave a blank box or use a punctuation mark if your name, address, or city has Mc, Van, O, etc.
  • Use dashes or other punctuation in boxes
  • Print a PO number if the post office delivers to your home
  • Use a PO Box on any line of your address except the line directly above your city and state
  • Use an X or check mark (¸) in an oval
  • Erase or use correction fluid

GENERAL INSTRUCTIONS

PA-40 Tax Form

If you do not electronically file your tax return, use the PA-40 form. Please read the instructions.

Keep Your Records

The department has the statutory authority to verify and audit all of the amounts you report on your return and accompanying schedules. Maintain your books and records for at least four years after filing, as evidence of the information you reported on your PA return. Basis documentation for any item reported or potentially reportable on current or future tax returns must be kept indefinitely or until such time as the asset is sold, exchanged or disposed of by a taxpayer. For example, books and records used to calculate basis for retirement plans, stocks, bonds, mutual funds, business assets, business interests, tuition account programs, principal residence, etc. must be kept indefinitely.

Daytime Telephone Number

Enter the area code and telephone number where the department can call you between 8:30 a.m. and 4 p.m.

School Code and School District Name

You must enter the five-digit code and name of the school district where you lived on Dec. 31, 2012, even if you moved after Dec. 31, 2012. Do not enter the school district where you work. Using an incorrect code may affect your school district’s funding. The lists of school district names and codes are on Pages 42 and 43. NOTE: If you do not know the name of the school district where you resided on Dec. 31, 2012, you can obtain this information from the Online Customer Service Center at www.revenue.state.pa.us.

Some examples of what to consider when entering the school district code on a return are as follows:

  • Military personnel should use the school district code for the domicile of their spouse (if the spouse lives in Pennsylvania), their parents (if entering the military while they are domiciled in Pennsylvania), or the code for the school district in which they live while on federal active military duty while stationed in Pennsylvania (if a PA resident).
  • Persons residing in a nursing home or other care facility who are planning to return to their principal residence after a temporary stay in such facilities should enter the school district code for the physical address of their principal residence and not the nursing home or care facility.
  • Persons who reside in a nursing home or care facility on a permanent basis and have made the decision to do so (who are or were mentally capable of making this decision) should use the school district code for the physical address of the nursing home or care facility.
  • The residence of a person in a nursing home, long-term care facility or similar facility is presumed to be the person’s residence prior to becoming a patient in the home or facility, unless there is substantial evidence that the person is legally competent and does not intend to return to his/her previous home.
  • PA residents who are students attending college inside or outside of Pennsylvania should use the school district code for the physical address of the domicile or principal residence of their parents.
  • Nonresidents or part-year residents who did not reside in the state as of Dec. 31, 2012, should enter 99999 in the school district code field.
  • Part-year residents who resided in Pennsylvania as of Dec. 31, 2012, should enter the school district code of the physical address of their domicile or principal residence.
  • Persons who use a mailing address other than the physical address of the domicile or principal residence should enter the school district code for the physical address of their domicile or principal residence.
  • Persons who work outside of Pennsylvania, but maintain a permanent place of abode inside Pennsylvania during their absence from Pennsylvania or persons who plan to return to Pennsylvania after a temporary relocation to another state or country who are still considered PA residents should use the school district code for the physical address of their permanent place of abode or the school district code of their physical address prior to moving out of Pennsylvania.

Extension of Time to File Your 2012 Tax Return

Fill in this oval if you have an extension to file your 2012 PA income tax return. Read the instructions on Page 38.

Amended Return

Fill in this oval only when you are amending your 2012 PA tax return. Please read the instructions beginning on Page 38.

Residency Status

  • (R) Resident : If you were a resident of Pennsylvania for all of 2012, fill in this oval. You must report all income (losses) regardless of the source from which you earned, received, or realized the income (loss).

Nonresidents and Part-Year Residents

Please read the instructions on Page 40. Nonresidents and part-year residents use the same PA-40 form as PA residents.

  • (N) Nonresident : If you were a nonresident of Pennsylvania for all of 2012, fill in this oval. PA law taxes nonresidents on the income earned, received, or realized from Pennsylvania sources during 2012. See Page 40 of the instructions for more information.
  • (P) Part-Year Resident : If you moved into Pennsylvania during 2012, fill in this oval even though you were a PA resident at the end of 2012. If you moved from Pennsylvania during 2012, fill in this oval even though you were not a PA resident at the end of 2012.

PA law taxes part-year residents on all income from all sources while a PA resident, and all income (loss) earned, received, and realized from PA sources when not a resident of Pennsylvania. See Page 40 of the instructions for more information.

See Chapter 4, “Who Must File a PA Tax Return,” of the PA PIT Guide found on the department’s website for more information. You may also request the Determining Residency for PA Personal Income Tax Purposes brochure (REV-611) from the department’s website, or one of the Forms Ordering Services on Page 3.

Students

If you are a PA resident college student attending school outside Pennsylvania or a nonresident college student attending school within Pennsylvania, request the brochure PA Personal Income Taxes for College Students (REV-758) for more information.

Filing Status

Fill in the oval that describes your status on Dec. 31, 2012. You do not have to file a PA tax return if you do not individually meet the requirements described under Who Must File a PA Tax Return? on Page 5. If you do not live in Pennsylvania and do not have any income (loss) from PA sources, you do not have to file a PA tax return, even if married to someone who must file a PA tax return. If you are a PA resident who does not have any PA income (loss) to report, you do not have to file a PA tax return, even if married to a person who must file a PA tax return.

(S) Single

You must file as single if on Dec. 31, 2012:

  1. You were not married; or
  2. During 2012, you divorced or became a widow or widower and did not remarry.

(J) Married, Filing Jointly

You and your spouse, even if living apart, can file a joint return for convenience. To file jointly, you must meet ALL of the following conditions:

  1. Your taxable years end on the same date; and
  2. You and your spouse elect to have the same residency period (earliest starting date if you moved into Pennsylvania and latest ending date if you moved out of Pennsylvania) if you are part-year residents; and
  3. Neither of you is individually claiming one or more of the credits on PA Schedule OC, (see Page 20); and
  4. Your spouse is still living; and
  5. Neither of you is individually liable for the payment of child or spousal support, or another liability to the PA Department of Public Welfare.

FILING TIP: If you and your spouse made separate

estimated payments, you should file separate tax returns, each claiming only your own payments. If you and your spouse made your estimated payments jointly, you should file a joint tax return. However, if you and your spouse made estimated payments jointly and because of PA guidelines you must file separate tax returns, you must allocate the payments by completing Form REV-459B, Consent to Transfer, Adjust or Correct PA Estimated Personal Income Tax Account. The form must be completed in its entirety, showing the total number of payments made for the year and the amount of the payments to be transferred to the spouse.

Both individuals must sign the form. This form can be sent to the address shown on the form prior to filing the return or a copy of the form can be submitted with both returns when filing. This avoids processing delays and correspondence from the department.

Joint Income - Joint Returns

Married taxpayers can file a joint tax return for convenience only. If you and your spouse jointly own income-producing property, you must each report your share of the income (loss). Income-producing property includes savings accounts, businesses, securities, and real estate. Spouses usually equally divide income from jointly owned property.

CAUTION! On a joint return, you and your spouse are each separately liable for the entire amount of PA tax due, even if only one of you had taxable income, and even if one of you paid your own PA tax through withholding or estimated payments. The income and losses of a taxpayer and spouse must be determined separately. You may not offset the income of the taxpayer with a loss from the spouse and vice versa. See REPORTING NET INCOME, GAINS, AND LOSSES ON LINES 4, 5, AND 6 beginning on Page 14 and the requirements for the schedules reporting the income and losses for each class of income for additional information and reporting requirements.

(M) Married, Filing Separately

You and your spouse have the option to file separate returns. However, you and your spouse must file separate returns if:

  1. 1. Your taxable years end on different dates; or
  2. 2. Your taxable years begin on different dates for part-year residents; or
  3. 3. Either of you is claiming one or more of the credits on PA Schedule OC; or
  4. 4. Either of you is individually liable for the payment of spousal/child support, or another liability to the PA Department of Public Welfare; or
  5. 5. One of you is a PA resident and the other is not. However, you can file jointly if you both elect to file as PA residents and meet all other requirements for filing jointly. See Married, Filing Jointly on the previous page.

(F) Final Return

Use this filing status if you lived in Pennsylvania during 2012, but permanently moved away or if for any other reason, you will not have any PA-taxable income (or loss) in 2013. You will not receive a 2013 booklet. Provide the reason, such as you moved to another state.

REMEMBER: Even after you move from Pennsylvania, you must report any PA-taxable income you earned, received, or realized from PA sources.

(D) Deceased

Use this status if the taxpayer died in 2012. Enter the date of death. The department will not send a 2013 tax booklet in the name of the decedent.

The surviving spouse, the executor, or other person responsible for the affairs of the decedent uses this filing status to complete, sign, and file a separate return for the decedent. The return must report all the decedent’s 2012 income, payments, and credits. The person signing the decedent’s return must indicate his or her relationship to the decedent (surviving spouse, executor or person responsible for the affairs of the decedent).

Surviving Spouse

If the decedent was married, the surviving spouse should file a separate return, and use the Single (S) filing status. If the decedent made PA estimated payments, the surviving spouse may request Form REV-459B to reconcile the estimated payments to the separate PA tax returns. Request this form from the department’s website, or one of the Forms Ordering Services on Page 3.

Taxpayer Died After the End of 2012

If a taxpayer died after Dec. 31, 2012, but before filing his or her 2012 PA tax return, the surviving spouse, executor, or other person responsible for the affairs of the decedent has the option to file the 2012 return as:

  • Single, for a single taxpayer. The department will mail a 2013 PA tax booklet in the name of the decedent. The responsible person will then have to file a 2013 PA tax return for the decedent using the Deceased (D) filing status and report any income that the decedent earned, received, or realized in 2013.
  • Married, Filing Jointly for a married taxpayer. The department will send a 2013 tax booklet in the names of the decedent and surviving spouse. For 2013, the surviving spouse or other responsible person must file a separate 2013 tax return for the decedent as Deceased, reporting any income that the decedent earned, received, or realized in 2013.
  • Married, Filing Separately for a married taxpayer. The department will send a 2013 PA tax booklet in the name of the decedent and a separate 2013 PA tax booklet to the surviving spouse. On the 2013 return, the surviving spouse or other responsible person must file a signed separate return for the decedent as Deceased, reporting any income that the decedent earned, received, or realized in 2013.
  • Final, for a taxpayer that died after Dec. 31, 2012, and had no PA-taxable income (loss) in 2013.

Identification Label Change

Fill in this oval if any of the information on your label is wrong, or if you did not file a PA income tax return last year.

Farmers

Fill in this oval if you derived at least two-thirds of your 2012 gross income from farming.

PA INCOME CLASSES

You must report your income (loss) by applicable class, whether it is received directly, through an estate or trust or as a distributive share of the income of a partnership or PA S corporation. Read the instructions for each income class.

Line 1. Compensation - Page 10

Line 2. Interest - Page 13

Line 3. Dividends and Capital Gains Distributions - Page 14

Line 4. Net Income or Loss from the Operation of a Business, Profession, or Farm - Page 15

Line 5. Net Gain or Loss from the Sale, Exchange, or Disposition of Property - Page 16

Line 6. Net Income or Loss from Rents, Royalties, Patents, or Copyrights - Page 17

Line 7. Estate or Trust Income - Page 18

Line 8. Gambling and Lottery Winnings - Page 18

Federal income classifications are disregarded to the extent they are inconsistent with PA classifications.

FILING TIP: Generally, other or miscellaneous income is either compensation on Line 1a, (see Page 10), or business income on Line 4, (see Page 15). If you cannot determine the income class, contact the department for assistance.

TAXABLE INCOME FOR PA PIT PURPOSES:

The PA-40 line number on which to report the income follows each item. Classify means report the income in the appropriate PA income class based on all facts and circumstances. See PA PIT Guide for more information.

  • Employer provided fringe benefits, unless excludable (Line 1a)
  • Sick pay and disability benefits that represent regular wages, such as sick leave pay (Line 1a)
  • Allowances and reimbursements in excess of allowable employee business expenses (Line 1a)
  • The value of property received as payment for services (Line 1a)
  • Delay damages received in connection with a court judgment or settlement to the extent that the payments represent back wages (Line 1a)
  • Honoraria (Line 1a)
  • Compensation as fees for performing services as an executor or an administrator of an estate or a director of a corporation (Line 1a)
  • Severance pay (Line 1a)
  • Incentive payments received for terminating employment before reaching normal retirement age (Line 1a)
  • Awards and gifts given in recognition for, or given as a transfer of cash or property, in payment for past, present, or future service as an inducement to perform future services (Line 1a)
  • Jury fees (Line 1a)
  • Expert witness fees (Line 1a)
  • Cash reimbursements for personal expenses, such as commuting and day care (Line 1a)
  • A discharge of indebtedness, unless specifically excludable from taxable income (Classify)
  • Damage awards and settlements to the extent that the payments represent back wages or another uncollected entitlement to PA-taxable income (Classify)
  • Covenants not to compete, or for refraining from the performance of services (Classify)
  • Other income described in the PA income classes (Classify)
  • Income for performing services as an executor or director when such services are undertaken as part of your business or profession (Line 4)

INCOME NOT TAXABLE FOR PA PIT PURPOSES:

  • Social Security benefits and/or Railroad Retirement benefits
  • Commonly recognized pension, old age, or retirement benefits paid after becoming eligible to retire, and retiring
  • United Mine Workers Pension
  • Military pension benefits
  • Civil Service Annuity
  • Unemployment compensation and public assistance
  • Payments received under federal trade assistance, trade adjustment allowances and alternative adjustment assistance.
  • Payments received under workers' compensation acts, occupational disease acts, or similar legislation; including Heart and Lung Pension
  • Payments for injuries received while working, and damages received, whether by suit or otherwise, for personal injuries
  • Sick pay and disability benefits, including payments by third party insurers for sickness or disability (does not include amounts paid as sick leave) NOTE: If your employer includes your payments for sickness, disability, and/or on-the-job injuries in Box 16 of your Form W-2, provide a statement from your employer verifying the amount of these payments.
  • Employer-paid group term life insurance premiums
  • Damage awards and settlements from physical injury or sickness such as pain and suffering or emotional distress
  • Child support
  • Alimony
  • Inheritances, death benefits, and income in respect of a decedent (IRD) as defined for federal income tax purposes
  • Active-duty pay received as a member of the U.S. Armed Forces from the U.S. government for service outside Pennsylvania (see Page 37)
  • Awards and gifts made from detached or disinterested generosity
  • Personal use of an employer’s owned or leased property and/or services, at no cost or at a reduced cost
  • Federally taxable punitive damages received for personal physical injury or physical sickness, whether received by suit or by settlement
  • Income from contracts of insurance for long-term care that do not have accumulated refundable reserves payable upon lapse or surrender

DIFFERENCES BETWEEN PA PIT AND IRS

For more information on differences between Pennsylvania and the IRS, refer to the PA PIT Guide and the specific chapters related to the income class for which you have a question. The differences described below are the result of recent Pennsylvania and federal legislation.

Other Federal Legislation :

Federal legislation signed into law late in 2011 and early 2012 - including the vow to Hire Heroes Act and the Middle Class Tax Relief and Job Creation Act - contained no provisions applicable for or that may be used in calculating PA personal income tax liabilities. Any provisions provided in the aforementioned acts to defer income or accelerate deductions must be reversed for PA personal income tax purposes.

Depreciation - PA Limitations :

  • Bonus Depreciation - PA PIT law does not follow the federal allowances for additional depreciation expenses. You may not use any of the bonus depreciation elections enacted for federal purposes.
  • ACRS and MACRS and IRC Section 179 - Pennsylvania allows ACRS and MACRS and limited IRC Section 179 to the extent allowable under the version of the Internal Revenue Code in effect at the time the property was placed in service, or under Section 179 of the IRC of 1986, as amended to Jan. 1, 1997, whichever is earlier, but not any other accelerated method. 72 PS § 7303(a.3)(Act 89 of 2002.)
  • Limited IRC Section 179 - The maximum deduction that PA income tax law permits using IRC Section 179 is $25,000. If you have income (loss) from more than one business, profession, or farm, you may not deduct more than a total of $25,000 of IRC Section 179 expenses for all activities. The PA Section 179 expense is phased out for purchases in excess of $200,000.
  • Other Differences - You must adjust your federal expense for the difference between your federal depreciation and your depreciation for PA PIT purposes, when you elect a different generally accepted method that you consistently use. IMPORTANT: The basis for property (where bonus depreciation or IRC Section 179 in excess of $25,000 has been taken for federal income tax purposes) will be different for federal and state tax purposes. As a result, PA law requires straight-line depreciation to be taken on these assets.

PA-40 LINE INSTRUCTIONS

Deductions : PA law does not allow standard deductions, deductions for personal exemptions, itemized deductions or deductions for personal expenses.

CAUTION! PA-taxable interest income (Line 2), dividend income (Line 3) and gambling and lottery winnings (Line 8) are gross taxable income classes. You may not deduct any expenses in computing these classes of income. In computing compensation, only certain expenses are deductible; see the special instructions beginning on Page 26. The remaining classes of income are net taxable - you may deduct ordinary and necessary expenses paid or accrued during the taxable year in their production. See the line instructions for each class of income.

Cost Recovery : PA law does not permit deductions or exemptions for contributions to retirement plans, investments in annuities, mutual funds, money market funds, and other personal contributions, even when deducted or exempt for federal purposes. Therefore, Pennsylvania will not tax your distributions or the payments you receive until you have recovered an amount equal to your contributions. Maintain your records of your contributions. If you receive an early taxable distribution from a retirement plan, and you do not have records of your contributions, consult your plan administrator.

Education Savings Accounts - Qualified Tuition Programs under IRC Section 529 : Contributions to a Pennsylvania 529 College Savings Program, account and other IRC Section 529-qualified tuition program accounts are deductible. For additional information, see the instructions for Line 10, Other Deductions, on Page 19 and the instructions for PA Schedule O, Other Deductions, beginning on Page 33.

NOTE: Certain withdrawals and distributions not used for educational purposes are taxable. See the instructions for PA Schedule A on Page 30 for additional information.

LINE 1a. GROSS COMPENSATION

Overview: PA-taxable compensation includes, but is not limited to: salaries; wages; tips; gratuities; commissions; bonuses; incentive payments; vacation and holiday pay; employer student loan payments; student loan debt forgiveness for entering certain fields or professions; distributions from nonqualified deferred compensation plans; certain early

distributions from retirement plans; and termination pay. The amount your employer reports in Box 16 of your Form W-2 shows your PA-taxable compensation. If you receive Forms 1099 or other statements, your PA-taxable compensation is the gross amount that you received for performing services.

The amount in Box 16 of your Form W-2 may be different from the amount in Box 1. PA law requires your employer to follow PA income tax rules to determine Box 16. If you have any questions, contact your employer.

Form W-2 Wage and Tax Statement :

When reporting PA-taxable compensation, you may or may not have to submit Form(s) W-2 with your tax return. If you do not have to submit your Form(s) W-2 as shown below in When to Submit Form(s) W-2, you have these options:

  • Complete PA Schedule W-2S, Summary of PA-Taxable Employee, Miscellaneous, and Non-employee Compensation. See the instructions on Page 25 and When to Submit Form(s) W-2 below; or
  • Submit photocopies of your state copy of each Form W-2 on 8-1/2 X 11-inch paper. You may photocopy more than one Form W-2 on each sheet, but the form must be legible; or
  • Submit your actual state copy of Form(s) W-2. Report your PA compensation and withholding from each 2012 Form W-2 from each employer. Enter your PA-taxable compensation from Box 16 of your 2012 Form(s) W-2. Do not use Box 1, Federal Wages. Report your PA income tax withheld from Box 17 of each Form W-2 on Line 13 of your PA-40. Do not report federal income tax withheld, or income tax withheld or paid to another state or country, or income tax withheld and paid to any local tax authority.

When to Submit Form(s) W-2 :

Submit an actual state copy or a legible photocopy of each state copy of Form W-2 (keep the original for your records) and a written explanation if:

  1. The PA compensation you enter on Line 1a of your PA-40 is not the same as Box 16 on your Form W-2 (you believe that the PA compensation or withholding is incorrect).
  2. Your employer gave you a handwritten Form W-2.
  3. Your employer reported an incorrect amount on your Form W-2. You must also submit a written statement from your employer.
  4. Your employer withheld PA income tax from your wages at a rate that is more than the 2012 tax rate of 3.07 percent.
  5. You are a resident of a reciprocal compensation agreement state and your employer withheld PA income tax.
  6. The Medicare wages in Box 5 on your Form W-2 are greater than your PA wages in Box 16. In this case, complete and include with your return the PA-40 W-2 Reconciliation Worksheet. To obtain the worksheet, use one of the Forms Ordering Services on Page 3.
  7. You are a PA resident working in another state or country and did not have PA income tax withheld by your employer.
  8. You have a distribution from a nonqualified deferred compensation plan included in Box 1 of your Form W-2.
  9. Your Form W-2 shows income earned or tax withheld for another state.

NOTE: If you do not have a Form W-2 or a federal substitute W-2, Form 4852, you must submit evidence of your PA compensation and tax withheld by providing pay stubs and a statement identifying your employer and the reason you do not have a Form W-2. Please submit legible photocopies. Keep your original documents.

FILING TIPS:

  1. Complete and submit a PA Schedule W-2S unless the original Form W-2 is required to be included with your return as described above.
  2. Some original Form W-2 documents cannot be processed by the department’s imaging equipment (onion skin paper printed in blue ink, for example) and could delay the processing of a return. If possible, submit a photocopy of the Form W-2 on standard size paper instead of the actual Form W-2.
  3. If the PA-taxable wages you are reporting are less than the amount reported on your Form W-2, please include a brief explanation of the difference with your return and/or a letter from your employer documenting the difference in taxable amounts.
  4. If your employer withholds excess PA personal income tax at your request, include with your return a statement from your employer verifying the rate and amount of tax withheld for the tax year.
  5. If you worked outside of Pennsylvania and your employer did not withhold PA personal income tax, your PA wages may be higher or lower than the state wages reported on your Form W-2 in Box 16. Amounts paid to you as retirement plan contributions, personal use of company automobile and/or group term life insurance may require additional adjustments to the amount reported to the other state or country. See the PIT Guide, Chapter 7 for additional information.

CAUTION! If you receive distributions of previously taxed contributions from a nonqualified deferred compensation plan, you should complete and include with your return the PA-40 W-2 Reconciliation Worksheet. To obtain the worksheet, use one of the Forms Ordering Services on Page 3.

Reciprocal Compensation Agreement States

Pennsylvania has agreements with Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia. Generally, under these agreements, one state will not tax a resident of the other state on compensation that is subject to employer withholding. These agreements apply to most types of W-2 compensation earned while a resident of the reciprocal compensation agreement state. It does not apply to miscellaneous and non-employee compensation, compensation earned while a PA resident and received while a resident of the reciprocal compensation agreement state or compensation paid to Ohio resident shareholder-employees with a 20 percent or greater interest in a PA S corporation who worked or performed services in Pennsylvania in 2012.

If you are a PA resident working in one of these states, and your employer withheld the other state’s income tax, you must file for a refund from that state.

FILING TIP: File early so you will have your refund before the due date for paying your PA tax liability.

CAUTION! IMPORTANT: If you earn at least $8,000 in the other state, and your employer doesn’t withhold PA income tax, under PA law you may have to make estimated payments. Please read the information on Page 37. If this is your situation, you are liable for Estimated Underpayment Penalty. See the instructions for Line 27 on Page 22.

Resident of a Reciprocal State Filing for a Refund :

If you are a resident of a reciprocal state working in Pennsylvania and your employer withheld PA income tax, you may request a refund of the PA tax. You report zero taxable compensation on Line 1a, and the PA tax withheld on Line 13. Submit a legible photocopy of your Form W-2, a copy of the resident income tax return that you filed with your resident state (without the supporting forms and schedules), and a statement explaining that you are a resident of a reciprocal state.

Reimbursable Expenses/Cash Reimbursements for Personal Employee Expenses :

PA-allowable employee expenses are not always the same as allowable federal business expenses. Read the instructions beginning on Page 26. You must be able to substantiate travel expenses as to time, place and business purpose.

Report all reimbursements and allowances paid by your employer as compensation unless you meet all three of the following requirements:

  1. The expenses are PA-allowable employee business expenses; and
  2. You must, and do, account for these expenses to your employer; and
  3. Your employer reimburses you in the exact amount of the allowable business expenses.

If you receive a fixed-mileage allowance or a per diem living expense allowance that does not exceed applicable federal limits, you meet these requirements. Do not report these expenses on PA Schedule UE.

Retirement, Pensions, and Deferred Compensation

  • Eligible Employer-Sponsored Retirement Plans Pennsylvania does not impose income tax on payments you receive that are commonly recognized retirement benefits distributed from eligible employer-sponsored retirement plans. Eligible employer-sponsored retirement plans can, but do not necessarily, include employer- sponsored deferred compensation plans; pension or profit sharing plans; 401(k) plans; thrift plans; thrift savings plans; and employee welfare plans. Ask your employer or plan administrator if your employer’s retirement plan is an eligible plan for PA income tax purposes. Eligible non-employer-sponsored retirement plans can, but do not necessarily, include Individual Retirement Accounts (IRAs) and Roth IRAs.
  • Contributions The contributions you make to your employer’s sponsored retirement plan are PA-taxable compensation, even if your contributions are not taxable for federal purposes or included in the state wages shown on your W-2.
  • Distributions from Employer-Sponsored Qualified Retirement or Deferred Compensation Programs All amounts you receive from your employer's PA qualifying retirement or old age benefit plan are taxable in the year you receive the payments, except:
    1. Payments you receive after you qualify for retirement and retire.
    2. Payments you receive that you rollover into another deferred payment program or retirement IRA, but only when the transferred amounts are not taxable income for federal purposes.
    3. Distributions from an employer-sponsored deferred compensation plan that represent your previous contributions.
    4. Payments paid to the estate or designated beneficiary upon an employee’s death are not PA-taxable income on the employee's final PA-40 or on the decedent’s estate or trust PA-41, PA Fiduciary Income Tax Return or on the beneficiary’s PA-40.
    5. All distributions (regardless of the distribution code reported in Box 7 of the 1099-R) from the State Employees’ Retirement System, the Pennsylvania School Employees’ Retirement System, the Pennsylvania Municipal Employees’ Retirement System, and the U.S. Civil Service Commission Retirement Disability Plan.
    6. Retired or retainer pay of a member or former member of a uniform service computed under Chapter 71 of Title 10, U.S. Code as amended.

Individual Retirement Accounts

  • Contributions - PA law does not allow you to deduct your contributions to any IRA.
  • Undistributed Income - You do not report the undistributed interest and other earnings on the assets held in your IRA.
  • Withdrawals - Distributions from an IRA, including a federal Roth IRA, are taxable to the extent the distribution exceeds your previous contributions. Distributions you receive after retiring but before age 591/2 are taxable even if you receive substantially equal payments, and you do not pay the federal penalty for an early withdrawal. PA law does not have any exceptions similar to the federal exceptions for withdrawal before age 591/2. However, distributions from an IRA are not taxable if the payments are:
    1. Received, including lump sum distributions, on or after reaching the age of 591/2.
    2. Paid to the estate, or designated beneficiary, of the participant because of the participant’s death.

Traditional IRA Rollover :

You do not have to pay PA tax on the difference between the amount distributed from your traditional IRA and your previous contributions:

  1. 1. If you rolled over the entire withdrawal directly (trustee to trustee) from one traditional IRA to another traditional IRA, or
  2. 2. If you withdrew from the traditional IRA and within 60 days invested the entire (100 percent) amount you received into another traditional IRA.

Roth IRA Rollover :

You do not have to pay PA tax on the difference between the amount distributed from your traditional IRA and your previous contributions:

  1. If you rolled over the entire withdrawal directly (trustee to trustee) from the traditional IRA to the Roth IRA, or
  2. If you withdrew from the traditional IRA and within 60 days invested the entire (100 percent) amount you received into a Roth IRA.

CAUTION! If federal tax is withheld from a rollover distribution, the amount of federal tax withheld must also be reimbursed into the new IRA account in order for the rollover to be considered nontaxable for PA PIT purposes. See Filing Tips on Page 26 for additional information.

CAUTION! IMPORTANT: For detailed information on Pennsylvania taxation of distributions from IRAs, please review Tax Bulletin 2008-01 on the department’s website, www.revenue.state.pa.us.

Early Retirement Incentive Plans :

Payments you receive as an inducement to retire early are taxable compensation. Such payments are not part of a PA- qualifying retirement program. Your employer includes these incentive payments on your Form W-2 and withholds PA tax. Even when you move out of Pennsylvania, these incentive payments remain taxable to Pennsylvania.

  • Distributions - If you withdrew from your retirement or pension plan, and received a Form 1099-R, you may have PA-taxable compensation if:
    1. Your retirement plan is not an eligible Pennsylvania retirement plan; or
    2. If you have not reached the retirement age or years of service requirements under such eligible Pennsylvania retirement plan.

Non-Qualified Deferred Compensation Programs :

With certain exceptions, Pennsylvania’s constructive receipt rules are the same as the federal constructive receipt rules to determine when compensation is received by a cash basis taxpayer. Following the federal constructive receipt rule, deferrals to nonqualified deferred compensation plans are not included in compensation. However, compensation includes distributions from nonqualified deferred compensation plans attributable to an elective deferral of income, regardless of whether the distributions are paid during employment or retirement. Also, distributions of previously taxed contributions are not taxable. If you receive distributions of previously taxed contributions, complete and include with your return the PA-40 W-2 Reconciliation Worksheet. To obtain the worksheet, use one of the Forms Ordering Services on Page 3.

Federal Form 1099-R (Qualified Plans and IRAs) :

The PA PIT Guide contains a table which cross-references the information on the Form 1099-R with its corresponding PA income tax treatment. PA law does not follow federal law concerning early retirement options for Individual Retirement Accounts, IRC Section 401 plans, 403 plans, and other federally qualified plans. To determine if the amount you received is taxable in Pennsylvania, review Boxes 1 through 3 (the amount you received or your distributions) and the PA tax treatment of Box 7 (the codes that will help determine the taxability of your distribution). The federal codes contained in Box 7 of Form 1099-R include:

  • Code 1 & 2 Early Distribution : This distribution is taxable for PA purposes, unless: (1) your pension or retirement plan was an eligible plan for PA tax purposes, and (2) you retired after meeting the age conditions of the plan or years of service conditions of the plan. If your plan was not an eligible plan, or if you have not attained the age or years of service required under the plan to retire, you must determine the PA-taxable amount of your distribution. You must use the cost recovery method to determine this amount. See Page 10 for additional information. IMPORTANT: If you are not sure whether your plan was an eligible retirement plan under PA tax law, ask your plan administrator.
  • Code 3 or 4 Death/Disability Distribution: This is a distribution due to death and/or disability. A distribution due to death is not taxable for PA purposes. A distribution due to disability generally is not taxable for PA purposes.
  • Code 7 Normal Distribution : This distribution from an eligible Pennsylvania retirement plan is not taxable if you met the plan requirements (the age and/or years of service required by the plan) for retirement, and retired after meeting those requirements.

CAUTION: Distributions from a commercial insurance or mutual company annuity purchased as a retirement annuity are not distributions from an eligible Pennsylvania retirement plan and are taxable as interest income to the extent they are included in federal gross taxable income. See Annuities, Life Insurance or Endowment Contracts on Page 14 and the instructions for PA Schedule W-2S beginning on Page 25 for additional information.

  • Code G or H Rollover : This is a rollover from one qualified fund to another and is not taxable for PA purposes. See IRA Distributions below.
  • Boxes 8 or 9b : Distributions listed in these boxes are distributions from an insurance policy or annuity purchased for your retirement. Such distributions are not taxable if: (1) your insurance policy or annuity was from an eligible plan for PA tax purposes; and (2) you retired after meeting the age or years of service conditions of such eligible plan. If you do not meet these requirements, the taxation of your distributions must be determined under the cost recovery method. See Page 10 for additional information. This distribution is taxable as interest on PA Schedule A, not as compensation on Line 1a.
  • Boxes 10 and 11 : If there is state withholding noted in Box 10 of the 1099-R and the state indicated in Box 11 is PA, report the amount of PA tax withheld on PA Schedule W-2S in Part B.

IRA Distributions (60-day rollover rule) :

If you received a distribution from an IRA (before age 591/2 and retiring) and rolled the entire distribution (100 percent) into a Roth IRA directly, or within 60 days, the distribution is not taxable income for PA purposes. If you did not roll the entire distribution into another IRA, you must report PA-taxable income to the extent the distribution exceeds your contributions that is apportionable thereto.

CAUTION! IMPORTANT: If you retired, but did not reach age 591/2, you must report your distributions on a cost recovery basis until you reach age 591/2.

Annuities :

If you received a distribution from an annuity that is not an employer-sponsored retirement plan, see Annuities, Life Insurance, or Endowment Contracts on Page 14.

FILING TIP: If you receive a distribution from a retirement plan, IRA or any other plan reported on federal Form 1099-R, you must complete Part B of PA Schedule W-2S regardless of whether the distribution is taxable or tax-exempt. Withholding on distributions is also reported on this schedule. See the instructions for PA Schedule W-2S, beginning on Page 25.

LINE 1b. UNREIMBURSED EMPLOYEE BUSINESS EXPENSES

Review the instructions beginning on Page 26 to determine if you can deduct expenses from your PA-taxable compensation. Follow the instructions. PA law does not follow federal law for allowable employee business expenses. EXAMPLE: You may deduct 100 percent of your PA-allowable expenses on the PA Schedule UE. If claiming expenses on PA Schedule UE, briefly describe your occupation or job in the space provided. If your spouse also has expenses, describe his or her occupation or job on a separate PA Schedule UE.

CAUTION! IMPORTANT: The department has the legal authority to request evidence that your expenses are allowable for PA purposes.

LINE 1c. NET COMPENSATION

Subtract Line 1b from Line 1a.

LINE 2. INTEREST INCOME

Report all PA-taxable interest income received or credited during the year. Generally, Forms 1099-INT and similar statements from financial institutions show the interest amount. You do not have to submit these forms and statements. Include interest income from personal savings and checking accounts, insurance contracts, obligations of other states (not Pennsylvania), and investments. If your total interest income (taxpayer, spouse and/or joint) is more than $2,500, complete and submit PA Schedule A. See the instructions on Page 30.

Do not report interest income from direct obligations of the U.S. government, the Commonwealth of Pennsylvania, and political subdivisions of Pennsylvania. For a list of exempt obligations, obtain Tax Exempt Obligations for Pennsylvania Personal Income Tax Purposes (Form REV-1643) from one of the Forms Ordering Services on Page 3.

How to Classify Interest Income :

  • You must classify interest, regardless of how you report the income for federal purposes. Report personal interest on Line 2. Otherwise, include interest: From business accounts, working capital interest, and accounts receivable in determining profit (loss) on a PA business schedule;
  • From installment sales on PA Schedule D-1; and
  • From rental security deposits in determining income (loss) on PA Schedule E.

Money Market Funds, Mutual Funds, and Other Investment Companies :

Include the earnings distributed to you (other than withdrawals of your previously PA-taxed contributions) as dividend income on Line 3.

Annuities, Life Insurance, or Endowment Contracts :

If you invested in an annuity, including a retirement annuity that is not part of an employer-sponsored retirement program, you may have PA-taxable income when you begin receiving annuity payments. If you are required to report an amount from an annuity for federal income tax purposes, you are required to report the amount as interest income for PA PIT purposes. Also, if you are required to report an amount from a life insurance and endowment contract for federal income tax purposes, you are required to report the amount as interest income for PA personal income tax purposes.

Charitable Gift Annuities :

If you established a gift annuity to a charitable organization from which you are receiving periodic payments, you have PA-taxable income. Charitable gift annuities report their income as interest income on Line 4 of PA Schedule A using the amounts reported or included in gross income for federal income tax purposes (ordinary income and capital gains income) regardless of when they began reporting the income from that charitable gift annuity. In the event that a charitable gift annuity is exchanged or sold in the future, the PA basis in a charitable gift annuity will be different from the federal basis for charitable gift annuities from which payments began prior to Jan. 1, 2005. Income from the sale or exchange of a charitable gift annuity is reported on PA Schedule D.

Forfeited Interest Penalty :

You may offset the penalty for premature redemption or withdrawal of a time savings account or certificate of deposit, only against the interest income you received in the same taxable year from that account or certificate. You cannot offset this penalty against other interest income. If your total penalty exceeds the related interest income, you may report the excess as a loss on PA Schedule D.

LINE 3. DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS FROM MUTUAL FUNDS

Report all dividend income received or credited during 2012. You do not have to submit your Forms 1099-DIV and other statements. If your total dividend income (taxpayer, spouse and/or joint) is more than $2,500, you must complete and submit PA Schedule B. See instructions for this schedule beginning on Page 30. You cannot substitute a Federal Schedule B for PA Schedule B.

Capital Gains Distributions - Report capital gains distributions from your mutual funds from Box 2a of your 1099-DIV as PA-taxable dividend income, even though you report such distributions as capital gains on federal Schedule D.

How to Classify Dividend Income - You must classify dividend income, regardless of how you report the income for federal purposes. Report personal dividends on Line 3. Otherwise, include dividend income from business accounts and working capital dividend income in determining profit (loss) on your PA business schedule.

PA Resident Shareholders in Another State's S Corporation that is not also a PA S - Corporation If you are a shareholder in another state's Subchapter S corporation, and that corporation elected not to be treated as a PA S corporation, include the cash or property you actually received out of the corporation’s earnings and profits as dividend income on Line 3. If you received distributions in excess of the corporation’s earnings and profits, report these distributions on PA Schedule D. Do not report the amount of your distributable income, and do not submit the federal Schedule K-1. A shareholder may not claim a credit for income tax paid to another state by an S corporation that elected not to be treated as a PA S corporation.

FILING TIP: You must include nontaxable interest and dividends as Eligibility Income on PA Schedule SP.

REPORTING NET INCOME, GAINS, AND LOSSES ON LINES 4, 5, AND 6 ONLY

Under PA law, losses may only be reported on Lines 4, 5, and 6. If entering a loss, fill in the oval next to the line.

REMEMBER: You may not offset income in one PA income class with a loss in any other PA income class. You cannot carry forward or carry back gains or losses to other tax years.

Spouses, whether filing jointly or separately, may not use each other’s expenses to reduce income or offset each other’s income and losses.

If you are married, you and your spouse may file a joint tax return for convenience only. PA law does not provide any advantage when filing a joint return. PA law does not allow spouses to offset income and losses with each other, even when both have activity in the same income class. You must follow these rules:

  1. If each realizes a net profit, gain, or income, add the net income amounts together and report that total on the appropriate line.
  2. If each realizes a net loss, add the net losses and report that total on the appropriate line. Fill in the oval next to that line.
  3. If one spouse has a net profit, income or gain and the other spouse has a net loss, report only the net income on the appropriate line. Do not take into account the spouse’s loss.

EXAMPLES:

Line 4. Mary and Ben file a joint tax return. Mary owned a flower shop, and realized a net profit of $5,000. Ben was a shareholder in a PA S corporation, and received a PA Schedule RK-1 reporting $35,000 of business income. They jointly owned a small retail store and realized a loss of $8,000. They report $32,000 on Line 4 from Mary’s net income of $1,000 ($5,000 less her half of the $8,000 loss), plus Ben’s net income of $31,000 ($35,000 less his half of the $8,000 loss).

Line 5. They sold the retail store for a $6,000 loss. Mary sold stock that she owned individually for a $9,000 gain. Ben sold stock that he individually owned for a $3,000 loss. On Line 5, they report a gain of $6,000. Mary’s net gain is $6,000 ($9,000 less her half of the $6,000 loss). Ben’s net loss is $6,000 (his $3,000 stock sale loss and his half of the $6,000 loss on the sale of the store). Since Ben's separate loss may not reduce Mary’s gain, they report a gain of $6,000 on Line 5.

Line 6. They jointly owned a rental property and realized a loss of $2,000. Mary was a partner in a rental partnership and her share of the partnership’s loss was $1,000. Ben’s PA S corporation realized a loss from its rental operations. His share of the loss was $4,000. Mary's total loss was $2,000 and Ben's total loss was $5,000. On Line 6, they report the total loss of $7,000 (and fill in the oval) since they each individually realized a total net loss.

PA-Taxable Income. On their jointly filed 2012 tax return, they report total taxable income of $38,000: Line 4 of $32,000 and Line 5 of $6,000, not taking into consideration their Line 6 loss of $7,000.

PA AND FEDERAL SCHEDULES

Submit the required Pennsylvania or allowable federal schedule for each amount you report on Lines 4 through 8. Read the instructions for each income class carefully.

CAUTION! If you do not provide the required schedules, the department will need to request the missing information. Failing to provide schedules that the department requires will delay the processing of your tax return and therefore delay the initial date your return is considered to be complete.

PARTNERSHIP, LIMITED LIABILITY COMPANY AND PA S CORPORATION PARTNERS, MEMBERS AND SHAREHOLDERS

PA Schedules RK-1 and NRK-1 :

These schedules show your share of income (loss) for each PA income class. If you received any guaranteed payments, add those payments to your share of income (loss) as shown on your Pennsylvania schedules. The partnership, limited liability company or PA S corporation deducts all allowable expenses and other allowable adjustments. If your partnership, limited liability company or PA S corporation requires that you incur direct business expenses, and the expenses are allowable unreimbursed expenses for PA purposes, you must itemize them on a separate statement. The department may require, at a later date, a copy of the partnership or limited liability company agreement or articles of incorporation that require the partner, member or shareholder to pay expenses out of his or her personal assets. You cannot deduct any personal expenses or expenses that you incur for your own convenience.

Copies of PA Schedules RK-1 or NRK-1 must be submitted for each S corporation, partnership or limited liability company in which you are a shareholder, partner or member. Copies of PA Schedules RK-1 and NRK-1 must be submitted with all paper returns filed. Electronically filed returns do not require the separate submission of these schedules as they are electronically submitted with the electronic return. In cases where a PA Schedule RK-1 or NRK-1 is not made available, federal Schedule K-1 should be provided. Federal Schedules K-1 cannot be used to prepare electronically filed returns as they cannot be electronically submitted to the department.

PA Resident Shareholder and/or Partner of an S Corporation or Partnership from Another State :

If you are a PA resident shareholder of an S corporation or a PA resident partner in a partnership that does business entirely within another state, the entity is also required to file a PA-20S/PA-65, PA S Corporation/Partnership Information Return as a result of having a PA resident shareholder or partner. You should receive a PA Schedule RK-1 from that entity which you must submit with your PA-40 return to report your share of the income (loss) whether distributed or not, as shown on your PA Schedule(s). All the shareholders may also elect to not be taxed as a PA S corporation by filing Form REV-976, Election Not To Be Taxed As A Pennsylvania S Corporation. You or the S corporation can obtain this form by using one of the Forms Ordering Services on Page 3.

PA Resident Partner and/or Shareholder :

If you are a partner in a partnership or a shareholder of a PA S corporation, you should receive a PA Schedule RK-1. You must submit a copy of each PA Schedule RK-1 and report your share of income whether distributed or not as shown on your PA Schedule(s). If the partnership does not provide a PA Schedule RK-1, you still must report and classify the income (loss) from the federal Schedule K-1 according to the instructions for each PA income class. You must also submit a copy of your federal Schedule K-1 and related supporting schedules where applicable that provide information as to the classification of the income from the federal Schedule K-1.

Nonresident Partner and/or Shareholder :

If you are not a resident of Pennsylvania, but are a partner in a PA partnership or a shareholder of a PA S corporation, you should receive a PA Schedule NRK-1. You must submit a copy of each PA Schedule NRK-1 and report your share of PA-taxable income (loss) whether distributed or not as shown on your PA schedule(s). If the partnership does not provide a PA Schedule NRK-1, and the partnership has income (loss) from PA sources, you still must report and classify the income (loss) from your federal Schedule K-1 according to the instructions for each PA income class. You must also submit a copy of your federal Schedule K-1 and related supporting schedules where applicable that provide information as to the classification of the income from the federal Schedule K-1. If the income (loss) is being reported to PA from a federal Schedule K-1 and the income (loss) is not 100 percent of the amount from the federal Schedule K-1, a schedule or written explanation should be submitted along with the federal Schedule K-1 explaining how the amount reported was determined.

LINE 4. NET INCOME OR LOSS FROM THE OPERATION OF A BUSINESS, PROFESSION, OR FARM

Report all income (loss) from business, farm, and business activity from partnership and PA S corporation schedules. You may offset your own income in this class against your own loss or losses from other business activities. If reporting a total net loss, fill in the oval next to Line 4 on your PA-40.

For PA purposes, determine net income (loss) under accepted principles and practices of the accounting profession. Report your net income (loss) from an unincorporated business or profession on PA Schedule C. File a PA Schedule C or a PA Schedule F using your separate books and records for PA purposes. You may be able to submit a PA Schedule C-EZ, if you file a federal Schedule C-EZ.

NOTE: These PA schedules are not in this booklet. You can obtain the schedule(s) you need from one of the Forms Ordering Services on Page 3.

If you do not maintain separate books and records for Pennsylvania, you may submit your federal schedule with your PA-40, only if you do not have to adjust your federal amounts to comply with the specific differences between federal law and PA law.

Generally, you must adjust your federal amounts for PA tax purposes. These adjustments can increase or decrease your PA-taxable income (loss). You must maintain appropriate records of such adjustments.

Additional information regarding income and expenses required to be adjusted is available within the instructions for PA Schedules C and F and in the PA PIT Guide. You may also visit the department's website at www.revenue.state.pa.us to obtain detailed information about federal and Pennsylvania differences and adjustments.

Reporting Rental Income (Loss) as Business Activity on Line 4 or as Rents on Line 6 :

Rental activity may be a business activity if meeting the conditions described below. If in business, you report your net profit (loss) on a PA Schedule C. If not in the business of rents, you report your rental activity on a PA Schedule E on Line 6. You report rental business when:

  1. You offer the use of your property with the intention of realizing a profit; and
  2. The leasing of your property is characterized by regularity and continuity of activities; and
  3. You offer the use of your property on a commercial basis to others in a marketplace and at least one of the following applies:
    • The average period of customer use is 30 days or less; or
    • The property is customarily made available for use only during defined business hours; or
    • In addition to the property, the taxpayer also provides significant services (see explanation below) to the lessee; or
    • The taxpayer incurs significant operating expenses in making the property available for lease; or
    • The leasing activity is incidental to a real estate sales business.

Significant Services :

Providing housekeeping service, room service, valet parking, decorating assistance, delivery services, transportation services, and concierge services are significant services.

However, providing heat, lighting, electric service, elevators, cleaning public access and exit areas, collecting trash, and maintaining the property in a usable rental condition are not usually significant services.

LINE 5. NET GAIN OR LOSS FROM THE SALE, EXCHANGE, OR DISPOSITION OF PROPERTY

Report your gain (loss) from each sale, exchange, or disposition of any kind of intangible property and any real or tangible property. Report your share of the gains (losses) from a partnership or PA S corporation in which you are a member. Report your total net gains (losses) on PA Schedule D.

CAUTION! IMPORTANT: PA law does not distinguish between long-term and short-term gains (losses) or have provisions relating to casualty losses, sales to related parties, and nonrecognition of gains (losses) under IRC Section 1031 (like-kind exchanges). PA law does not allow the installment sale method of reporting for the sale of intangible property, such as stock.

You may offset your own net gains against your own losses in determining this line. If married and you both have income (losses) in this class, see REPORTING INCOME, GAINS, AND LOSSES ON LINES 4, 5, AND 6 beginning on Page 14. If you realize an overall net loss, fill in the oval next to Line 5 on your PA-40.

On PA Schedule D, report gains (losses) from selling:

  • Land and buildings;
  • Properties held for investment, including rental properties;
  • Stocks and bonds;
  • Ownership interests in partnerships and business enterprises;
  • A business asset in a transaction that is not an ordinary or recurring business transaction; and/or
  • Obligations of other states and countries.

Also, include the following on PA Schedule D:

  • Amounts from PA Schedules D-1, D-71, RK-1 and NRK-1.
  • Amounts from PA Worksheets REV-998 and REV-999.
  • Proceeds from an insurance company demutualization.
  • Sales of inherited property. The basis of inherited property is its fair market value at the date of death.
  • A distribution from a C corporation (other than a dividend) that exceeds your adjusted basis in that corporation. Please see the instructions for Line 4 of PA Schedule D beginning on Page 31.
  • A nonqualifying sale of your principal residence - obtain PA Schedule 19, Sale of a Principal Residence.
  • A distribution from a partnership or PA S corporation (other than dividends) that represents a return of your investment in that entity. You must determine if such a distribution results in a taxable gain by completing worksheets REV-998 or REV-999. These worksheets are available on the department’s website.
  • Gains or losses from the IRC Sections 988, 1256, and 475 or from straddles, hedges, options or other derivatives.

Loss on the Disposition of Property :

PA law recognizes a loss only on a transaction entered into for profit, and only in the year in which an identifiable event closed and completed the transaction and fixed the amount of the loss so there is no possibility of any eventual recovery. Do not report a loss on the sale of property that you did not acquire for profit, such as a personal car, furniture, or a qualifying sale of your principal residence.

Capital Gains Distributions :

Report capital gains distributions received from mutual funds as PA-taxable dividend income, even though you report such distributions as capital gains on federal Schedule D. See Page 14 for more information.

Exchange of Insurance Contracts :

Do not report the gain (loss) on the sale, exchange, or disposition of any insurance contracts that are tax-exempt for federal income tax purposes under IRC Section 1035. Tax-exempt exchanges of insurance contracts include:

  • An exchange of a life insurance contract for another life insurance contract, an endowment contract or an annuity contract;
  • An exchange of an annuity contract for another annuity contract;
  • An exchange of an endowment contract for an annuity contract; and
  • An exchange of one endowment contract for another endowment contract if the dates for payments begin on or before the original contract’s payment dates.

If the exchange of contracts has the effect of transferring property to a non-U.S. citizen, the gain or loss is not tax-exempt. If you receive cash or other boot in an exchange of contracts, see the PA PIT Guide.

Charitable Gift Annuities :

See Page 14 for additional information on where to report income from charitable gift annuities.

Exempt Obligations Originally Issued before Feb. 1, 1994 :

Do not report the gain (loss) realized on the sale, exchange, or disposition of the following obligations, if the original issue date was before Feb. 1, 1994, regardless of the date you acquired the obligation:

  • Direct obligations of the U.S. government, such as federal treasury bills and treasury notes;
  • Obligations of certain agencies, instrumentalities, and territories of the U.S. government; and
  • Direct obligations of the Commonwealth of Pennsylvania and its political subdivisions.

CAUTION! IMPORTANT: You may not use any loss realized on the disposition of the above obligations to offset other gains.

Exempt Obligations Originally Issued on or after Feb. 1, 1994 :

Report the gain (loss) realized on the sale, exchange, or disposition of the above obligations, if the original issue date was on or after Feb. 1, 1994.

CAUTION! IMPORTANT: You must report all such gains and can use any losses to offset other gains.

Sale of Your Principal Residence :

If you sold your principal residence in 2012 and meet the requirements for the 100 percent gain exclusion, do not report the sale on your tax return. This exclusion is not identical to the federal exclusion. Generally, if during the five years preceding the sale of your home, you owned it for at least two years, and used it as your principal residence for at least two years, you are eligible for this exclusion.

If you used a portion of your principal residence for business purposes during your ownership, you may have gain or loss to report on the sale. For more information, request the brochure Sale of Your Principal Residence (REV-625) and PA Schedule 19, Sale of a Principal Residence. Also see the PA Schedule D instructions beginning on Page 31.

CAUTION! If you sold your principal residence, but you do not qualify for the exclusion, report your gain or enter zero if you realized a loss on PA Schedule D.

LINE 6. NET INCOME OR LOSS FROM RENTS, ROYALTIES, PATENTS, OR COPYRIGHTS

Rental income includes the amounts you receive for the use of, or the right to use, your real or personal property.

Royalty income includes the amounts you receive for the extraction of coal, oil, gas, or other minerals in place, and the amounts that you receive for the use of your patents, copyrights, secret processes, formulas, goodwill, trademarks, trade brands, franchises, and similar property.

If in the business of renting your property, you report your net profit (loss) on a PA Schedule C. Please see Page 16, Reporting Rental Income (Loss) as Business Activity on Line 4 or as Rents on Line 6.

Gross rents and royalties include all items of gross receipts as described above except:

  1. Receipts from the sale, exchange, or other disposition of rental, royalty, and similar property; and
  2. Receipts from operating an oil, gas, or mineral interest as a business, profession, or farm, or otherwise derived in the ordinary course of, and from the operation of, a business.

Report the total income (loss) from all PA Schedules E and all PA Schedules RK-1 or NRK-1. Generally, you must use PA Schedule E. You may use federal Schedule E, if using only Part I, and with the following adjustments:

  • Report passive rental/royalty loss in full, rather than carry it over to future years.
  • Add any capital gains and distributions that you report on other federal schedules.
  • Do not take any depreciation expense on sales tax that you elected to currently expense for PA personal income tax purposes.
  • Optional: Deduct sales tax on acquired property as an expense currently rather than add it to the basis of the property as required for federal purposes.

CAUTION! IMPORTANT: If you currently expense such sales tax, the basis of that property will differ from the federal basis, and you must adjust your depreciation expense accordingly. You cannot expense sales tax and still take depreciation on the sales tax. If you do not expense sales tax, you may add such sales tax to the cost basis of the property and depreciate the aggregate cost plus sales tax.

  • You must separately show your share of any rental or royalty gain (loss) that you realize as a partner, a shareholder of a PA S corporation, or other entity.

You may only offset your own net income and losses in determining the amount to report on this line. If married and you both have income (losses) in this class, see REPORTING NET INCOME, GAINS AND LOSSES ON LINES 4, 5, AND 6 only beginning on Page 14. If you realize a total net loss, fill in the oval next to Line 6 on your PA-40.

CAUTION! Generally, PA law follows IRC Section 280A if you rent or lease your property, but do not intend to realize a profit. Therefore, your rental expenses are limited to your rental income, and you may not use a loss. If you rent or lease your property to realize a profit, read the description of Reporting Rental Income (Loss) as Business Activity on Line 4 or as Rents on Line 6 on Page 16 to determine if you have a business activity that you should report on PA Schedule C.

Rental and Royalty Allowable Expenses :

You deduct those expenses that you paid or incurred during the taxable year that are ordinary and necessary for:

  1. The production of, or collection of, rents and royalties; or
  2. The management, conservation, or maintenance of rents, royalties, patents, copyrights, and similar property.

See the PA Schedule E instructions beginning on Page 32 for the allowable expenses. You may not deduct expenses for your own labor, capital investment, or capital improvements.

You recover costs associated with capital improvements through depreciation deductions. You may not deduct personal expenses or that part of any expense that is personal.

Rental Income (Loss) on Line 6 or Net Gain (Loss) on Line 5 :

  • Lease with an Option to Buy A lease with an option to buy may be a purchase contract under accepted accounting principles and practices. If it is, the payments you received under the contract are payments of the purchase price and are not includable as rental income. Report such income on PA Schedule D.
  • Selling Mineral Interests, Patents, or Copyrights If you gave up all rights to mineral interests, patents, or copyrights, the amounts you received are considered payments for the sale or exchange of property. Report such income on PA Schedule D.

LINE 7. ESTATE OR TRUST INCOME

As a beneficiary of an estate or trust, you report the total PA-taxable income that the estate or trust must distribute, pay, or credit to you on PA Schedule J. You cannot report a loss as a beneficiary for PA purposes.

CAUTION! You should receive a PA Schedule RK-1 and/or NRK-1 from the estate or trust. If you received a federal Schedule K-1, you must report only the total income, not taking into account any losses, shown on the federal Schedule K-1. Add the total of income reported on federal Schedule K-1 as interest, dividends, long-term and short-term gains, annuities, royalties, trade or business income, rental income, etc. If you included any of these amounts on a PA schedule, other than PA Schedule J, adjust your PA schedule(s) accordingly. Include a photocopy of the federal Schedule K-1 with your return for each nonresident estate or trust and/or each estate or trust for which you fail to receive a PA Schedule RK-1 and/or NRK-1.

FILING TIP: Cash and property you acquire from an estate or trust by gift, bequest, devise, or inheritance is not taxable. You must report any PA-taxable income that you subsequently earn or receive from that cash or property.

Revocable Trusts :

The person (settlor) who establishes a revocable trust (including grantor trusts that are revocable) does not file a PA-41 if, under the governing instrument, he/she retains authority to:

  1. Completely revoke the trust without the declaration of new uses or the consent of any other party; and
  2. Revest in himself/herself the legal title to the corpus of the trust, without the consent of any other party.

If you establish a revocable trust, report the income (loss) that the trust earns, receives, and realizes in the appropriate PA income class on your PA-40 personal income tax return. Do not report the amounts on PA Schedule J.

When submitting supporting schedules and statements showing the name of the trust, write REVOCABLE clearly on the schedule.

Grantor Trust :

A grantor trust generally files a PA-41. The beneficiaries of the trust, including the grantor, if he/she receives income from the trust, report the income as beneficiaries on their PA Schedules J.

LINE 8. GAMBLING AND LOTTERY WINNINGS

PA law imposes its income tax on PA residents on all gambling and lottery winnings from any source, except prizes from playing the Pennsylvania Lottery. As a PA resident, you must include lottery winnings from other states and countries.

PA law imposes its income tax on nonresidents on all gambling and lottery winnings from PA sources, except prizes from playing the Pennsylvania Lottery.

Gambling and lottery winnings include cash, the value of property (automobiles, jewelry, electronic devices, appliances, clothes, etc.), the value of the use of property (trips, vacations, airline tickets, cruises, etc.), and other items of value. You may only deduct your costs of gambling, wagering, betting, and playing lotteries from your winnings. You may not deduct any expenses (programs, tip sheets, travel, meals, lodging, etc.) that you incurred to take part in gambling, wagering, betting, and lottery activities.

CAUTION! IMPORTANT: You may not deduct the cost of Pennsylvania Lottery tickets from other PA-taxable gambling and lottery winnings.

Powerball and Mega Millions :

If you purchase a Powerball or Mega Millions ticket in Pennsylvania, whether a PA resident or not, any prize you win is not taxable for PA PIT purposes. If you are a PA resident and purchase a Powerball or Mega Millions ticket in another state, any prize you win is PA-taxable income.

Report your PA-taxable winnings on PA Schedule T. Spouses must report their winnings separately. The payers of prizes provide the department with copies of the federal Forms W-2G that they submit to the IRS.

Documenting Gambling and Lottery Winnings and Losses :

Taxpayers claiming gambling winnings and losses must be able to document their winnings and losses. This documentation should not be included with your return, but may be requested at a future date by the department. You should keep an accurate diary or similar record of winnings and losses. In addition to a diary, you should have other documentation to support the entries within the diary. Some but not all of the documents that can be used to support gambling winnings and losses include: federal Form W-2G, Certain Gambling Winnings; federal Form 5754, Statement by Person(s) Receiving Gambling Winnings; wagering tickets; canceled checks; substitute checks; credit records; bank withdrawals; and statements of actual winnings or payment slips provided by the gambling establishment.

Some examples of the record keeping for slot or electronic gaming machines may include a record of the machine number and all winnings by date and time the machine was played as well as statements of actual winnings, payment slips, or other documentation provided by the gambling establishment. Record keeping for harness or horse racing includes a record of the races, amounts of wagers, amounts collected on winning tickets and amounts wagered on losing tickets as well as the tickets themselves. For more information regarding other forms of gambling and the record keeping and documentation to support gambling winnings and losses, please see IRS Publication 529, Miscellaneous Deductions.

PA Withholding on Gambling and Lottery Winnings:

Many of the new casinos in Pennsylvania offer voluntary withholding of PA personal income tax. If you elected to have tax withheld from your winnings, report withholding on Line 7 of your PA Schedule T. You must also include a copy of your federal Form(s) W-2G with your return. See the instructions for Line 13 on this page for additional information.

LINE 9. TOTAL PA TAXABLE INCOME

Add only the positive income amounts from Lines 1c through 8. Do not add, subtract, or take losses into consideration.

CAUTION! IMPORTANT: You cannot use a loss that you report in one income class on your tax return to reduce income in any other class.

LINE 10. OTHER DEDUCTIONS

PA law allows three deductions against income. Deductions are allowed for: Medical Savings Account contributions; Health Savings Account contributions; and IRC Section 529 Qualified Tuition Program contributions. If you are claiming a deduction for any of these contributions you made, you must enter a code for the type of deduction you are claiming in the block provided next to the line description. Descriptions of the four codes that can be entered in that block are as follows:

M - Medical Savings Account contribution deduction;

H - Health Savings Account contribution deduction;

T - Tuition Account Program contribution deduction; or

C - Combined deduction from two or all three contribution deductions.

You must also complete PA Schedule O and/or include the information required for each contribution as discussed in the specific instructions below. The total deductions you claim cannot reduce your taxable income below zero.

Medical Savings Account and Health Savings Account Contributions :

Pennsylvania follows federal rules for these deductions. If you can take these deductions on your federal return and you wish to claim them for PA purposes, you must complete PA Schedule O and include a copy of page one of your federal Form 1040 with your PA income tax return. You may not claim these deductions if you cannot claim them for federal income tax purposes. Please refer to the PA PIT Guide for additional information. The amount you report as deductions cannot exceed the federal limits.

IRC Section 529 Qualified Tuition Program Contributions :

Pennsylvania allows a maximum deduction of $13,000 per beneficiary, per taxpayer for IRC Section 529 Qualified Tuition Program contributions for 2012. A taxpayer and spouse each may deduct $13,000 per beneficiary. For additional information on deductions and limitations, see the instructions for PA Schedule O beginning on Page 33.

NOTE: You may not claim a deduction for a rollover of an account from one IRC Section 529 plan into another IRC Section 529 plan. You also may not claim a deduction for the changing of beneficiaries within an account for an IRC Section 529 plan.

CAUTION! The amount you report on Line 10 cannot exceed the Total PA Taxable Income reported on Line 9. The amount reported on Line 10 on a joint tax return also cannot exceed the Total PA Taxable Income included in Line 9 for a taxpayer or spouse that would be calculated had the taxpayer or spouse filed separately.

CAUTION! Do not report any medical insurance premiums or itemized medical expenses from federal Schedule A on this line.

LINE 11. ADJUSTED PA TAXABLE INCOME

Subtract Line 10 from Line 9.

LINE 12. PA TAX LIABILITY

Multiply Line 11 by 3.07 percent (0.0307).

PAYMENTS AND CREDITS

LINE 13. TOTAL PA TAX WITHHELD

Enter your total PA tax withheld from your PA Schedule W-2S or from Box 17 of your federal Form(s) W-2. Include the PA tax withheld from PA Schedule T or from Box 14 of your federal Form(s) W-2G. Also include any PA tax withheld from Box 10 of your federal Form(s) 1099-R.

CAUTION! IMPORTANT: If your PA tax withheld is more than 3.07 percent, you must submit your Form W-2, or a legible photocopy, and a written explanation why your employer withheld at a higher rate. The department may also request an explanation from your employer.

Estimated Payments and Credits :

FILING TIP: Visit the Revenue e-Services Center at www.revenue.state.pa.us or call the department's FACT and Information Line at 1-888-PATAXES (728-2937) and verify your 2012 PA estimated payments and carryover credit before completing Lines 14, 15, and 16.

If filing separately with a joint estimated account, the department may delay one return until the other processes. If your estimated payments are not properly posted to your account, request and file Form REV-459B. Both spouses must sign this form. The department will apply your estimated payments according to your written request.

LINE 14. CREDIT FROM YOUR 2011 PA INCOME TAX RETURN

Enter your credit from your 2011 PA tax return.

CAUTION! IMPORTANT: Do not claim the credit if you originally requested the credit be carried over to your 2012 PA estimated account and you subsequently requested a refund, or if you received a refund of your carryover credit from the department. Also, if your account was adjusted by the department or the department assessed you for a previous year’s underpayment, do not claim the credit.

LINE 15. 2012 ESTIMATED INSTALLMENT PAYMENTS

Enter your total 2012 estimated payments. Include your spouse’s 2012 estimated payments if filing jointly. Do not include any payment of tax due made with a PA tax return.

If you are including Form REV-459B, Consent to Transfer, Adjust or Correct PA Estimated Personal Income Tax Account, fill in the oval on Line 15 of the PA-40.

LINE 16. 2012 EXTENSION PAYMENT

Enter the payment you made with your 2012 extension request.

LINE 17. NONRESIDENT TAX WITHHELD FOR NONRESIDENT PARTNERS AND SHAREHOLDERS OF PA S CORPORATIONS

Enter the PA tax withheld by your partnership or PA S corporation. You must submit your PA Schedule(s) NRK-1.

LINE 18. TOTAL ESTIMATED PAYMENTS AND CREDITS

Add only Lines 14, 15, 16, and 17.

Tax Forgiveness Credit :

Transfer the amounts for Lines 19, 20 and 21 from the PA Schedule SP that you submit with your PA tax return.

LINE 19a. FILING STATUS

Enter the status from Part A of your PA Schedule SP. To determine if you are eligible to include PA Schedule SP with your return, please refer to the instructions beginning on Page 34.

LINE 19b. DEPENDENT CHILDREN

Enter the number of dependent children you are claiming from Part B, Line 2 of PA Schedule SP.

LINE 20. TOTAL ELIGIBILITY INCOME

Enter your total eligibility income from Part C, Line 11 of your PA Schedule SP.

LINE 21. TAX FORGIVENESS CREDIT

Enter your credit from Part D, Line 16 of your PA Schedule SP.

FILING TIP: If you claim a credit for Tax Forgiveness on Line 21, you must complete and include PA Schedule SP. See the instructions beginning on Page 34 for additional information.

LINE 22. RESIDENT CREDIT

Enter your total allowable PA credit for personal income tax that you paid to another state(s) or country. You must:

  • Submit a PA Schedule G-R and PA Schedule G-S or PA Schedule G-L and a photocopy of each tax return that you filed in another state or country. PA Schedules G-R, G-S and G-L and their instructions are not included with this booklet and may be obtained by using one of the Forms Ordering Services on Page 3.
  • If you are a shareholder or partner, submit the following: a PA Schedule G-R; completed PA Schedule G-L for each state or country in which a credit is claimed; the statement from the partnership or S corporation providing the breakdown of the states and amounts and classes of income subject to tax in each state; a copy of your PA Schedule(s) RK-1; and a copy of the other states’ tax returns. If you are a shareholder or partner and the S corporation or partnership files a composite return on your behalf for the other state or states, your partnership or PA S corporation submits the other state’s return with its PA-20S/PA-65 Information Return and a copy of the other states tax returns are not required to be included with the PA-40. In such cases, submit a statement from the S corporation or partnership providing the breakdown of the income and taxes paid to each state on your behalf. PA Resident Shareholders in a Subchapter S Corporation that is not also a PA S Corporation

PA law does not permit a Resident Credit if you are a shareholder in a subchapter S corporation if that corporation elected : not to be taxed as a PA S corporation. See Page 15. See the instructions for PA Schedule G-L for additional information. PA Schedule G-L is not included with this booklet and may be obtained by using one of the Forms Ordering Services on Page 3.

LINE 23. TOTAL OTHER CREDITS

Enter the total of the allowable credits you can claim on PA Schedule OC. PA Schedule OC is not included with this booklet and may be obtained by using one of the Forms Ordering Services on Page 3.

FILING TIP: Taxpayers claiming any credit on PA Schedule OC may not file a joint return and are required to file separate returns.

The credits listed on PA Schedule OC are restricted credits meaning taxpayers or entities must obtain special documentation authorizing the use of the credits. Documents must also be sent to the Bureau of Corporation Taxes so the credit can be verified and applied to the taxpayer. Additional information on restricted credits is available in Chapter 17 of the PA PIT Guide found on the department’s website at www.revenue.state.pa.us.

LINE 24. TOTAL PAYMENTS AND CREDITS

Add Lines 13, 18, 21, 22, and 23.

LINE 25. USE TAX

Use tax is the counterpart of sales tax and applies to taxable purchases made over the Internet, through toll-free numbers, from mail order catalogs and from out-of-state locations, or any other occasion where sales tax was not charged and collected by the seller. The use tax rate is the same as the sales tax rate: 6 percent state tax, plus an additional 1 percent local tax for items purchased or used in Allegheny County and 2 percent local tax for Philadelphia.

If you purchase items or services subject to sales tax for which the seller does not charge and collect sales tax on the invoice or receipt, you are personally responsible for remitting the use tax directly to the PA Department of Revenue.

Examples of taxable items include the following: antiques, paintings, appliances, books, stationery, computers, exercise equipment, sports equipment, formal clothing, furniture, furnishings, jewelry, luggage, handbags, musical instruments, office equipment, souvenirs, televisions, radios, stereo equipment, video equipment and camera equipment. Examples of taxable services include lawn care, pest control, self-storage, building cleaning and maintenance services such as housekeeping services. See the Retailer’s Information Guide (REV-717) for an extensive, though not comprehensive, list of taxable items and services.

Please see the CAUTION statements in the instructions for Schedule C, Schedule E and Schedule UE for additional information.

This method of reporting and paying use tax may not be used for purchases of motor vehicles, watercraft, boats, ATVs, snowmobiles or cigarettes.

If you have receipts or purchase records for items or services subject to use tax, use the worksheet below to calculate your use tax liability. Taxpayers are encouraged to review purchase histories made available online by popular Internet sellers and use that information to calculate the tax due.

Note that this worksheet must be used to calculate use tax due on individual purchases over $1,000.

If you paid some sales tax on items - for example, sales tax at a lower rate paid to another state or sales tax paid to Pennsylvania but not Philadelphia - you may offset your use tax liability by the sales tax already paid using this worksheet.

LINE 26. TAX DUE

If the total of Line 12 and Line 25 is more than Line 24, enter the tax you owe. You must pay the tax due, in full, on or before April 15, 2013. See the instructions for payment options beginning on Page 23.

LINE 27. PENALTIES AND INTEREST INCLUDING ESTIMATED UNDERPAYMENT PENALTY

Enter on this line all the penalties and interest you owe from filing your return late and/or failing to pay your tax by the due date. If including Form REV-1630, Underpayment of Estimated Tax by Individuals, or Form REV-1630A, Underpayment of Estimated Tax by Individual Farmers, fill in the oval on Line 27 of the PA-40. Enter the appropriate code in the block provided:

Descriptions of the code that can be entered in the block are as follows:

L - If Late Payment Penalty and Interest, Failure to File Penalty and Interest or Late Filing Penalty and Interest is included in Line 27;

E - If only the Estimated Underpayment Penalty is included in Line 27;

B - If both Late Payment Penalty and Interest and Estimated Underpayment Penalty are included in Line 27;

X - Indicates there is no Estimated Underpayment Penalty due to Exception 2 or the Special Exception rules as indicated on the completed and included REV-1630 or the exception for farmers on the completed and included REV-1630A.

CAUTION! IMPORTANT: If you do not owe any penalty or interest, do not complete the amount blocks for Line 27 - leave them blank. If there is no amount included on Line 27 of the return, no code should be entered in the block provided for the code on this line unless an REV-1630 is included with the return that indicates there is no Estimated Underpayment Penalty due to Exception 2 or the Special Exception rules as indicated on the completed and included REV-1630 or REV-1630A is included with the return indicating the individual meets the exceptions for farmers. All returns with amounts listed on Line 27 should have a code listed in the block provided for the code on this line. See the description of the codes listed above for the proper code to enter when an REV-1630 or REV-1630A is included.

You can determine your penalty and interest by visiting the department's e-Services Center at www.revenue.state.pa.us. Forms REV-1630 and REV-1630A are also available on the department’s website or by utilizing one of the Forms Ordering Services on Page 3 of the instructions.

The department will send you a notice if you do not include an amount on Line 27, and we determine you owe late filing and/or underpayment penalty and interest.

Include on Line 27 any penalty for failing to make estimated PA income tax payments, or making your payments late, or underpaying your estimated taxes.

Estimated Underpayment Penalty :

You are subject to this penalty if:

  1. You received more than $8,000 of taxable income that was not subject to PA withholding;
  2. Your credits from Lines 17, 21, 22 and 23 do not offset the tax due on the income from 1 above, and
  3. You failed to make timely estimated tax installment payments to cover the difference between 1 and 2 above, if any.

If you are subject to the penalty, the penalty will not be imposed if:

  1. Each estimated tax installment payment due and paid is equal to the installment payment you should have paid based upon the income from last year’s full year return, or based upon the income as if you were a full year resident, based upon this year’s tax rate; or
  2. Each estimated tax installment due and paid is equal to 90 percent of the installment payment due for each quarter based upon the income you received during the months in each installment period.

You can calculate this penalty on Form REV-1630 or Form REV-1630A that you submit with your return. Submit the appropriate form with your return if you owe the penalty.

The department will send you a notice if we determine you owe this penalty. If you disagree with the department's notice, you must submit Form REV-1630 or REV-1630A to support your own calculation or claim for an exception.

LINE 28. TOTAL PAYMENT DUE

Add Lines 26 and 27. Or, if the total of Line 12 plus Lines 25 and 27 is more than Line 24, add Lines 12, 25 and 27 and subtract Line 24. You must pay the total due, in full, on or before April 15, 2013. See the instructions for payment options beginning on Page 23.

REMINDER: If you owe $1 or less, you do not have to submit a payment with your return.

FILING TIPS: If you overpaid your 2012 PA income tax, but owe estimated underpayment penalty, you must subtract your estimated underpayment penalty from your overpayment.

If you file your return by April 15, 2013 and are unable to make full payment of the taxes due, the department will bill you for the remainder of any tax, penalties and interest due. It is better to file your return when it is due and have a 5 percent penalty plus interest added to the amount you owe than to not file and not pay and have up to a 25 percent penalty plus interest added to the amount you owe.

LINE 29. OVERPAYMENT

Subtract Line 12 (and subtract Lines 25 and 27, if you entered amounts on these lines) from Line 24, and enter the difference here.

REMINDER: The department will not issue a refund for less than $1.

Refund Offsets :

  • PA PIT Liability. The department will apply your overpayment to any outstanding PA personal income tax liability from a previous tax year.
  • Delinquent Spousal/Child Support. Federal law requires Pennsylvania to establish a child-support offset program. The Department of Revenue, in cooperation with the Department of Public Welfare (DPW), intercepts PA income tax refunds of taxpayers that are delinquent in spousal/child support, and provides the offsets to the PA Child Support Enforcement System.

CAUTION! IMPORTANT: A married person who is liable for spousal/child support must file a separate PA tax return (Married, Filing Separately). If a married person who is liable for support files jointly with his or her spouse, the department will delay the refund until the taxpayers authorize the department to pay over the refund to DPW, or the spouses file separate returns. If the taxpayers do not reply to the department's notice, the department will process the return as Married, Filing Jointly.

  • Treasury Offset Program for Delinquent PA Income Taxes. The Internal Revenue Service (IRS) will intercept federal income tax refunds for delinquent PA income tax liabilities. The Department of Revenue will notify delinquent taxpayers about its intention to intercept their federal refund and allow them 60 days to pay their liabilities.
  • State Income Tax Levy Program for Delinquent Federal Income Taxes. The PA Department of Revenue will intercept PA income tax refunds for delinquent federal income tax liabilities. The Department of Revenue will provide a notice of the refund offset. The department’s only responsibility in this levy process is sending your refund to the IRS. Therefore, all correspondence and inquiries regarding such offsets must be with the IRS.

LINES 30 THROUGH 36. APPLICATION OF OVERPAYMENT

If you do not enter amounts on Lines 30 through 36, or the total of these lines does not equal Line 29, you will receive a refund check. If you overpaid, you may apply all or part of your overpayment as follows:

LINE 30. Enter the amount of Line 29 that you want as a refund check.

LINE 31. Enter the amount of Line 29 that you want as a credit to your 2012 PA Estimated Tax account.

DONATIONS

LINE 32. Enter the amount of Line 29 that you want to donate to the Wild Resource Conservation Fund.

LINE 33. Enter the amount of Line 29 that you want to donate to the Military Family Relief Assistance Program.

LINE 34. Enter the amount of Line 29 that you want to donate to the Governor Robert P. Casey Memorial Organ and Tissue Donation Awareness Trust Fund.

LINE 35. Enter the amount of Line 29 that you want to donate to the Juvenile (Type 1) Diabetes Cure Research Fund.

LINE 36. Enter the amount of Line 29 that you want to donate to the PA Breast Cancer Coalition’s Refunds for Breast and Cervical Cancer Research fund.

The total of Lines 30 through 36 must equal Line 29. For additional information about these donation lines, see Page 41.

Review Your Return :

Before you sign your return, did you:

  • Enter your Social Security number(s)?
  • Verify that your name(s) and address are correct?
  • Report all your PA-taxable income and claim all your allowable PA credits?
  • Check all the entries from Form(s) W-2 and schedules?
  • Round income, loss, deductions and credit amounts to the nearest dollar?
  • Check your math?
  • Enclose all required supporting forms and schedules and assemble the return according to Page 5?
  • Make a copy of your PA tax return for your records?

Your Signature(s) and Date :

Read the oath before you sign and date your return. If Married, Filing Jointly, a spouse must also sign and date the return. If you are responsible for the affairs of a minor, disabled person, or a decedent who could not prepare his or her own PA tax return, you must sign to file a valid tax return.

E-File Opt Out :

A paid preparer must fill in this oval if the taxpayer requested to file a paper copy of the return instead of electronically transmitting the return. If you are preparing your return yourself, do not fill in this oval.

Preparer/Company Name, Telephone Number, PTIN and Firm FEIN :

If you paid someone to prepare your tax return, the preparer should enter his or her name or business name, telephone number, PTIN and the company’s EIN in the spaces provided on the return.

How to Pay :

You must submit your payment on or before midnight, Monday, April 15, 2013. Select your payment option.

PAYMENT OPTIONS

PA Payment Voucher (Form PA-V) :

Use your personalized Form PA-V with your payment if you owe tax with your 2012 PA tax return. Do not use this voucher for any other purpose. Follow the instructions below.

REMEMBER: You also have the option to pay using a credit/ debit card or through electronic funds transfer.

Paying With Form PA-V :

  • Social Security number(s) - print your SSN and your spouse’s SSN on your Form PA-V in the same order as they appear on your tax return.
  • Name(s) - verify that your name is correct on the Form PA-V. If the name on your Form PA-V is not correct, you may use your Form PA-V. The department will obtain your correct name from your PA tax return.
  • Address - if the address on your Form PA-V is not correct, you may use your Form PA-V. The department will obtain your correct address from your PA tax return.
  • Payment - Carefully enter the amount of your payment. Make the check or money order payable to: PA DEPT OF REVENUE. Do not send cash.
  • Mailing your payment - Please write (1) the last four digits of your SSN, (2) "2012 PA-V", and (3) daytime telephone number on your check or money order. The department will need the last four digits of your SSN if your check becomes separated from your Form PA-V. Carefully detach your Form PA-V from the insert. Do not staple your check or money order to the Form PA-V. Please place your Form PA-V and payment in the envelope with your PA-40 tax return using the "Payment Enclosed" label.

If you filed using Fed/State e-file, TeleFile, or padirectfile, mail only your Form PA-V and payment. Use the envelope and "Payment Enclosed" label provided in the booklet.

Fill-In Form PA-V :

If you did not receive a personalized Form PA-V, complete the fill-in form version of the 2012 PA-40 PA-V found on the department’s website at www.revenue.state.pa.us. Using this version of the form will enable the department to more accurately process your payment.

Paying Without a Form PA-V :

  • If you do not have a Form PA-V make your check or money order payable to: PA DEPT OF REVENUE.
  • Write (1) the last four digits of your SSN, (2) "2012 PA-V", and (3) daytime telephone number on your check or money order. If you are filing a joint return, enter the last four digits of the SSN shown first on your return. The department will need the last four digits of your SSN to accurately apply your payment.
  • Use the correct label (Payment Enclosed) from the envelope the department provided.
  • If you do not have a preprinted envelope, mail your payment to:

    PA DEPT OF REVENUE
    PAYMENT ENCLOSED
    1 REVENUE PLACE
    HARRISBURG PA 17129-0001

Credit/Debit Card :

You can pay your PA taxes with a major credit card or a debit card. Credit card transactions are charged a 2.49 percent convenience fee ($1 minimum charge), and debit card transaction fees start at $3.95. You can use your American Express, Discover, MasterCard or Visa credit card to pay your taxes online or by phone. You may also use a MasterCard or Visa debit card to make payments online. Select one of these options to pay using your credit/debit card:

  1. Internet. Go to Official Payments Corporation at www.officialpayments.com.
  2. Telephone. Call 1-800-2PAYTAX (1-800-272-9829).

Electronic Funds Transfer :

You may also pay your 2012 PA tax due using electronic funds transfer by accessing the Revenue e-Services Center at www.revenue.state.pa.us. You will be prompted for your bank account information and the payment will be deducted from your account on the date you specify. There is no charge for using this option.

ORIGINAL AND AMENDED RETURN MAILING INSTRUCTIONS

The U.S. Postal Service returns envelopes without sufficient postage. If your tax return is more than five pages or in an oversized envelope, you may need additional postage. Check with your local Post Office. Please write your complete return address in the upper left corner of the envelope.

If using the envelope the department provided in the booklet, follow these instructions for mailing your PA tax return:

  1. Remove the labels from the envelope flap.
  2. Choose the correct label that applies to your return.
  3. Affix only the correct label on the front of the envelope. If you do not have a department-provided envelope, send your return to the address that applies to you.

If you owe tax - You have an amount on Line 28:

PA DEPT OF REVENUE
PAYMENT ENCLOSED
1 REVENUE PLACE
HARRISBURG PA 17129-0001

If you overpaid - You have an amount on Line 29:

PA DEPT OF REVENUE
REFUND OR CREDIT REQUESTED
3 REVENUE PLACE
HARRISBURG PA 17129-0003

If you neither owe nor overpaid - You have zeros on Lines 28 and 29:

PA DEPT OF REVENUE
NO PAYMENT OR NO REFUND
2 REVENUE PLACE
HARRISBURG PA 17129-0002

CAUTION! IMPORTANT: Do not use these mailing labels to send other correspondence to the department.

SCHEDULE INSTRUCTIONS

For all schedules, enter the complete name and SSN of the taxpayer reporting the income or claiming the expenses. If filing a schedule jointly, enter the complete name and SSN of the taxpayer listed first. Each taxpayer must submit a separate schedule for each separately owned business, profession or farm. You and your spouse may file these schedules jointly:

PA Schedules A, B and J - these schedules do not show any losses or expenses.

  • You may no longer submit federal Schedule B even if you do not have any Capital Gains Distributions and your amounts are exactly the same for Pennsylvania. You must use PA Schedules A and B. Spouses must submit separate PA Schedules A and B unless all the income is joint income.
  • You cannot submit a federal Schedule K-1 in lieu of PA Schedule J.

PA Schedule SP - see the instructions beginning on Page 34 for when to include this schedule.

PA Schedule O - see the instructions beginning on Page 33 for when to include this schedule.

FILING TIP: If a joint return including IRC Section 529 Qualified Tuition Program deductions for both taxpayers is filed, schedules reporting the income on a separate basis for each taxpayer should be included, so that the department may calculate the income limitations.

You and your spouse must file these schedules separately, each reporting only your own income, expenses and net income (losses):

PA Schedule UE - a separate schedule for each employer or job.

  • You may only submit a federal Schedule 2106 when your unreimbursed travel expenses are the same for Pennsylvania and you do not have any miscellaneous expenses and/or are not using federal per-diem amounts for any overnight, meals or incidental expenses.

PA Schedules C, C-EZ and F - separate schedules for each commercial activity, unless both own each of the businesses or farms jointly.

PA Schedules D - must submit a separate PA Schedule D for you and your spouse reporting income unless all the gains and losses are joint.

PA Schedules D-1 and D-71 - separate schedules for each taxpayer.

PA Schedule E - follow the instructions on the schedule. PA Schedules G-R (with G-S/G-L) and T - separate schedules for each taxpayer.

PA Schedule OC - a taxpayer and spouse must file separate PA-40 tax returns if one or both are claiming any credits on this schedule.

Reproducing PA Returns and Schedules :

You may not prepare your own facsimile schedules as replacements for PA schedules. Also, if using the forms within the booklet, do not submit a photocopy of your PA-40 form.

Multiple Schedules :

If you have multiple Schedules A, B, D, E, or J due to entries beyond the capacity of the forms, include the total income for that form on one form only.