How to File Your Pennsylvania Tax Return for 2020: A Step-by-Step Guide

Pennsylvania has a flat income tax rate system, so you must pay attention to the state's specific filing rules and deadlines. The Commonwealth's income tax return system differs from the federal tax system, especially regarding what deductions are allowed, how to figure out business expenses, and how to calculate depreciation. Knowing these differences helps you stay compliant and avoid common filing mistakes that could cost you money, time, or penalties.

To file your Pennsylvania tax return correctly, you need to do more than just copy information from your federal return. To meet the requirements of the Pennsylvania Department of Revenue, you must use specific forms, schedules, and calculation methods that are unique to Pennsylvania. The state's tax system has particular rules for Pennsylvania residents, nonresidents, and part-year residents, with each group facing different filing obligations based on income thresholds and source locations that affect your tax burden.

For the 2020 tax year, Pennsylvania made several significant changes, including eliminating Schedule W-2S, launching the new myPATH online filing system, and adding enhanced preparer identification requirements. The state kept its flat rate of 3.07 percent while setting a minimum filing threshold of thirty-three dollars in Pennsylvania gross taxable income. These changes, along with the April 15, 2021, filing deadline and available six-month extension options through October 15, 2021, mean taxpayers must understand timing requirements and proper documentation procedures.

Overview of Pennsylvania State Income Tax for 2020

Who Needs to File

Pennsylvania has specific filing requirements based on residency status and income level, determining your obligation to file a personal income tax return.

Pennsylvania Residents: You must file if you received total Pennsylvania gross taxable income exceeding thirty-three dollars during 2020, regardless of age or dependency status. This applies to all residents, including minors and individuals not required to file federal returns, which helps ensure comprehensive state revenue collection across all income levels.
Nonresidents and Part-Year Residents: You must file when Pennsylvania-sourced income exceeds thirty-three dollars during any portion of the tax year. Nonresidents only report Pennsylvania income sources like wages earned in-state, business income from Pennsylvania operations, or rental income from Pennsylvania properties within the Keystone State.
Exceptional Circumstances: Individuals with business, partnership, or Pennsylvania S corporation losses must file regardless of total income level. Taxpayers with Pennsylvania tax withholding, estimated payments, or prior year overpayments also must file to claim refunds or settle final obligations.

Tax Rate and Key Dates

Pennsylvania maintains a simplified tax structure with consistent rates and deadlines for all eligible taxpayers.

Flat Income Tax Rate Structure: Pennsylvania uses a 3.07 percent flat rate for all income levels without progressive brackets or alternative minimum tax calculations. This flat income tax rate applies to net taxable income after allowable deductions, making calculations simpler than those of the federal progressive tax system and many other states.
Filing and Payment Deadlines: Returns were due April 15, 2021, with both filing and payment obligations owing simultaneously to avoid penalty assessments. Extensions follow federal procedures and allow additional filing time until October 15, 2021, though payment obligations remain due by April 15.

Key Changes for the 2020 Tax Year

Several significant modifications affected Pennsylvania state tax return filing procedures and requirements for 2020.

Schedule W-2S Elimination: The most significant administrative change was eliminating Schedule W-2S summary requirements, which streamlined taxpayer documentation procedures. Payers must attach all W-2s, 1099s, and compensation documents directly to returns.
MyPATH System Implementation: Pennsylvania launched the comprehensive MyPATH online filing system, replacing older platforms with better security and functionality features. The system offers free filing services, secure account management, real-time status tracking, and integrated payment processing for all Pennsylvania residents and nonresident individuals.

Required Pennsylvania Tax Forms

Main Individual Income Tax Forms

Pennsylvania requires specific forms based on your filing situation and business activities during the tax year. All forms are available online at the Pennsylvania DOR’s Forms page.

Form PA-40 Personal Income Tax Return: This form is the primary comprehensive document required for all individual Pennsylvania taxpayers regardless of income complexity or filing circumstances. It captures all income sources, including wages, business profits, investment earnings, deductions, credits, and tax calculations necessary for determining final liability or refund amounts.
Schedule SP Special Tax Forgiveness: This critical supplementary form allows qualifying taxpayers to claim tax forgiveness based on specific income thresholds and family size criteria. The schedule can significantly reduce or eliminate tax liability for eligible individuals and families meeting financial hardship requirements.
Schedule C Profit or Loss From Business: This mandatory Pennsylvania-specific version is required for sole proprietors and business owners reporting business operations and financial results. You must use this form instead of the federal Schedule C due to fundamental differences in depreciation rules and expense limitations under Pennsylvania tax law.

Common Schedules and Credits

Various supporting schedules help calculate specific types of income, deductions, and credits available to Pennsylvania taxpayers.

Income Reporting Schedules: Schedule A reports interest income from banks and investments, while Schedule B captures dividend income from stocks and mutual funds. Schedule D handles capital gains and losses from property sales, requiring careful basis calculations and transaction documentation.
Credit and Deduction Schedules: Schedule G-L provides essential resident credit calculations for taxes paid to other states, preventing double taxation on income earned outside Pennsylvania. Schedule O captures other allowable deductions specific to Pennsylvania tax law, while Schedule OC reports various credits available to eligible taxpayers.
Important Filing Note: Pennsylvania mandates using state-specific versions of business-related forms rather than federal equivalents due to fundamental differences in depreciation methodologies and expense calculation rules. Federal Schedules C and F cannot be substituted because Pennsylvania prohibits federal bonus depreciation and strictly limits IRC Section 179 expensing.

Step-by-Step Filing Instructions

Preparing to File

Proper document collection and organization streamline the Pennsylvania tax return preparation process and ensure compliance.

Employment Records: Collect all W-2s showing wages and Pennsylvania withholding from all employers, including part-time positions and contract employment. Include forms from temporary work that generated Pennsylvania income during 2020 for complete reporting compliance.
Investment and Business Documentation: Obtain 1099-INT, 1099-DIV, 1099-MISC, and 1099-NEC forms reporting interest, dividends, and miscellaneous income subject to Pennsylvania tax. Gather business income records, expense receipts, and depreciation schedules for sole proprietorships or partnerships operating during 2020.
Payment Records: Collect all family members' estimated tax payment confirmations, withholding statements, and Social Security numbers. For accurate reconciliation calculations, document all Pennsylvania tax payments made during 2020.

Filing as a Full-Year Resident (Form PA-40)

Pennsylvania residents follow a systematic approach to complete their personal income tax return accurately and efficiently.

Step 1: Gather Your Documents

Employment records form the foundation of accurate Pennsylvania tax return preparation and compliance verification. Collect all W-2s showing wages and Pennsylvania withholding from all employers, including part-time positions and contract employment throughout 2020.

Step 2: Determine Filing Status and Residency

Filing status selection affects tax calculations and available credits throughout the return preparation and submission process. For an accurate liability determination, choose single, married filing jointly, married filing separately, or final return status based on December 31, 2020, circumstances.

Step 3: Calculate All Income Sources

Wage and salary income reporting requires comprehensive documentation of all compensation received during the tax year. Pennsylvania residents report all compensation, while nonresidents report only Pennsylvania-sourced employment income for accurate liability calculation under the flat income tax rate system.

Step 4: Apply Pennsylvania Deductions

Pennsylvania allows only four specific deductions, including medical savings account contributions, Health Savings Account contributions, Pennsylvania 529 contributions up to fifteen thousand dollars per beneficiary, and PA ABLE program contributions. These limited deductions require careful documentation and proper calculation for maximum tax benefit utilization.

Step 5: Calculate Tax Liability and Credits

Tax computation involves multiplying total Pennsylvania taxable income by 3.07 percent for gross tax liability before applying available credits. When eligible, apply tax forgiveness credits and resident credits for taxes paid to other states to appropriately reduce the final tax burden.

Step 6: Determine Final Payment or Refund

Payment reconciliation compares the total tax liability to all payments made, including withholding, estimated payments, and prior-year overpayments applied to the current year. Based on an accurate reconciliation of all Pennsylvania taxes paid versus liability owed, calculate whether an additional fee is required or a refund is due.

Filing as a Part-Year or Nonresident

Part-year residents and nonresidents follow modified procedures to report Pennsylvania-sourced income and calculate the appropriate tax liability accurately.

Step 1: Identify Pennsylvania-Source Income

Pennsylvania-source income includes wages earned while working in Pennsylvania, business income from Pennsylvania operations, and rental income from Pennsylvania properties. Non-residents must carefully identify all income sources subject to Pennsylvania taxation in the Keystone State.

Step 2: Allocate Income and Deductions

Allocate income between Pennsylvania and other states based on source location and residency periods during 2020. Part-year residents prorate deductions based on Pennsylvania residency periods, while nonresidents limit deductions to Pennsylvania-source income calculations.

Step 3: Calculate Proportional Tax Liability

Calculate tax liability using Pennsylvania's flat rate applied only to Pennsylvania-source income for accurate compliance. Apply appropriate credits for taxes paid to other states to prevent double taxation on income subject to multiple state tax jurisdictions.

Common Filing Mistakes to Avoid

Understanding frequent errors helps prevent delays, additional correspondence, and potential penalties or interest charges.

Form Selection Errors: Use Pennsylvania-specific Schedules C and F instead of the federal versions due to different depreciation and expense calculation requirements. Federal business forms cannot be used for Pennsylvania compliance and will result in processing errors.
Missing Documentation: Attach all required W-2s, 1099s, and supporting schedules to avoid processing delays and potential correspondence issues. Incomplete returns trigger additional review procedures and significantly delay refund processing.
Calculation Errors: Verify all Social Security numbers, school district codes, and mathematical calculations before submission to prevent processing delays. Errors require correction procedures and may necessitate amended return filing for accurate compliance.

Filing Methods and Mailing Information

Electronic Filing

Electronic filing provides the fastest, most accurate method to submit your tax return for Pennsylvania with immediate confirmation.

myPATH Free Filing System: Pennsylvania's official myPATH system at mypath.pa.gov provides free electronic filing for all Pennsylvania personal income tax returns. The system offers step-by-step guidance, automatic calculation verification, immediate confirmation, and secure account management capabilities for all eligible taxpayers.
Fed-State E-File Through Commercial Software: Many commercial tax preparation programs offer combined federal and state e-filing services that process Pennsylvania returns simultaneously with federal submissions. These services typically charge fees but provide comprehensive preparation support and professional error checking.
Electronic Filing Benefits: Electronic submission provides faster refund processing with direct deposit options, reduces mathematical errors through automatic calculations, offers immediate confirmation, and maintains secure transmission. E-filed returns typically process within two to three weeks versus eight to ten weeks for paper returns.

Paper Filing

Paper filing remains available for taxpayers who prefer traditional submission methods or cannot access electronic options.

Document Assembly Requirements: Assemble the paper return with the original PA-40 form first, then all W-2 and 1099 forms, then the PA Schedule OC with supporting documentation. Include all other required schedules in proper order for efficient processing.
Mailing Address Selection: Mail completed returns to the appropriate Pennsylvania Department of Revenue address based on payment status: payments enclosed to 1 Revenue Place, refund requests to 3 Revenue Place, and zero balance returns to 2 Revenue Place. All addresses are located in Harrisburg, PA, for centralized processing.

Payment Options and Deadlines

Electronic Payments

Pennsylvania offers several convenient electronic payment options that provide immediate confirmation and eliminate mailing delays.

Electronic Funds Transfer Benefits: Pennsylvania's myPATH system allows direct bank account transfers without processing fees, making this the most cost-effective payment method. Electronic transfers provide immediate confirmation and eliminate risks associated with traditional mailing methods for taxes owed.
Credit and Debit Card Processing: Pennsylvania accepts American Express, Discover, MasterCard, and Visa through authorized processors with convenience fees. Credit cards incur a 2.49 percent fee with a one-dollar minimum, while debit cards start at $3.95, depending on the payment amount.

Check or Money Order

Traditional payment methods remain available for taxpayers who prefer paper transactions or cannot access electronic payment options.

Check Preparation: Payo "PA DEPT OF REVENUE" with the Social Security number and "2020 PA-40" noted in the memo line for proper account identification. Use the Form PA-40V payment voucher to ensure accurate payment allocation and processing.
Estimated Tax Requirements: Taxpayers expecting to owe two hundred forty-six dollars or more should make quarterly estimated payments using Form PA-40ES. Quarterly deadlines are April 15, June 15, September 15, and January 18 of the following year for proper compliance.

Tracking Your Refund or Balance Due

Checking Your Refund Status

Pennsylvania provides multiple convenient methods to monitor your refund status and account information throughout processing.

Online Tracking Options: You can check your refund status via the MyPath refund status tool using your Social Security number and the exact refund amount shown on your filed return. The system provides 24-hour access to processing information and the expected completion time for Pennsylvania state tax refunds.
Phone Inquiry System: Call 1-888-PATAXES for automated status updates requiring the same information as online inquiries. The phone system provides similar status information with automated response capabilities for taxpayer convenience and accessibility.

Refund Processing Times

Processing times vary significantly based on filing method, return accuracy, and seasonal volume at the Pennsylvania Department of Revenue.

Electronic Return Processing: E-filed returns receive priority processing, with automated validation checks that identify potential issues before manual review. When filed without errors or missing documentation, electronic returns typically process within two to three weeks.
Paper Return Delays: Paper returns may require up to ten weeks for processing, especially during peak filing season from February through April. Manual data entry and review processes prolong traditional paper submissions' processing times.

Balance Due Management

Taxpayers with outstanding balances have several options for managing their Pennsylvania tax obligations and avoiding additional penalties.

Payment Plan Options: Contact the Pennsylvania Department of Revenue at 717-787-8201 for payment arrangements if unable to pay the full amount immediately. Interest and penalties continue accruing on unpaid balances regardless of the establishment of a payment plan.
Notice Response: Review notices carefully and pay promptly if calculations are accurate to minimize additional penalties and interest charges. Follow the notice instructions to dispute assessments if errors exist in calculations or the account application.

Final Filing Checklist

Review this comprehensive checklist before submitting your Pennsylvania tax return to ensure completeness and accuracy:

Personal Information Verification: Confirm all Social Security numbers are correct and complete throughout the return and supporting documentation. For accuracy, double-check mathematical calculations, including income totals, deduction amounts, tax calculations, and payment reconciliations.
Required Form Completion: Complete Form PA-40 with all applicable schedules based on your tax situation and income sources. Use Pennsylvania-specific business forms rather than federal equivalents to ensure proper depreciation and expense calculations.
Supporting Documentation: Include all W-2s, 1099s, and supporting schedules specified by Pennsylvania filing requirements. Verify school district code accuracy for local tax calculations and ensure all necessary signatures are on completed returns.
Payment or Refund Selection: If taxes are owed, choose the appropriate payment method or select a refund delivery option for overpayments. Electronic options provide faster processing, immediate payment, and refund delivery confirmation.
Filing Method Selection: Select electronic filing through myPATH for free processing or paper filing with the proper mailing address based on payment status. Electronic filing provides faster processing, immediate confirmation, and reduced error rates compared to paper submissions.
Recotaxetention Preparation: To meet Pennsylvania requirements, maintain return copies and supporting documentation for a minimum of four years after filing. Indefinitely keep asset basis records for accurate capital gains or losses calculations when assets are sold.
Local Tax Considerations: Remember that local income taxes are separate from Pennsylvania state taxes and require separate filings with local authorities. Local earned income tax rates vary by municipality and are independent of state tax obligations.

Frequently Asked Questions

How do you file your Pennsylvania tax return for 2020 if you missed the deadline?

File immediately to minimize penalties and interest on unpaid Pennsylvania taxes. Pennsylvania allows automatic extensions until October 15, 2021, but taxes owed were still due April 15 with interest accruing daily. Late filing penalties apply in addition to interest charges on outstanding balances from the original due date, regardless of extension status.

What is Pennsylvania's income tax rate for 2020?

Pennsylvania maintains a flat income tax rate of 3.07 percent for 2020, applying to all income levels without progressive brackets or rate tiers. This flat rate applies to net taxable income after allowable deductions, making calculations straightforward for taxpayers across all income ranges. The flat rate ensures consistent treatment across different income levels throughout the Keystone State.

Are local taxes separate from Pennsylvania income tax?

Local taxes, including local earned income tax and local sales tax rate, are separate from Pennsylvania state income tax requirements. Municipalities impose local income tax rates independent of state requirements, typically 0.5 to 2 percent. Taxpayers must file separate local tax returns with their municipalities while completing Pennsylvania state income tax obligations.

Does Pennsylvania have an inheritance tax on transfers to other states?

Pennsylvania imposes an inheritance tax on property transfers regardless of where heirs reside, including those in other states or foreign countries. Tax rates vary by relationship to the deceased: direct descendants pay 4.5 percent, siblings pay 12 percent, and other heirs pay 15 percent. Transfers to the surviving spouse and qualified charitable organizations are exempt from the Pennsylvania inheritance tax.

Can I e-file my Pennsylvania income tax return for free?

Pennsylvania offers free electronic filing through myPATH at mypath.pa.gov for all personal income tax returns without income restrictions or limitations. The system provides step-by-step guidance, automatic error checking, immediate confirmation, faster refund processing, and secure account management without fees or charges for any taxpayer, regardless of complexity.

What happens if I pay income tax to other states?

Pennsylvania residents who paid income tax to other states on the same income can claim a resident credit using Schedule G-L to prevent double taxation issues. You must provide documentation of taxes paid to other states and meet specific requirements for credit eligibility. This credit reduces Pennsylvania tax liability dollar-for-dollar for qualifying payments made to other jurisdictions.

How are local income tax rates determined in Pennsylvania?

Municipalities set local income tax rates independently, varying significantly across Pennsylvania communities based on local revenue needs and municipal requirements. These local earned income tax rates typically range from 0.5 to 2 percent, depending on your municipality and local government requirements. Contact your local tax collector or municipality to determine the local income tax rate.