As a taxpayer, you may receive a letter from the local tax collector (e.g., Berkheimer, Keystone Collections Group) that states that the income that was reported on your local earned income tax (EIT) return differs from what was reported to the local tax collector by the PA Dept. of Revenue (DOR). Why did you receive this letter? Part of the agreements between the PA DOR and the PA Department of Education requires that the DOR provide a report each year to each school district detailing the individuals that utilized their \u201cschool code\u201d when they filed their state return and the income reported. This report is then used to verify that the school district is receiving all of the taxes it is due, as well as to determine funding levels to the district. The reports are released approximately 15 months after the taxpayer was required to file with the state. So as an example: the PA-40 form for 2013 was due 04\/15\/14. The report on the income reported by each taxpayer will be released in or around July 2015.<\/p>\n
Should your local earnings match your state earnings? In 2003, the PA legislature passed ACT 166 which made the definitions of \u201cearned income\u201d and \u201cnet profits\u201d identical for both local and state taxation purposes. The change was implemented to help eliminate the confusion that had existed to that point with what was taxable to each. By implementing the change, it became easier for taxpayers and preparers alike to know exactly what was to be reported to their local collector.\u00a0 The definitions are based on the state\u2019s which are found in the \u201cTax Reform Code of 1971\u201d. Based on ACT 166 there is only one source of earned income that is not taxed by both. That income source is \u201cClergy Housing Allowances\u201d which are taxed by the state, but not locally.<\/p>\n
Accordingly, what appears on a taxpayer\u2019s PA-40 form as taxable W-2 earnings should also be reported on the local EIT return as taxable W-2 earnings. If the earnings do not agree, an individual should consult with the employer\u2019s payroll department. Likewise, earnings from self-employment Schedule C and earned income from partnership K-1s should agree. However, K-1 income from an S Corporation is subject to taxation by the PA DOR, but not for local EIT purposes.<\/p>\n
Reporting problems can arise:<\/p>\n
If you want to discuss your tax preparation<\/a> or tax planning<\/a> concerns with an experienced tax professional, we invite you to call 610-594-2601<\/a> today to make an appointment at our Exton PA CPA office<\/a> to discuss your situation. You can also schedule a consultation at Click Here<\/a>.<\/p>\n As a taxpayer, you may receive a letter from the local tax collector (e.g., Berkheimer, Keystone Collections Group) that states that the income that was reported on your local earned income tax (EIT) return differs from what was reported to the local tax collector by the PA Dept. of Revenue (DOR). Why did you receive […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[4],"tags":[],"class_list":{"0":"post-1727","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-pennsylvania-tax-news","7":"entry"},"aioseo_notices":[],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9W9tf-rR","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts\/1727","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/comments?post=1727"}],"version-history":[{"count":4,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts\/1727\/revisions"}],"predecessor-version":[{"id":1731,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts\/1727\/revisions\/1731"}],"wp:attachment":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/media?parent=1727"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/categories?post=1727"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/tags?post=1727"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Copyright \u00a9 2015 Keystone Financial Solutions, P.C. All rights reserved. BE SURE TO READ THE DISCLAIMER PAGE: Content in this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher of this blog makes no representations as to the accuracy or completeness of any information herein, will not be liable for any errors or omissions, and shall not assume liability for any losses, injuries, or damages from the display or use of this information.<\/strong><\/h6>\n","protected":false},"excerpt":{"rendered":"