Does Pennsylvania Tax S Corps?

Does Pennsylvania tax S corps?
Businesses that elect federal subchapter S status are considered Pennsylvania S corporations and are subject to the 9.99 percent corporate net income tax only to the extent of built-in-gains. Rather, shareholders in the businesses considered S Corporations are taxed at the personal income tax rate, 3.07 percent.
Read more on www.revenue.pa.gov

One of the states that accept S corporations or S corps is Pennsylvania. For federal tax purposes, a S corporation is a specific type of organization that passes through all of its income, losses, deductions, and credits to its owners. As a result, the S corp does not have to pay federal income taxes. Instead, the S corp’s profits and losses are reported by the stockholders on their personal tax returns.

S corporations are not taxed on their corporate income in Pennsylvania. Other state taxes, such the personal income tax and the capital stock/foreign franchise tax, must still be paid by the S corp and its stockholders. The capital stock/foreign franchise tax rate in Pennsylvania is 0.89 mills on each dollar of capital stock, surplus, and undivided earnings, whereas the personal income tax rate is a flat 3.07%.

The corporation must first fulfill the IRS’s eligibility standards in order to be eligible to operate as a S corp in Pennsylvania. No more than 100 individuals, estates, specific trusts, or tax-exempt organizations may be stockholders in the corporation. In order to qualify as a domestic corporation for tax purposes, a company must also have been incorporated in the United States and not chosen to be taxed as a foreign corporation.

There is no separate S corp election necessary in Pennsylvania. Instead, the firm must include a declaration that it is a S corporation in a Pennsylvania RCT-101 Corporate Tax Report. On their individual tax returns, the shareholders must additionally disclose their portion of the S corp’s profits and losses.

In conclusion, S corporations are not subject to income tax in Pennsylvania. The personal income tax and the capital stock/foreign franchise tax are two additional state taxes that still apply to S companies and their shareholders. The corporation must satisfy the IRS’ eligibility standards and submit a Pennsylvania RCT-101 Corporate Tax Report with a statement designating it as a S corporation in order to be considered a S corporation. A shareholder’s part of the S corp’s profits and losses must also be reported on their personal tax returns.

FAQ
Can I file my own S corp taxes?

You can submit your own S company taxes, yes. To make sure that you are appropriately reporting all income and deductions and according to all tax laws and regulations, it is advised that you either work with a tax professional or use tax preparation software.

Can I file my S corp with my personal taxes?

You cannot file your S company taxes alongside your personal taxes, sorry. S corporations are pass-through entities, which means that the business’s gains and losses are distributed to each shareholder individually and recorded on their individual tax returns. However, the S corporation itself is required to submit a separate tax return (Form 1120S) and give a Schedule K-1 to each shareholder outlining their own income, deductions, and credits.