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Business owners, no matter how small or large their organization is, are required to abide by tax laws. Tax laws tend to be quite complicated for any size business, particularly since they continuously change. Regulations can sometimes take the fun out of running and managing your own business, but failure to comply with local, state, and federal laws can put your organization at risk for fines, penalties, and adverse tax implications. Below, the team at Simplifi outlines new tax rates and updates for Pennsylvania and what they mean for you and your business.
Pennsylvania State Tax Changes That Took Effect January 1, 2023
Most state tax changes take effect at the beginning of the calendar year, January 1, or the start of the fiscal year, July 1. On July 8, 2022, Pennsylvania Governor Tom Wolf signed HB 1342, the legislation for the 2022-2023 state budget. The decree includes several significant and beneficial PA tax law changes. To help you better understand these updates, we’re outlining the noteworthy shifts and what they mean for your organization.
Corporate Income Tax Changes
H.B. 1342, part of the state’s FY 2022-23 budget, will reduce the corporate net income tax (CNIT) rate from 9.99 percent (the highest rate in the United States) to 8.99 percent. This change took effect on January 1, 2023. Subsequently, each year the rate will decrease by 0.5 percentage points until it reaches 4.99 percent at the beginning of 2031.
The Pennsylvania Department of Revenue extended the due dates for filing many personal and business tax returns for those affected by Hurricane Ian. The tax relief is for various tax return filing deadlines that begin on September 23, 2022. These specific returns have until February 15, 2023, to file extended returns:
- Individuals filing form PA-40 who have a valid extension that will run out on October 17, 2022.
- Calendar-year estates or trusts filing Form PA-41, whose 2021 extensions ran out on September 30, 2022.
- Calendar year corporations filing Form RCT-101, whose 2021 extensions end November 15, 2022, will have until March 15, 2023, to file their returns.
Several tax incentives were also enacted for individual taxpayers, including the following:
- Dependent and Child Care Enhancement Program – Modeled after the federal Child Tax Credit, this program will return up to 30% of child care-related expenses that filers claim on their return.
- Research and Development Tax Credit – For organizations interested in research and development activities, this tax credit program is for you. The R&D credit means businesses that invest in qualified research and development activities for innovation and growth (as defined in Internal Revenue Code section 41) may be eligible for a business tax credit.
Tax Updates Made Easy With Simplifi
Generally, these tax updates are great news for taxpaying PA citizens and business owners. For any additional information or to better understand Pennsylvania state taxes, contact Simplifi Payroll & HR. With us by your side, we make these new tax rates and changes easy to understand and comply with. When you partner with us, you can pay your way with a simplified, easy-to-use platform for tracking hours, pay rates, tax deductions, and more. From our seamless onboarding experience to superior customer service, we help you navigate the many challenges and regulations that come with filing and complying with local, state, and federal tax laws. To learn more about our services and see how we can benefit your business, contact us at 215-437-7110.