By Peter Calcara, Vice President - Government Relations

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After an inauspicious start to the Pennsylvania tax season, when software vendors were delayed in getting their products approved in large part due to the state budget impasse, things seem to have settled down a bit. Prior to, and throughout, tax season, the PICPA and the Pennsylvania Department of Revenue (DOR) routinely meet to share information and discuss filing issues practitioners might be experiencing. While a quick resolution is not always feasible, having open lines of communication is a critical step in resolving compliance problems.  

Before we get too far into the depths of filing season, here are some tips and helpful information for taxpayers and practitioners alike that might make it a little more bearable.

As part of its Refund Fraud Project launched in early 2014, DOR set out on a new and aggressive enforcement posture as it relates to taxpayers claiming unreimbursed business expenses (UE) on their personal income tax returns (PA-40). Most taxpayers and many tax practitioners across the state were caught unaware of this change in enforcement until they started receiving notices that unilaterally denied these expenses. Taxpayers use PA Schedule UE, Allowable Employee Business Expenses, to report allowable unreimbursed business expenses, but for an expense to be allowable, it must meet certain conditions and be supported by required documentation.

To ease the filing process, the department has a new website dedicated to unreimbursed business expenses (UE), as well as a second website with UE filing tips, a template for an employer verification letter, and information as to what a taxpayer should do if they cannot obtain a letter from their employer. The websites are an excellent resource for both taxpayers and professional tax practitioners.

New this year, as part of a national effort by states to combat stolen-identity tax fraud, software programs are asking tax filers to voluntarily provide a driver's license number or state-issued identification card number with the filing of a return. Providing this information gives the department an extra security measure to help make sure tax refunds reach the proper filer. Providing the number is strictly optional, and may help speed the processing of a taxpayer’s return. A taxpayer’s return will not be rejected if a driver's license or state-issued identification is not provided.

In addition, application forms for the Property Tax/Rent Rebate Program are now available for eligible residents to begin claiming rebates for property taxes or rent paid in 2015. Claimants must reapply for rebates every year because rebates are based on annual income and property taxes or rent paid each year. Spouses, personal representatives, or estates may file rebate claims on behalf of claimants who lived at least one day in 2015 and met all other eligibility criteria. The deadline to apply for a rebate on property taxes or rent paid in 2015 is June 30, 2016. Rebates will be distributed beginning on July 1, as specified by law.

Corporate taxpayers should be aware of new filing requirements in 2015. Act 52 of 2013 requires the add-back of intangible expenses to income for interest, royalties, patents, trademarks, etc., between affiliated entities in certain instances. To report the add-back for tax years beginning in 2015, taxpayers must complete REV-802, Schedule C-6, Add-back for Intangible Expenses or Cost and Related Interest. The form will be located on DOR’s website at www.revenue.pa.gov. The total amount of additions from Schedule C-6, Line 11, should be carried over and included as a separate line item in form REV-860, Schedule OA. The total of all additions from Schedule OA is then carried over to Section C of the RCT-101, Line 3e.

For taxpayers calculating a credit for tax paid by affiliated entities, taxpayers must complete REV-803, Schedule C-7, Credit for Tax Paid by Affiliated Entities. The form will be located on DOR’s website at www.revenue.pa.gov. For the 2015 tax year only, no line is present under Section C on the 2015 Corporate Tax return to report the amount of credit. The credit will be applied to the taxpayer’s account directly from the filing of Schedule C-7, and subsequently offset against the reported tax upon processing of the tax return.

Please note, both REV-802, Schedule C-6, and REV-803, Schedule C-7, must be submitted via e-mail to RA-RVINTNGBLADBAC@pa.gov by the due date of the 2015 tax return. These forms will be available on or before Feb. 9, 2016.

There’s more! The department’s January 2016 Tax Update newsletter contains helpful hints as well. This issue covers the 2015 PA-41 fiduciary income tax return, the revised statement of account notice (which now includes sections that correspond to the reported taxes for which an entity is subject), and reminders to taxpayers and tax professionals of the steps they can take to protect personal and tax data to prevent refund fraud.

Additionally, the AICPA has a busy season webpage with helpful resources.

One final note: As I mentioned at the outset, the PICPA and the DOR maintain open lines of communication throughout tax season. But, sometimes, a problem may arise that you put on the back burner and think that you’ll get back to it after April 15. Instead of leaving it to chance or your memory, I encourage you to e-mail me and let me know what problem or problems you’re having. We compile those issues and take them to the DOR after tax season.

Think of it as one more way to maximize your membership experience with the PICPA.

File away!