Pennsylvania’s tax system imposes specific obligations on corporations and pass-through entities. C corporations are required to file a PA Corporate Net Income Tax Report and pay a flat income tax rate of 8.49% for 2024. Filing rules apply even if no activity was carried out during the year, with strict estimated tax payment requirements and penalties for late filing or underpayment.
On the other hand, S corporations, partnerships, LLCs, and LLPs are treated as pass-through entities, meaning income and losses flow to the owners, who must report them on their personal returns. The individual tax rate is a flat 3.07% for 2023. Extensions, estimated payments, and penalties also apply to owners and partners.
This blog provides a detailed breakdown of taxation in Pennsylvania, covering filing requirements, due dates, estimated taxes, extensions, and penalties for both C corporations and pass-through entities.
C Corporation Income Tax
All business entities electing to file as corporations that are doing business in Pennsylvania, deriving income from Pennsylvania sources, registered with the PA Department of State, or conducting any business during the year are required to file a PA Corporate Tax Report, regardless of whether they have net income or a loss.
Tax Rate
- For the year 2024, the corporate net income tax rate in Pennsylvania is a flat 8.49% on taxable income.
Filing Requirements
- All domestic corporations must file RCT-101, PA Corporate Net Income Tax Report, even if no business activity took place during the taxable period.
Due Date
- The return is due on or before the 15th day of the 4th month following the close of the corporation’s tax year.
Extensions
- If a federal extension is granted, the corporation is automatically granted an extension for filing RCT-101, provided a copy of the federal extension request is attached to the state return.
- Corporations without a federal extension may still request a 60-day extension to file by submitting REV-853 before the original due date.
C Corporation Income Tax (2/2)
Estimated Tax Payments
Corporate income tax in Pennsylvania is paid through an estimated payment system, with prepayments treated as deposits.
- Prepayments must exceed 90% of the reported annual liability or 100% of the prior two years’ liability, whichever is applicable.
- Payments are due quarterly on the 15th day of the 3rd, 6th, 9th, and 12th months of the tax year.
- Final reports and payments are due 30 days after the federal report is due, or would have been due if the corporation were required to file federally.
Interest and Penalty
- A minimum penalty of USD 500 is imposed for late filing, regardless of liability.
- An additional 1% penalty is charged on any determined liability exceeding USD 25,000.
- The Pennsylvania Department of Revenue calculates daily interest on overdue taxes using an annual rate that changes each year. For 2023, the interest rate is 7%.
Pass Through Entity Tax
In Pennsylvania, S corporations, partnerships, LLCs, and LLPs are treated as pass-through entities. This means that income, deductions, and losses flow directly to shareholders, members, or partners, who must report them on their individual PA personal income tax returns (Form PA-40).
Tax Rate
- For 2023, Pennsylvania imposes a flat personal income tax rate of 3.07% on individuals.
Filing Requirements
- Pass-through entities themselves do not file separate state-level income tax returns.
- Owners and members are responsible for reporting income and deductions on Form PA-40.
Due Date
- Individual returns are due on or before the 15th day of the 4th month following the close of the tax year.
Extensions
- Individual owners or members may request additional time by filing Form REV-276, which grants an automatic six-month extension.
Estimated Tax Payments
Owners and members of pass-through entities must make quarterly estimated tax payments using Form PA-40ES.
- Due dates are April 15, June 15, September 15, and January 15 of the following year.
Interest and Penalty
- A penalty of 5% of unpaid tax is charged for each month or part of a month the return is late, capped at 25%, with a minimum penalty of USD 5.
- For underpayment or non-payment of taxes, a penalty equal to 7% of the unpaid tax is applied.
Conclusion
Pennsylvania applies a straightforward yet strict tax regime. For C corporations, a flat rate of 8.49% applies, with mandatory filing requirements and a rigorous estimated payment system. Extensions are available but must be properly requested, and penalties for late filing are significant.
For S corporations, partnerships, LLCs, and LLPs, Pennsylvania relies on the pass-through model. Income and deductions flow to individual owners, who must report them on personal returns at a flat rate of 3.07%. Estimated payments, strict deadlines, and penalties highlight the state’s focus on timely compliance.
Businesses and individuals alike must stay alert to due dates and ensure proper filings to avoid unnecessary costs. Understanding Pennsylvania’s corporate and pass-through tax framework is essential for maintaining compliance and managing financial obligations effectively.
