Pennsylvania income not already included in gross income carried or designated as Pennsylvania income.
W-2 wages and 1099-R IRA/Pension distributions, entered with Pennsylvania information included in the state sections are automatically included in your Pennsylvania gross compensation.
NOTE: You must be sure to list Pennsylvania in the state section and include the state wages or state distribution, if applicable,** to carry to your state return. In addition to interest, dividends, business and rental income, gambling and lottery winnings and income reported on Form 1099-Misc taxable to Pennsylvania, below are additional items of taxable income that must be added.
- Employer provided fringe benefits, unless excludable
- Sick pay and disability benefits that represent regular wages, such as sick leave pay
- Allowances and reimbursements in excess of allowable employee business expenses
- The value of property received as payment for services
- Delay damages received in connection with a court judgment or settlement to the extent that the payments represent back wages
- Compensation as fees for performing services as an executor or an administrator of an estate or a director of a corporation.
- Severance pay
- Incentive payments received for terminating employment before reaching normal retirement age
- Awards and gifts given in recognition for, or given as a transfer of cash or property, in payment for past, present, or future service as an inducement to perform future services
- Jury fees
- Expert witness fees
- Cash reimbursements for personal expenses, such as commuting and day care
- A discharge of indebtedness, unless specifically excludable from taxable income
- Damage awards and settlements to the extent that the payments represent back wages or another uncollected entitlement to Pennsylvania taxable income
- Covenants not to compete, or for refraining from the performance of services
- Other income described in the Pennsylvania income classes in the Individual Tax Guide
- Income for performing services as an executor or director when such services are undertaken as part of your business or profession (report this addition under Business and Rental Income/(Loss))
What are the exceptions to taxable IRA/Pension distributions?
- Payments you receive after you qualify for retirement and retire.
- Payments you receive that you rollover into another deferred payment program or retirement IRA, but only when the transferred amounts are not taxable income for federal purposes.
- Distributions from an employer-sponsored deferred compensation plan that represent your previous contributions.
- Payments paid to the estate or designated beneficiary upon an employee’s death are not PA-taxable income on the employee's final PA-40 or on the decedent’s estate or trust PA-41, PA Fiduciary Income Tax Return or on the beneficiary’s PA-40.
- All distributions (regardless of the distribution code reported in Box 7 of the 1099-R) from the State Employees’ Retirement System, the Pennsylvania School Employees’ Retirement System, the Pennsylvania Municipal Employees’ Retirement System, and the U.S. Civil Service Commission Retirement Disability Plan.
- Retired or retainer pay of a member or former member of a uniform service computed under Chapter 71 of Title 10, U.S. Code as amended.
- IRA distributions received, including lump sum distributions, on or after reaching the age of 59 1/2.
- IRA distributions paid to the estate, or designated beneficiary, of the participant because of the participant’s death.
For additional information, please refer to the instructions for Form PA-40IN.