Q&A with the Pennsylvania Department of Revenue

Is there a threshold for the number of Schedule C expenses that can be reviewed?

Jan 22, 2018
Q:

Is there a threshold for the number of Schedule C expenses that can be reviewed? If we have a client that has a $20,000 expense that is questioned, the possible state tax impact is $614. By the time copies of the supporting documents are made, the data reviewed (and billed for), it may be more affordable for the client to just pay the additional state tax.

A:

The department uses data analytics to identify average expenses, line items on the Schedule C, which are claimed by a particular industry. Returns are examined when outliers are identified. We are not limiting our review to either a particular industry or particular level of income. The department has been reevaluating current year suspensions and has started making adjustments.

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Disclaimer

These documents provide a summary of the answers provided by the Department of Revenue to the PICPA Committee on State Taxation at its annual question and answer session. These documents are classified as revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on their specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.