What are Income Law Requirements in the State of Pennsylvania?
In the state of Pennsylvania, residents are required to pay income taxes on their taxable income. It is applicable for individuals, businesses, trusts, and estates.
Who should file a tax return request in Pennsylvania?
You should file a tax return if you are a resident or a part-resident of the state of Pennsylvania if:
- You had a gross taxable income higher than $33, even if taxes are not due, and
- You had a loss from any transaction, whether you are an individual, proprietor, partner or a shareholder in an S corporation.
Minors also need to file returns.
Income types in Pennsylvania
In Pennsylvania, the following are the types of income, which would be subject to taxation:
- Any compensation earned
- Net profits from a business
- Net gains or income less the net loss from a sale of property
- Net gain or income from royalties, rents, copyrights, etc.
- Interest earned
- Winning from lotteries and gambling
- Income or net gains from trusts or estates
Returns status in Pennsylvania
While filing returns, the status of the filing would be denoted as S, if filing as single or unmarried; J, if filing jointly as a couple; M, if filing returns as married but separately; D, if the person filing the returns has died in the tax year; and F, if filing returns finally or last time as a resident of Pennsylvania for this tax year, if the taxpayer has shifted out of the state.
Deadline to file returns
In Pennsylvania, you must file returns for the calendar year from January 1st to December 31st, on or before April 15th or the next business day if 15th is a holiday.
The tax rate in Pennsylvania
Pennsylvania has a flat income tax rate in the state. There are no tax slabs. There are also no standard deductions or any sort of exemptions. The flat rate charged is 3.07%.
Any tax paid to other states can be used to get a credit.
Exemptions in Pennsylvania
In Pennsylvania, the following sources of income are exempt from taxes:
- All types of social security benefits
- Child support
- Gifts received from others
- Compensation received by workers
- Unemployment benefits
- Capital gains obtained by selling the primary residence
Forgiveness of tax in Pennsylvania
Pennsylvania forgives or exempts taxes for low-income earners, i.e., those who earn less than $6,500, when filing returns and a single or $13,500 when filing returns as married, whether filing individually or separately. A couple who are married and have two children can claim exemption up to $32,000. A single parent who has two children can claim exemption up to $25,000.
Local taxes in Pennsylvania
Apart from the state income tax that is levied by the State of Pennsylvania, local counties are also permitted to charge a wage tax. Most local municipalities charge up to 1% of wage tax, except Pittsburgh, Philadelphia, and Scranton, which don’t charge such a wage tax.
Penalty in Pennsylvania
If anyone does not file a return or submits it after the due date, then a penalty levy of 5% of tax per month can be charged, subject to a maximum of 5%. The minimum penalty would be $5.
Also, if you do not pay the tax due or pay less than the tax you are supposed to pay, then you can be charged 5% penalty, up to a maximum of 25%. If the tax not paid is more than 25% of the taxable income, then an additional 25% penalty will be levied.
Interest is also levied for tax not paid, as per prevailing rates.
Criminal penalties in Pennsylvania
Authorities may initiate a criminal prosecution for those indulging in tax evasion, deliberate failure to pay tax, fraudulent statements, and assisting others to file a false statement.