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SUBCHAPTER S CORPORATIONS Income Tax

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SUBCHAPTER S CORPORATIONS Income Tax CONTACT INFORMATION CORPORATION TAXES All corporations and LLCs electing to file as is subject will automatically be provided to the Online Customer Service Center corporations with the IRS that are formed under PA corporation or LLC by letter. www.revenue.pa.gov law – or formed under the laws of another state, Questions regarding establishment of a Revenue ID but doing business in PA – must pay corporate net Number should be directed to the Revenue SUBCHAPTER S CORPORATIONS income tax. PA S corporations are subject to Taxpayer Service & Information Center Department at 717-70 5- 6225. LIMITED LIABILITY COMPANIES corporate net income tax to the extent of any built- Personal Taxes: 717-787-8201 in gains recognized for federal income tax Do nonprofit corporations need to file Business Taxes: 717-787-1064 purposes. All other income of a PA S corporation is returns? e-Business Center: 717-783-6277 reported by shareholders and taxed at 3.07 Yes. Only corporations exempt by provisions of percent, the PA personal income tax rate. Article IV of the PA Tax Reform Code do not have to 1-888-PATAXeS (728-2937) file tax returns. Touch-tone service is required for this CORPORATION TAXES What taxes are foreign (out-of-state) automated, 24-hour, toll-free line. Call to How do I create a corporation or limited corporations required to pay? order forms or check the status of a liability company? corporate tax account. If business activities in PA involve more than Information on forming a corporation or LLC is solicitation of sales of tangible personal property, available on the PA Department of State website, the company is subject to corporate net income forms Ordering message Service www.dos.pa.gov . In short, creating a corporation 1-800 -362 -2050 tax. Corporations involved in certain industries may is a legal process that entails drawing up and filing be subject to specialty taxes in addition to or in lieu articles of incorporation; to form a limited liability of corporate net income tax. Services for Taxpayers with Special Hearing company, business organizers must file a certificate and/or Speaking Needs of organization. How does a business transfer account 1-800 -447 -3020 Once created, a corporation or LLC should apply for credits? an employer identification number with the Internal Transfer requests – on company letterhead and Call or visit the Revenue district office Revenue Service (IRS), if required. Corporations or signed by an officer of the corporation – may be nearest you, listed in the government pages LLCs wishing to be classified as S corporations faxed to the Accounting Division at 717-70 5- 6227 of your local phone directory. must also file federal form 2553, election by a or mailed to the following address: Small Business Corporation, with the IRS. PA DePARTmeNT Of ReVeNue BuReAu Of CORPORATION TAXeS Such businesses must also register for PA tax PO BOX 280701 accounts online at www.PABizOnline.com or by HARRISBuRg PA 17 12 8-0701 completing the PA enterprise Registration form, PA-100. The form is available at each request must include account name, address, While this brochure answers some of the most www.revenue.pa.gov or by calling frequently asked questions regarding PA’s Revenue ID number and/or federal employer corporation taxes, taxpayers are encouraged to 1-800-36 2-2050. identification number and transfer periods. review ReV-1200, PA Corporate Net Income Tax Instructions, before completing any How do I obtain a Revenue Identification Describe nexus and the definition of doing corporate tax reports or schedules. Number? business. Once a corporation or LLC is registered with the PA Nexus is a connection that determines a company Department of State, business information is is doing business in PA and is subject to PA taxes. shared with the Department of Revenue so it may establish a Revenue ID Number. The account What is a corporation’s safe harbor amount? number and notice of taxes to which the business The safe harbor amount is the tax value from the www.revenue.pa.gov ReV-582 (PO+) 01-17 www.revenue.pa.gov second preceding period (base year) recalculated Organizations are also encouraged to review Tax Can the election not to be taxed as an did not elect to file as a corporation with the IRS is based on current rates and law. This value may be Bulletins 53e, 53f, 53C and 53B, available on the S corporation ever be revoked? not subject to corporate net income tax, and used as a basis for making current-year estimated department’s website, or call 717-78 3- 6052, for Once this election is made, it cannot be revoked for therefore is not required to file RCT-101. prepayments. failure to make adequate estimated further information on going out-of-existence or five years unless the taxpayer becomes a qualified prepayments could result in the imposition of withdrawing from doing business in PA. subchapter S subsidiary. Does PA follow federal LLC laws? Yes. LLCs that do not elect to file as corporations additional interest. Such requests must be made in writing to the What are the filing requirements for inactive with the IRS are exempt from corporate net income Bureau of Corporation Taxes and submitted within What is the corporate net income tax sales corporations? tax. LLCs classified as federal corporations – the first 75 days of the tax year in which including restricted professional companies – are factor? A corporate tax return must be filed as long as an reinstatement to PA S status is requested. each subject to corporate net income tax. Corporations doing business and subject to tax in organization remains a registered corporation, request must contain the name of the corporation, more than one state are required to apportion even if no business was conducted. In such a case, federal eIN, Revenue ID number and the effective Are there advantages to organizing as an income when calculating PA tax liabilities or PA net RCT-101-I, Inactive PA Corporate Net Income Tax date of revocation. LLC? operating losses. The corporate net income tax Report, must be filed. A corporation with any each request must be signed by at least 51 percent Advantages and disadvantages to doing business apportionment formula is based on sales activity, real property, other assets or income is not of a corporation’s shareholders. each shareholder as an LLC vary depending on the type of business. considered inactive. attributable to PA. should also indicate his/her percentage of stock Individuals considering doing business as an LLC ownership in the corporation. The revocation letter are encouraged to consult legal and/or accounting What is a net operating loss? professionals to determine if this type of SUBCHAPTER S CORPORATIONS should be sent to the following address: PA’s net operating loss (NOL) carry-forward allows organization is appropriate. corporate taxpayers to deduct losses from one year for tax years beginning after Dec. 31, 2005, an PA DePARTmeNT Of ReVeNue from profits in subsequent years. Losses can be entity with a valid federal Subchapter S status is BuReAu Of CORPORATION TAXeS What kind of PA tax return does an LLC file? PO BOX 280701 carried forward and deducted from profits for up to automatically considered a PA S corporation. If the LLC is classified as a corporation for federal HARRISBuRg PA 17128-0701 income tax purposes, it is subject to PA Corporate 20 subsequent tax periods. See ReV-1200, PA An S corporation can reduce its tax liability because Net Income Tax and must complete the RCT-101. If Corporate Net Income Tax Instructions, for the income earned is not taxed at the 9.99 percent If a federal S corporation has been taxed an LLC is classified as a partnership, it must also additional information. as a PA C corporation prior to tax years corporate net income tax rate ; rather income is file an Information Return, PA-20S/PA-65. beginning after Dec. 31, 2005, must How does a company go out-of-existence or passed through to shareholders who pay PA REV-976 still be filed? withdraw from doing business in PA? personal income tax on the business income at the rate of 3.07 percent. Shareholders of S Yes. ReV-976, election Not to Be Taxed as a PA S The corporation should indicate on its Corporate corporations include their shares of income, loss or Corporation, must be filed regardless of any prior Tax Report, RCT-101, that the report is a final credit on their personal income tax returns. revocation or termination of PA S status. report. ReV-861, Schedule DA, Disposition of Assets, may also be required if the corporation held An S corporation is subject to corporate net income any assets during the year. tax only to the extent of its built-in gains. LIMITED LIABILITY COMPANIES LLCs provide limited personal liability to their for tax periods beginning prior to Jan. 1, 2002, or What if a federal Subchapter S corporation members and may be formed with one or more for tax periods beginning on/after Jan. 1, 2002, for wishes to be taxed as a PA C corporation? members. To establish an LLC in PA, a certificate of which an RCT-101 was filed but was not marked as A federal Subchapter S corporation that wishes to organization must be filed with the PA Department final, ReV-238, Out of existence/Withdrawal be taxed as a PA C corporation must elect not to of State. Affidavit, should be filed. be taxed as a PA S corporation using ReV-976. This A restricted professional company is a unique type Companies dissolving through or withdrawing from election must be signed by all shareholders and of LLC formed by one or more licensed the PA Department of State must file ReV-181, filed on or before the due date or extended due professionals who restrict their practice to Application for Tax Clearance Certificate.
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