My firm (an S corporation) does business in Pennsylvania. The firm as a whole had an overall loss, but the Pennsylvania operations had a profit. Do I need to file a tax report in Pennsylvania, and will I have to pay taxes on the Pennsylvania operations even though the firm had a net loss as a whole?
Each business is required to file a return to the IRS and then to each state in which it operates reporting income and loss. To the extent that there is income for Pennsylvania, it would be reported on a PA Form K-1 and then reported on your personal income tax return. Each state stands by itself. You cannot net the loss from one state against another.
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Answered by: Mark B. Zinman, CPA, is a managing partner with Zinman & Company in Southampton, Pa.