Page last updated August 7, 2023
Find Answers to FAQs Related to COVID-19
The Department of Revenue is developing responses for taxpayers and tax professionals who have
specific questions related to the COVID-19 pandemic. Please visit the department’s
Online Customer Service Center to look through these responses. You can also use the
Online Customer Service Center to submit a specific question directly to a representative from the department.
Relief for Taxpayers During COVID-19 Pandemic
To help taxpayers facing financial challenges resulting from the COVID-19 pandemic, the Department of Revenue is providing taxpayers with increased flexibility, additional time to meet tax obligations, and relief from a number of compliance actions. The goal is to help Pennsylvania taxpayers and citizens during this unprecedented health crisis.
Read more about the increased flexibility for taxpayers here.
Federal Stimulus Checks Not Subject to PA Taxes
The stimulus checks, otherwise known as economic impact payments, being distributed by the federal government are not subject to Pennsylvania personal income tax. The payments are considered a rebate that is non-taxable in Pennsylvania. Additionally, Act 1 of 2021 (SB 109) that was signed by into law by the Governor specifically states the payments are not taxable under Pennsylvania's Tax Reform Code.
The payments are being distributed as part of federal economic stimulus legislation that has been passed in response to the COVID-19 pandemic.
The U.S. Treasury Department and the Internal Revenue Service have announced the payments are distributed automatically, with no action required for most people. However, if you didn't get any payments or got less than the full amounts, you may qualify for the Recovery Rebate Credit. Visit the
Economic Impact Payment Information Center on the IRS website for further information.
Taxability of Paycheck Protection Plan Loans
Act 1 of 2021 (SB 109) that was signed into law by the Governor on February 5, 2021 states that Paycheck Protection Plan (PPP) loans used to pay business expenses during the COVID-19 pandemic that are subsequently forgiven by the lender are not taxable income for Pennsylvania personal income tax purposes. The bill also states that for PA personal income tax purposes no deduction may be disallowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan.
For corporate net income tax, Pennsylvania taxable income is based upon federal taxable income. Pennsylvania law does not include an add back to or deduction from federal taxable income for forgiveness of a Paycheck Protection Plan loan.
Deferment of Federal Payroll Taxes Does Not Apply to PA Personal Income Tax
President Trump on August 8, 2020 issued three memoranda and an executive order that were aimed at providing additional economic support during the COVID-19 pandemic. One memorandum instructs the U.S. Secretary of the Treasury to defer the collection of payroll taxes for federal Social Security and Medicare payments. The deferral is in effect from Sept. 1 through Dec. 31 for workers who earn less than $4,000 every two weeks, according to the memorandum.
This deferral does not apply to Pennsylvania personal income tax withholding. Employers should continue to withhold Pennsylvania personal income tax from each payment of taxable compensation to their employees.
Hazard Pay is Taxable Compensation for Personal Income Tax
Governor Tom Wolf announced the availability of
$50 million in grant funding to help employers provide hazard pay to employees in life-sustaining occupations during the COVID-19 pandemic. Hazard pay is intended to keep front-line employees working in vital industry sectors across Pennsylvania.
The additional pay to employees is taxable as compensation for personal income tax.
For personal income tax purposes, the grant funding is not income to the employer (sole proprietor or pass-through entity). Even though the grant funding is not taxable income, the employer may still take a business expense deduction for grant funding used to pay its employees hazard pay.
For employers subject to the corporate net income tax, the tax treatment at the federal level will flow into the state base.
Commonwealth Hospitality Industry Recovery Program (CHIRP)
Act 1 of 2021 provided for county block grants. Applications should be made to the county Certified Economic Development Organizations (CEDOs) and Community Development Financial Institutions (CDFIs). Grants are not taxable to Pennsylvania Personal Income Tax (PIT). Questions about the application process should be directed to the county CEDOs and CDFIs.
COVID-19 Relief for Long Term Living Programs
Under Act 24 of 2020, the Pennsylvania Department of Human Services is empowered to make payments to nonpublic and county nursing facilities. For Pennsylvania Personal Income Tax purposes, the money should be treated as nontaxable grant money.
Coronavirus Food Assistance Programs
The United States Department of Agriculture (USDA) announced the first round of the Coronavirus Food Assistance Program, CFAP 1, on April 17, 2020. CFAP 1 provided direct relief to producers who faced price declines and additional marketing costs due to the COVID-19 pandemic. USDA announced an expansion of the Coronavirus Food Assistance Program on September 17, 2020. Coronavirus Food Assistance Program 2, CFAP 2, provided producers with financial assistance to absorb some of the continued impacts of the COVID-19 pandemic. For both Personal Income Tax and Corporate Net Income Tax purposes, these payments are taxable as subsidies.
Employee Retention Credit
The Employee Retention Credit (ERC) under the CARES Act is a federal credit that encourages businesses to keep employees on their payroll. According to the IRS, the refundable tax credit is 50% (or 70% for wages paid during the first 3 quarters of 2021) of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19. Please reference the following link from the Internal Revenue Service’s website regarding the ERC: Employee Retention Credit.
The department advises people to be mindful of potential ERC scams and promotions. The IRS has published guidance regarding such scams: IRS alerts businesses, tax-exempt groups of warning signs for misleading Employee Retention scams; simple steps can avoid improperly filing claims.
ERC for PA Tax Purposes
For Corporate Net Income Tax (CNIT) purposes, the calculation of taxable income begins with federal taxable income. There is no provision in Pennsylvania statute allowing the deduction of the disallowed federal wage expense. Therefore, there is no adjustment for Pennsylvania CNIT purposes.
For Personal Income Tax (PIT) purposes, any reduction to the wage expense for federal tax purposes that is a result of a credit against taxes withheld from the employee (generally, the "refundable" portion of the credit) would be deductible for Pennsylvania PIT purposes. Any reduction to the wage expense for federal tax purposes that is a result of a credit against the employer's (taxpayer's) own FICA liability (generally, the "non-refundable" portion of the credit) would not be deductible for Pennsylvania PIT purposes. Following is an example of how the expenses are treated for Pennsylvania PIT purposes:
Assume taxpayer pays employees $50,000 in wages for the year. The taxpayer receives a $35,000 ERC. Per the Federal Form 941, Federal income tax withheld on those wages is $12,500 and total FICA taxes are $7,650 ($3,825 employee FICA and $3,825 employer FICA). The taxpayer requests a refund of $14,850 on the Form 941 ($35,000 credit less $12,500 used to offset payment of employee withholding and $7,650 used to offset payment of FICA).
For federal purposes, the deductible wage expense will be $15,000 ($50,000 reduced by the $35,000 ERC).
For Pennsylvania purposes, the deductible wage expense will be $46,175 ($15,000 federal wage expense plus the $12,500 federal income tax withholding, plus the $3,825 employee FICA, plus the $14,850 refunded). The refunded portion of the credit does not reduce the deductible PA wage expense.
- the taxpayer is a sole proprietor, the taxpayer would simply report $46,175 on the wage expense line of Schedule C.
- If the taxpayer is a pass-through entity, the taxpayer would report an additional $31,175 ($12,500 federal income tax withheld, plus $3,825 employee FICA, plus the $14,850 refunded) on the PA-20S/PA-65 Schedule M as expenses that PA law allows that the entity could not deduct on its federal form. This would give the taxpayer a total wage deduction of $46,175 for PA PIT purposes.
Taxpayers do not need to make these calculations on a "per employee" basis. Figures from the quarterly 941s should be used for calculations.
Taxpayers who are approved for a retroactive ERC claim are required to amend their employer tax returns for the year in which the ERC is claimed to reduce their business expense deductions based upon the approved ERC credit. The reduction of business expenses should be based upon the rules outlined above. The reduction of business expenses will result in an increase in business income and may result in additional tax, interest, and penalties. Taxpayers may be eligible for an abatement of penalties. A request for an abatement should be made by filing a petition with the department’s Board of Appeals.
Stimulus Checks Not Considered Income For Property Tax/Rent Rebate Program
The stimulus checks, otherwise known as economic impact payments, being distributed by the federal government in response to the COVID-19 pandemic will not be considered as income for applicants of the Property Tax/Rent Rebate Program. The payment is considered a rebate that Pennsylvanians should not include on the Property Tax or Rent Rebate Claim form (PA-1000).
The Department of Revenue announced the deadline for older adults and Pennsylvania residents with disabilities to apply for rebates on rent and property taxes paid in 2019 has been extended from June 30 to Dec. 31, 2020.
Read more about the extension here.
Waiver of In-Person Service of Legal Action Requirement
Pursuant to PA.R.Civ.P. 402(b), the Office of General Counsel has agreed to waive the in-person service requirement on legal actions and accept service via email or mail during the COVID-19 pandemic. For matters which are to be served physically, please contact the Department of Revenue's Office of Chief Counsel at 717-787-1382 or
Temporary Waiver Lifted for IFTA/MCRT Requirements
The temporary waiver that was previously in place for certain requirements of the
International Fuel Tax Agreement (IFTA) and Motor Carrier Road Tax (MCRT) will expire as of March 1, 2021. Road tax decals, temporary permits and trip permits are required for all commercial carriers/vehicles traveling into or within Pennsylvania.
The prior waiver had been in effect since March 6, 2020, the date the Governor signed an emergency disaster declaration in response to the COVID-19 pandemic. The waiver stated that certain IFTA and MCRT requirements were temporarily waived to ensure the timely and efficient transportation of commercial vehicles during the pandemic.
Read the prior waiver here.
Additional Coronavirus Information
Learn more about the
coronavirus (COVID-19) outbreak and connect with
resources for Pennsylvanians.