Form PA-40 Schedule C "Profit or Loss From Business or Profession (Sole Proprietorship)" - Pennsylvania

What Is Form PA-40 Schedule C?

This is a legal form that was released by the Pennsylvania Department of Revenue - a government authority operating within Pennsylvania.The document is a supplement to Form PA-40, Pa Schedule F - Farm Income and Expenses. As of today, no separate filing guidelines for the form are provided by the issuing department.

Form Details:

  • Released on May 1, 2019;
  • The latest edition provided by the Pennsylvania Department of Revenue;
  • Easy to use and ready to print;
  • Quick to customize;
  • Compatible with most PDF-viewing applications;
  • Fill out the form in our online filing application.

Download a fillable version of Form PA-40 Schedule C by clicking the link below or browse more documents and templates provided by the Pennsylvania Department of Revenue.

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Download Form PA-40 Schedule C "Profit or Loss From Business or Profession (Sole Proprietorship)" - Pennsylvania

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2003110059
PA SCHEDULE C
Profit or Loss from
Business or Profession
START
(Sole Proprietorship)
HERE
PA-40 C (EX) 09-20
(FI)
20___
PA Department of Revenue
Include with Form PA-40 or PA-41
OFFICIAL USE ONLY
Name of owner as shown on PA tax return:
Owner’s Social
Security number
A. Main business activity
Product or service
C. Federal Employer Identification Number
B. Business name
D. Business address (number and street)
C
City, State and ZIP Code
E. Method(s) used to value closing inventory. Fill in the appropriate oval:
Sales Tax License Number (if applicable)
(1)
Cost
(2)
Lower of cost or market
(3)
Other (if other, attach explanation)
F. Accounting method. Fill in the appropriate oval:
(1)
Cash (2)
Accrual
(3)
Other (specify)
. . . . . . . . . . . . . . . . . . . . . . Yes No
Federal NAICS Code
G. Was there any change in determining quantities, costs, or valuations . . . . . . . . . . . . . . . . . .
between opening and closing inventory? If “Yes,” submit explanation.
H. Did you deduct expenses for an office in your home? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I. If the business is out of existence, fill in this oval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION I
INCOME
1. a. Gross receipts or sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1a.
b. Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1b.
c. Balance (subtract Line 1b from Line 1a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1c.
2. Cost of goods sold and/or operations (Schedule C-1, Line 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
3. Gross profit (subtract Line 2 from Line 1c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
4. Other Income (submit statement). Include interest from accounts receivable, business checking
accounts and other business accounts. Also include sales of operational assets. . . . . . . . . . . . . . . . .
4.
5. Total income (add Lines 3 and 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
DEDUCTIONS
SECTION II
6. Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . .
28. Supplies (not included on Schedule C-1) . . . .
29. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Bad debts from sales or services . . . . . . . . . .
30. Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Bank charges . . . . . . . . . . . . . . . . . . . . . . . . .
31. Travel and entertainment . . . . . . . . . . . . . . . .
10. Car and truck expenses . . . . . . . . . . . . . . . . .
32. Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Commissions . . . . . . . . . . . . . . . . . . . . . . . . .
33. Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Cost depletion but not percentage depletion .
34. IDCs (1/3 current expensing) . . . . . . . . . . . . .
13. a.
Regular depreciation . . . . . . . . . . . . . . .
35. IDCs (amortization) . . . . . . . . . . . . . . . . . . . . .
13. b.
Section 179 expense . . . . . . . . . . . . . . .
36. Start-up costs (direct expense) . . . . . . . . . . . .
14. Dues and publications . . . . . . . . . . . . . . . . . . .
37. Other expenses (specify):
15. Employee benefit programs other than on Line 23
a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16. Freight (not included on Schedule C-1) . . . . .
b. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18. Interest on business indebtedness . . . . . . . . .
d. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19. Laundry and cleaning . . . . . . . . . . . . . . . . . . .
e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20. Legal and professional services . . . . . . . . . . .
f. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21. Management fees . . . . . . . . . . . . . . . . . . . . . .
g. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22. Office supplies . . . . . . . . . . . . . . . . . . . . . . . .
h. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23. Pension and profit-sharing plans for employees
i. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24. Postage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
j. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25. Rent on business property . . . . . . . . . . . . . . .
37. Total other expenses . . . . . . . . . . . . . . . . . . . .
26. Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38. Total expenses. (add Lines 6 through 37) . . . .
27. Subcontractor fees . . . . . . . . . . . . . . . . . . . . .
39. Net profit or loss (subtract Line 38 from Line 5). If a net loss, fill in the oval. Enter the result on your PA tax return. . . . .Loss
39.
SIDE 1
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2003110059
PA SCHEDULE C
Profit or Loss from
Business or Profession
START
(Sole Proprietorship)
HERE
PA-40 C (EX) 09-20
(FI)
20___
PA Department of Revenue
Include with Form PA-40 or PA-41
OFFICIAL USE ONLY
Name of owner as shown on PA tax return:
Owner’s Social
Security number
A. Main business activity
Product or service
C. Federal Employer Identification Number
B. Business name
D. Business address (number and street)
C
City, State and ZIP Code
E. Method(s) used to value closing inventory. Fill in the appropriate oval:
Sales Tax License Number (if applicable)
(1)
Cost
(2)
Lower of cost or market
(3)
Other (if other, attach explanation)
F. Accounting method. Fill in the appropriate oval:
(1)
Cash (2)
Accrual
(3)
Other (specify)
. . . . . . . . . . . . . . . . . . . . . . Yes No
Federal NAICS Code
G. Was there any change in determining quantities, costs, or valuations . . . . . . . . . . . . . . . . . .
between opening and closing inventory? If “Yes,” submit explanation.
H. Did you deduct expenses for an office in your home? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I. If the business is out of existence, fill in this oval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION I
INCOME
1. a. Gross receipts or sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1a.
b. Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1b.
c. Balance (subtract Line 1b from Line 1a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1c.
2. Cost of goods sold and/or operations (Schedule C-1, Line 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
3. Gross profit (subtract Line 2 from Line 1c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
4. Other Income (submit statement). Include interest from accounts receivable, business checking
accounts and other business accounts. Also include sales of operational assets. . . . . . . . . . . . . . . . .
4.
5. Total income (add Lines 3 and 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
DEDUCTIONS
SECTION II
6. Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . .
28. Supplies (not included on Schedule C-1) . . . .
29. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Bad debts from sales or services . . . . . . . . . .
30. Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Bank charges . . . . . . . . . . . . . . . . . . . . . . . . .
31. Travel and entertainment . . . . . . . . . . . . . . . .
10. Car and truck expenses . . . . . . . . . . . . . . . . .
32. Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Commissions . . . . . . . . . . . . . . . . . . . . . . . . .
33. Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Cost depletion but not percentage depletion .
34. IDCs (1/3 current expensing) . . . . . . . . . . . . .
13. a.
Regular depreciation . . . . . . . . . . . . . . .
35. IDCs (amortization) . . . . . . . . . . . . . . . . . . . . .
13. b.
Section 179 expense . . . . . . . . . . . . . . .
36. Start-up costs (direct expense) . . . . . . . . . . . .
14. Dues and publications . . . . . . . . . . . . . . . . . . .
37. Other expenses (specify):
15. Employee benefit programs other than on Line 23
a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16. Freight (not included on Schedule C-1) . . . . .
b. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18. Interest on business indebtedness . . . . . . . . .
d. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19. Laundry and cleaning . . . . . . . . . . . . . . . . . . .
e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20. Legal and professional services . . . . . . . . . . .
f. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21. Management fees . . . . . . . . . . . . . . . . . . . . . .
g. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22. Office supplies . . . . . . . . . . . . . . . . . . . . . . . .
h. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23. Pension and profit-sharing plans for employees
i. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24. Postage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
j. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25. Rent on business property . . . . . . . . . . . . . . .
37. Total other expenses . . . . . . . . . . . . . . . . . . . .
26. Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38. Total expenses. (add Lines 6 through 37) . . . .
27. Subcontractor fees . . . . . . . . . . . . . . . . . . . . .
39. Net profit or loss (subtract Line 38 from Line 5). If a net loss, fill in the oval. Enter the result on your PA tax return. . . . .Loss
39.
SIDE 1
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2003210057
PA SCHEDULE C
Profit or Loss from
Business or Profession
(Sole Proprietorship)
PA-40 C (EX) 09-20
(FI)
20___
PA Department of Revenue
OFFICIAL USE ONLY
Social Security Number
Name of owner as shown on PA tax return:
START
SCHEDULE C-1 - Cost of Goods Sold and/or Operations
1. Inventory at beginning of year (if different from last year’s closing inventory, include explanation) . . . .
1.
2.
a. Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2a.
b. Cost of items withdrawn for personal use . . . . . . . . . . .
2b.
c. Balance (subtract Line 2b from Line 2a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2c.
3. Cost of labor (do not include salary paid to yourself or subcontractor fees) . . . . . . . . . . . . . . . .
3.
4. Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.
5. Other costs (include schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
6. Add Lines 1, 2c, 3, 4 and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
7. Inventory at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.
8. Cost of goods sold and/or operations (subtract Line 7 from Line 6) Enter here and on Section I, Line 2 .
8.
SCHEDULE C- 2
Depreciation
-
PA PIT law does not permit any of the bonus depreciation elections added to the Internal Revenue Code (IRC). PA PIT law limits IRC Section
179 current expensing to the expensing allowed at the time you placed the asset into service or in effect under the IRC of 1986 as amended
Jan. 1, 1997. For each asset, you must also report straight-line depreciation, unless not using an optional accelerated depreciation method.
You need straight-line depreciation to take advantage of Pennsylvania’s Depreciation and Basis Adjustment rule when you sell the asset. See
the PA Personal Income Tax Guide - Net Gains or Losses from the Sale, Exchange or Disposition of Property for the Depreciation and Basis
Adjustment rule.
1. Total Section 179 depreciation (do not include in items below
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
)
2. Less: Section 179 depreciation included in Schedule C-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
3. Balance (subtract Line 2 from Line 1). Enter here and on Section II, Line 13b. . . . . . . . . . . . . . . . . .
3.
Depreciation for this year
Description of property
Cost or other basis
Depreciation allowed or
Life
Date acquired
Method of calcu-
or rate
allowable in prior years
lating depreciation
(g)
(a)
(c)
(d)
(e)
(f)
(b)
MM/DD/YY
4. Other depreciation:
Buildings . . . . . . . . . . . .
Furniture and fixtures . . .
Transportation equipment
Machinery and other equipment
Other (specify) . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
5. Totals (add all Line 4 amounts) . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
6. Any depreciation included in Schedule C-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
7. Balance (subtract Line 6 from Line 5). Enter here and on Section II, Line 13a. . . . . . . . . . . . . . . . . . . .
7.
SIDE 2
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Instructions for PA-40 Schedule C
Profit or Loss from Business or Profession
(Sole Proprietorship)
PA-40 C IN (EX) 09-20
Maintain separate books and records for PA PIT purposes
OVERVIEW
and file PA Schedule C. Even if you have no differences
between your federal and Pennsylvania expenses, you must
Use PA Schedule C to report income or loss from a business
complete and include PA Schedule C to report your income
you operate or a profession you practice as a sole proprietor.
for Pennsylvania personal income tax purposes.
Your activity qualifies as a business if your primary purpose
for engaging in the activity is income or profit, you conduct
your activity with continuity and regularity and you satisfy
IMPORTANT DIFFERENCES BETWEEN
the “Commercial Enterprise” test. Certain rental activity may
FEDERAL AND PENNSYLVANIA RULES
be business income and not rental income. If you are a sole
member of an LLC, complete PA Schedule C.
You may use any accounting method for PA purposes, as
long as you apply your accounting methods consistently.
For additional information regarding the definition of a business
PA law does not have material participation rules. Report
or profession, and for Pennsylvania’s requirements for report-
all transactions that are directly related to your business
ing income and expenses, refer to the PA Personal Income Tax
or profession on your PA Schedule C.
Guide – Net Income or (Loss) from the Operation of a Busi-
ness, Profession or Farm section for additional information.
If you own or operate more than one business, you must
submit a separate PA Schedule C for each business operation.
NOTE: Pennsylvania determines income and (loss)
under accepted accounting principles, systems or
The following federal schedules and instructions do not
practices that are acceptable by standards of the accounting
apply for PA Schedule C:
profession and consistent with regulations of the department.
SCHEDULE A
● You may use any accounting method for PA purposes,
You may not deduct nonbusiness-related personal interest,
as long as you apply your accounting methods consis-
taxes and casualty losses on any PA PIT return.
tently, it clearly reflects income and is not inconsistent
SCHEDULE E
with Pennsylvania law or regulations of the department.
Report rental and royalty income on PA Schedule E, unless
● PA law does not contain provisions for statutory employ-
engaged in the business of making your property or rights
ees. Federal statutory employees may be required to
available in a public market place with intention to realize a
report PA taxable income on Line 1a, PA-40, and use
profit.
PA Schedule UE to deduct expenses. However, you
may use PA Schedule C to provide the type and amount
SCHEDULE F
of expenses that are included as Miscellaneous
Report farming activity on PA Schedule F.
Expenses on PA Schedule UE when there are similar
SCHEDULE SE
types of expenses for your occupation or position. In
Do not report self-employment taxes to Pennsylvania.
such cases, the business will report the business name
and activity as “Schedule UE Miscellaneous Expenses”
FORM 4562
with zero amounts reported as Gross receipts or sales
If using bonus depreciation, do not use Form 4562. Use
and Total income. You must also include “See PA
Schedule C-2 on Side 2 of this schedule. The maximum
Schedule C for expenses” on Section III, Line 16 of PA
deduction PA income tax law permits under IRC Section 179
Schedule UE. If using PA Schedule C to report PA
is $25,000. If you have income or loss from more than one
Schedule UE expense types and amounts, you must
business, profession or farm, you may not deduct more than
follow PA Schedule UE rules for allowable and unallow-
$25,000 for all business activities.
able expenses. See the PA Personal Income Tax Guide
– Gross Compensation section for more information.
FORM 4684
Report gain or (loss) from all business activity on PA Schedule
● Unless a loss results from an activity where a net profit
C. Include a casualty or theft loss of business property (or
has not been realized in at least two years of a five
gain, if insurance proceeds exceed the basis of the property
consecutive-year period, an owner may deduct all
lost or taken) on Line 4 of PA Schedule C. You may refer to
losses from a business or profession in the taxable year
the federal schedule for an explanation of gain or (loss)
realized. Report all transactions directly related to your
items, but do not submit the federal schedule.
business or profession on PA Schedule C.
● Do not use the installment method for sales of inventory
FORM 4797
Report other sales, exchanges and involuntary conversions
if you sell such inventory in the regular and ordinary
course of a business or profession. Include interest on
of business property on Line 4 of PA Schedule C if the prop-
such sales in gross receipts.
erty sold was replaced. Refer to the federal schedule for an
www.revenue.pa.gov
1
PA-40 C
RETURN TO PAGE 1
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explanation of gain/loss items, but do not submit the federal
any differences in depreciation related to differences in basis
schedule.
of assets, amount of allowable Section 179 expense, or
method of depreciation for federal or PA purposes; and any
FORM 8271
other reductions in federal expenses allowed at 100 percent
Do not report or deduct any transactions related to tax
for PA personal income tax purposes.
shelters.
Examples of items that Pennsylvania requires as reductions
FORM 8594
in federal income or expenses include: income taxes based
Report the acquisition or disposition of business assets on
upon gross or net income; any differences in depreciation
Line 4 of PA Schedule C. Refer to the federal schedule for
related to differences in basis of assets, amount of allowable
an explanation for gain/loss items, but do not submit the
Section 179 expense, or method of depreciation for federal
federal schedule.
or PA purposes; recognition of cancellation of debt income;
recognition of income from IRC Section 481(a) spread
FORM 8824
adjustments; payments for owner pension, profit-sharing
Do not report a like-kind exchange on PA Schedule C. PA
plans, deferred, or welfare benefit plans; percentage deple-
law does not have like-kind exchange provisions. You must
tion; direct expensing of organizational expenses or syndi-
include the gain or loss from a sale, exchange or disposition
cation fees; losses from the sale of property where PA basis
of a business asset on Line 4 of PA Schedule C if the trans-
is different than federal basis; and any other income or
action was a normal business transaction. You must report
expenses where there is a specialized federal treatment that
any gain or loss from the sale of a nonbusiness asset or
is not specifically addressed or allowed by PA personal
property or the sale of a business or segment thereof on PA
income tax law that might involve additional expensing,
Schedule D if the property sold was not replaced.
expensing verses capitalization, carry back or carry forward
FORM 8829
of losses, income recognition, or other special treatments.
Include your allowable expenses for the business use of
Other differences between Pennsylvania and federal income
your home on Line 37 of PA Schedule C. Refer to the federal
tax include the following:
schedule for an explanation of this expense, but do not sub-
mit the federal schedule. Pennsylvania does not recognize
IDCs. Special rules apply for the direct expensing of intan-
the federal safe harbor method for determining the allowable
gible drilling & development costs (IDCs). Up to one-third of
deduction for business use of a residence for Pennsylvania
the amount of IDCs incurred in tax years beginning after
Personal Income Tax purposes. All home office expenses
Dec. 31, 2013 may be directly expensed, with the remaining
must be determined by using actual costs incurred.
amount amortized over 10 years. Taxpayers may also elect
to amortize the full amount of the IDCs over 10 years. The
election to expense any IDCs is made by including an
OTHER PENNSYLVANIA AND FEDERAL
amount on Line 34 of PA Schedule C. Amortization of the
INCOME TAX DIFFERENCES
IDCs must be reported separately on Line 35 of PA Schedule
C. IDCs incurred prior to Jan. 1, 2014 must be amortized
PA income from the operation of business generally differs
over the life of the well.
from the income determined for federal income tax purposes.
Further, Pennsylvania will no longer accept a PA Schedule
Qualified Joint Ventures. Pennsylvania is not a community
C-F Reconciliation for the purpose of adjusting the federal
property state. Therefore, for PA personal income tax
business income to PA business income. Therefore, the
purposes, a taxpayer and the taxpayer’s spouse must each
items which were previously included as additions to PA
report on a separate PA Schedule C their share of income
income or expense on the PA Schedule C-F Reconciliation
from a business entity they own that is considered a qualified
should be included with the specific line of income or
joint venture for federal income tax purposes.
expense on the PA Schedule C. In addition, those items
LINE INSTRUCTIONS
which Pennsylvania does not require be reported as income
or does not allow as expense in determining net business
income, which are allowed in the determination of net federal
IDENTIFICATION INFORMATION
business income, should not be included in the specific
Complete each line.
business income or expenses on PA Schedule C.
OWNER'S NAME
Enter the name of the business owner. If you are married
Examples of items that Pennsylvania requires as additions
to income include: any advance receipts for goods or serv-
and you jointly owned the business with your spouse, you
must complete separate PA Schedule C’s. If you and your
ices; working capital interest or dividend income including
federal-exempt interest and dividend income from obliga-
spouse have separate business activities, complete separate
PA Schedule(s) C.
tions of other states; gains from the sale of business assets
where the property is replaced by similar property; gains
SALES TAX LICENSE NUMBER
from like-kind exchanges; gains from involuntary conver-
Enter your Pennsylvania Sales Tax License Number if you
sions (such as those from IRC Section 1033); and gains
have one. Otherwise, leave this space blank.
from the sale of property where PA basis is different than
federal basis.
FEDERAL NAICS CODE
Provide your Federal NAICS Code as identified on your
Examples of items that Pennsylvania allows as additions to
Federal Schedule C.
expenses that require a reduction for federal tax purposes
include: meals, travel and entertainment expense deduction
SOCIAL SECURITY NUMBER (SSN)
of 100 percent by Pennsylvania for the expenses incurred;
Enter the SSN of the business owner.
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PA-40 C
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LINE 1a
LINE A
GROSS RECEIPTS OR SALES
MAIN BUSINESS ACTIVITY
Include all amounts you received in operating your business
Describe the business or professional activity that provided
or profession. PA law does not contain provisions for statutory
your principal source of income for Line 1. Use the same
employees. A statutory employee reports his or her PA tax-
description you use for your Federal Schedule C. Enter the
able income on Line 1a, PA-40, and uses PA Schedule UE
principal business or professional code you use on your
to deduct his or her allowable employee business expenses.
Federal Schedule C.
INSTALLMENT SALES
LINE B
You may use the installment method for sales of inventory.
Include interest on such sales in gross receipts.
BUSINESS NAME
Enter the name of the business as you registered with the
LAND AND BUILDINGS
IRS.
For PA purposes, you may not include the sales of land and
buildings on PA Schedule C unless the property sold is
LINE C
replaced. When the property sold is not replaced, the
department deems such sales as dispositions of a segment
TAXPAYER IDENTIFICATION NUMBERS
of a business to be reflected on PA Schedule D.
Enter the Federal Employer Identification Number (FEIN)
assigned to the business. If you do not have an FEIN for
LINE 1b
your federal Schedule C, leave this space blank.
RETURNS AND ALLOWANCES
LINE D
This amount is the same for both Pennsylvania and federal
purposes. If you report a different amount for Pennsylvania,
BUSINESS ADDRESS
submit an explanation.
Enter the complete address of the business.
LINE 2
LINE E
COST OF GOODS SOLD
CLOSING INVENTORY VALUATION
This amount is the same for Pennsylvania and federal pur-
Fill in the appropriate oval. Submit an explanation if necessary.
poses. If you report a different amount for Pennsylvania,
submit an explanation.
LINE F
LINE 4
ACCOUNTING METHOD
Fill in the oval for the accounting method you use for this
OTHER INCOME
business. Submit an explanation if necessary.
Enter gross proceeds you may have to report elsewhere on
your federal tax return, including but not limited to:
LINE G
● The sale of business assets when you reinvest the
proceeds in business operations;
INVENTORY CHANGES
Check “Yes” or “No” for this question. Submit an explanation
● The gain (loss) on replacing business property, including
if necessary.
land or buildings used in operating your business or
profession; and
LINE H
● Interest and dividend income from short-term invest-
ments to generate working capital.
OFFICE IN-HOME
Check “Yes” if you deduct expenses for an office in-home.
Submit a statement explaining the amount you enter. See
Check “No” if you do not deduct expenses for an office
various sections of the PA Personal Income Tax Guide for
in-home.
explanations of allocable interest, dividends and gains to
business or professions. Include other income you enter on
Line 6, Federal Schedule C, but not refunds of federal taxes
LINE I
and credits you did not deduct for PA purposes.
OUT OF BUSINESS
SECTION II
If the business is out-of-existence at the end of the tax year
for which you are filing, fill in the oval.
DEDUCTIONS
SECTION I
Use generally accepted accounting principles and practices
to maintain your books and records and report your expenses
INCOME
from your business or professional activity. PA law does not
Use generally accepted accounting principles and practices
impose dollar or percentage limitations on allowable expenses.
to maintain your books and records, and report your income
You may deduct 100 percent of the PA allowable business
from your business or professional activity.
or professional expenses incurred during the taxable year.
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3
PA-40 C
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