What do I need to know about the PA Local returns in Drake Tax?
As of January 1, 2012, due to Act 32, most* Pennsylvania localities/cities now use the same generic Local Earned Income Tax Return, Form CLGS-32-1. Due to this change, when the resident state on federal screen 1 is PA, the program defaults the Resident City field to LC for Local City (LC). Additional entries are needed on the PA > Local tab > LOC screen to indicate which city should be pulled to the form and letter. Most of the other entries on this screen are overrides and pull from federal unless changes are needed. After making all necessary entries, the PA LOCAL return will be generated in view mode.
*The city of Philadelphia was not subject to the changes under Act 32. If the taxpayer was a Philadelphia resident, change the selection on federal screen 1 to PL for Philadelphia. Forms for Employee Earnings Tax, Business Privilege Tax, and Net Profits Tax are available in the software. Relevant entries are made on the PA > Philadelphia tab for the PH-40, NPT, and BIRT, if applicable.
Note: If the taxpayer lived in Philadelphia and another local city during the year, you can choose PY for Part Year on federal screen 1 and then make any applicable entries on the PA Philadelphia and Local screens.
Use the LINK screen that is available on the PA Local tab in Drake Tax to review more information about Act 32 appointed collection group websites and contact information. Annual reporting forms are not allowed to be filed through the MeF System; however, some collection groups will allow the form to be filed online from their websites.
Complete information on Act 32 can be found at www.newPA.com.
Tax Rate Database
See Related Links below for information about the PA Locality tax database. This is used to generate the various PA Local returns.
E-filing or Paper-Filing
The generic PA Local return cannot be e-filed; it must be paper-filed. Therefore, the Individual Result Letter paragraph will always state that the return needs to be paper filed. This applies regardless of whether the Federal or State returns are being e-Filed.
There are two mutually exclusive methods for handing a local overpayment on a PALOCAL return:
- From the Federal ES screen, you can create PALOCES estimated tax payment vouchers for next year and direct a PALOCAL overpayment to them.
- From the PA LOC screen, you can credit an overpayment to next year or to a spouse's balance due this year. You cannot direct an overpayment to PALOCES vouchers created from the LOC screen.
From the Federal ES screen, create PALOCES vouchers that credit an overpayment.
- Before creating the Federal ES screen, go to the PA LOC screen (on the Local tab) and clear the screens opened by the TP ES Vouchers and SP ES Vouchers links (top of the LOC screen).
- Complete the Federal ES screen. This produces four PALOCES estimated tax vouchers. Note: For a joint return, complete a separate ES screen for the Taxpayer and Spouse.
In the State and City Section, on the right, complete the appropriate estimated taxes fields. In the example below, the taxpayer's full overpayment is credited against the voucher amounts if there are no countervailing entries on the PA LOC screen:
Appropriate ES screen entries:
Select T for the primary taxpayer, S for the spouse. In a MFJ return, create a separate ES screen for each taxpayer. A J selection does not produce a voucher for the spouse.
Select the appropriate rounding.
Select the appropriate code.
Amount of overpayment to apply to 20YY (where YY is the next year)
Enter an amount - entering an amount less than the full overpayment splits the overpayment between PALOCES vouchers and a PALOCAL refund.
Leave blank. The full overpayment is applied against PALOCES vouchers.
Leave blank and go to the PA LOC screen to send a partial overpayment amount to the vouchers by entering it in the Overpayment to ES Vouchers field.
Estimate amt column
Enter the quarterly estimate amounts (required)
Enter the quarterly overpayment amounts (optional).
The ES screen results flow to line 6 on each PA LOCAL ES voucher (the voucher worksheet is ignored).
- To credit part of an overpayment to ES vouchers, enter the partial amount in Amount of overpayment to apply to 20YY, or in the Overpayment column override fields. The balance of the overpayment becomes a PALOCAL refund. Or leave those two ES fields blank, and enter an amount in the Overpayment to ES Vouchers field (line 15) on the LOC screen.
- In a joint return, if you credit an overpayment to the spouse, the entire overpayment is first applied to the full extent of the spouse's balance due, with the remainder going to ES vouchers. On the LOC screen:
- Select If overpayment for taxpayer, credit to spouse (checkbox) or enter any amount in The amount of line 14 as credit to Taxpayer/Spouse (direct entry on line 15, the amount entered doesn't matter). Either control makes the full overpayment available to satisfy the spouse's balance. If the overpayment exceeds the spouse's balance due, the excess goes to ES vouchers.
- With either of these options, the line 15 fields Overpayment to Next Year and Overpayment to ES Vouchers can be used to direct the excess of the overpayment over the spouse's balance due.
- Select the option Print T/S separately to print the taxpayer and spouse PALOCAL returns separately.
From the Pennsylvania LOC screen, credit an overpayment to next year or to a spouse's account.
Overpayments cannot be sent to PALOCES vouchers created with the links at the top of the LOC screen (TP ES Vouchers and SP ES Vouchers).
Open the PA LOC screen (on the Local tab):
- To credit an overpayment to next year:
- To credit the entire overpayment, select If overpayment, credit to next year (checkbox).
- To credit part of the overpayment, enter the amount in Overpayment to Next Year (line 15)
- In a joint return, to credit a taxpayer overpayment to a spouse's balance due, or vice-versa, select the option If overpayment for taxpayer, credit to spouse (checkbox) or enter an amount in The amount of line 14 as a credit to Taxpayer/Spouse (this field is a toggle - the amount entered does not matter).
- The entire credit is applied to the extent of the spouse's balance due, and any excess becomes a PA LOCAL refund.
- To credit the refund to next year, don't use the checkbox option. Enter an amount in the The amount of line 14 as a credit to Taxpayer/Spouse field, and an amount in the Overpayment to Next Year field (line 15).
- To print the spouse's local return separately, select Print T/S separately.