5. ANÁLISIS RASGOS VULNERABLES
5.2. Vulnerabilidad viaria
Enter the amount of gambling and lottery winnings.
Pennsylvania Lottery prizes won on or after July 21, 1983, are not subject to PA tax. Powerball and Mega Millions prizes are treated in the same manner if the Powerball and Mega Millions tickets were purchased from a vendor in Pennsylvania. However, if a Powerball or Mega Millions ticket was purchased from a vendor outside Pennsylva- nia, the winnings are subject to tax as any other non-exempt lottery winnings.
For PA personal income tax purposes, a Lottery is any enterprise which involves a prize, a ran- dom determination of the winnings,
consideration and some form of an entry. The entry may involve a purchase, attendance at an event, submitting an entry, signing an entry form or other similar actions. Taxable winnings, whether in cash or property, are awarded in games of chance and lotteries that require the participant to make some form of consideration, e.g., raffles, fish bowls, bingo, etc. If no consid- eration is given, it is not gambling and not taxable. Consideration could be money, services or an incentive to perform an activity by the en- trant (which would not necessarily otherwise be done), such as mailing in an entry, telephoning or visiting a place of business or website.
As of Jan. 1, 2004, nonresidents of Pennsylvania are liable for PA income tax on PA-source winnings other than those from the Pennsylvania Lottery, Powerball and Mega Millions. This includes race- track winnings and slot machine winnings in addition to all other forms of games of chance mentioned above.
The Department of Revenue requires PA Sched- ule T be completed for the reporting of gambling and lottery winnings. For PA residents, winnings from PA casinos and out-of-state casinos are tax- able and must be reported on Schedule T.
Nonresidents are only required to report PA- source winnings. Spouses must report gambling activities separately on separate Schedules T, and the losses of one spouse cannot be used to offset the winnings of the other.
Losses
Pennsylvania Lottery losses incurred on or after July 21, 1983, may not be used to offset other gambling and lottery winnings. You may offset other gambling and lottery losses against gam- bling and lottery winnings, e.g., cost of each bingo game or raffle ticket.
Expenses
No expenses attributable to gambling and lottery income are deductible, e.g., travel, parking, postage, entry fees.
K-1 INCOME
The IRS and TaxAide expanded the scope of in- come that VITA/TCE volunteers deal with to include certain K-1 income. This K-1 income includes:
• Interest income, including tax-exempt interest
• Dividend income
• Net short-term and net long-term capital gains and losses
K-1s are schedules for individual shareholders, partners or beneficiaries that show their distrib- uted portions of income that passed through the entities to them at the individual level.
K-1s are received by any individual who is a shareholder in a corporation, a partner in a partnership or a beneficiary receiving a share of income through a trust. The individual owns a percentage of ownership in the corporation or partnership. When dealing with trusts, the indi- vidual, also referred to as the beneficiary, receives a certain percentage of income through the trust.
Types of K-1s
• Federal Schedule K-1
Form 1120S: Given to taxpayers who are shareholders in a corporation
If there is a Code A in Box 16 of the K- 1, review the statement that
accompanies federal Schedule K-1 to determine the source of the tax-ex- empt interest. Refer to the list of tax-exempt interest in your Personal Income Tax Preparation Guide to see whether or not the amount in Box 16 should be included in interest income. Form 1065: Given to taxpayers who are
partners in a partnership
If there is a Code A in Box 18 of the K- 1, review the statement that
accompanies federal Schedule K-1 to determine the source of the tax-ex-
empt interest. Refer to the list of tax- exempt interest in your Personal Income Tax Preparation Guide to see whether or not the amount in Box 18 should be included in interest income. Form 1041: Given to taxpayers who are
beneficiaries of a trust
Federal Schedule K-1 can be utilized when preparing returns for resident taxpayer.
Do not use federal Schedule K-1 for nonresident taxpayers; a nonresident taxpayer is only required to report PA- source income and the federal
Schedule K-1 includes income earned from sources inside and outside of PA. PA Schedule RK-1: Resident K-1 given
to PA resident taxpayers who are share- holders in a corporation, partners in a partnership, or beneficiaries of a trust PA Schedule NRK-1: Nonresident K-1
given to nonresident taxpayers who are shareholders in a PA corporation, partners in a PA partnership, or beneficiaries of a PA trust. Must use this K-1 if filing return for a nonresident; will only show tax- payer’s PA-source income from the corporation, partnership, or trust.
REPORT K-1 INCOME ON APPROPRIATE SCHEDULE
• Interest income from a K-1 should be re- ported on Schedule A (Line 7).
• Dividend income from a K-1 should be re- ported on Schedule B (Line 4).
• Net short-term/long-term capital gains or losses from a K-1 should be reported on Schedule D (Line 6).
NOTE: For trust K-1s, all positive income figures
should be added together (without deducting any net losses from the combination of short/long- term capital gains) and reported as trust income on PA Schedule J, Income from Estates or Trusts, and on Line 7 of the PA return.
LINE 9, TOTAL PA TAXABLE INCOME
Add Lines 1c, 2, 3, 4, 5, 6, 7 and 8 on Form PA-40.REMEMBER: A loss in one class cannot offset a
gain incurred in another class of income.
LINE 10, PA-40 CONTRIBUTIONS TO
MEDICAL SAVINGS ACCOUNTS, HEALTH
SAVINGS ACCOUNTS AND IRS SECTION
529 TUITION ACCOUNT PROGRAMS
Pennsylvania allows contributions to health sav- ings accounts, IRS Section 529 Tuition Savings Accounts and medical savings accounts to be claimed as deductions. If claiming a deduction for any of these contributions, one of the four followings codes must be entered in the space provided to identify the deduction being claimed.M – Medical savings account H – Health savings account T – Tuition savings account
C – Combined deduction from two or all three of the above
In addition, PA Schedule O must be completed. In no case may the total of the deductions ex- ceed the taxable income reported on Line 9 of Form PA-40.
In claiming the medical savings account and/or health savings account deduction, Pennsylvania follows federal rules. One must make a contribu- tion to a medical savings account or health savings account for federal purposes. The tax- payer may then take the same deduction on Line 10. If married filing separate returns, only one spouse may take this deduction. Pennsylvania also follows federal rules concerning withdrawals from these accounts. The amount reported on Line 10 should be the same amount reported on the federal income tax return.
NOTE: PA law does not impose an additional 15
percent tax for nonmedical withdrawals. How- ever, any amount included as income for federal income tax purposes as a result of a nonmedical withdrawal is included as interest income for PA income tax purposes.
If claiming a deduction for IRC Section 529 tu- ition account contributions, the limitation is on a per beneficiary, per taxpayer, per year basis, up to the amount of taxable income (if less than the $14,000 per beneficiary, per taxpayer limit). A taxpayer and spouse would each be able to con- tribute $14,000 to a qualified tuition plan for their child, provided each had income of $14,000 ($28,000 total income) separately included on their joint return. If a second beneficiary had an account, they could donate another $14,000 each to that beneficiary as long as they each had income of $28,000 (or $56,000 total income) separately included on their joint return. Contributions to a medical savings account are allowed up to the level allowed for federal income tax purposes. The amount comes from Line 36 of Form 1040, and a copy of the first page of the Form 1040 must be included with the PA-40 re- turn to verify this amount.
Contributions to health savings accounts are also deductible to the extent they are allowed for fed- eral income tax purposes. This amount comes from Line 25 of Form 1040, and a copy of the first page of the Form 1040 must be included with the PA-40 return to verify this amount.
NOTE: No deduction can be made for the
rollover from one IRC Section 529 plan into an- other or for the changing of a beneficiary within account.