The Lancaster County Tax Collection Bureau (lctcb.org) recently clarified their stance on the quarterly tax return and payment obligation for individuals who earn at least $25,000.00 per year and are either self-employed or do not have the tax withheld from his or her paycheck. These individuals must file quarterly tax returns and make quarterly estimated tax payments, or will be subject to interest and penalties for any tax that was not paid by the due date, plus a $25.00 late fee. Quarterly payments are due 30 days after the end of each calendar quarter.
In the past, the Tax Collection Bureau has taken a more forgiving approach with these taxpayers, foregoing the fine and the quarterly payment obligation even though the Bureau revised its Supplemental Information Regarding Annual and Quarterly Tax Return Filing Requirements and Filing Extensions (http://www.lctcb.org/earned-income-tax/annual-return-filing-requir.pdf) on January 1, 2014.
Here’s the full text of Section 404 which covers Individual Quarterly Returns:
SECTION 404 – INDIVIDUAL QUARTERLY RETURNS
Every Taxpayer with earned income or net profits not subject to Employer withholding shall file by April 30 a declaration of estimated income not subject to withholding during the year. Consistent with guidance promulgated by DCED, the Taxpayer shall file quarterly returns on April 30, July 30, and October 30 of the current year, and January 30 of the succeeding year, and pay to the Collector in four equal quarterly installments the Tax due on the estimated income. A Taxpayer who first anticipates any such income after April 15 shall file the declaration on or before the first quarterly return due date that follows the date on which the Taxpayer first anticipates such income. Quarterly returns are not required if the individual’s total income subject to Tax for a year is less than $25,000.
As provided in Section 503, a Taxpayer who fails to file quarterly returns and make required quarterly payments is subject to interest, penalties, and fines as set forth in the Enabling Act, 53 P.S. § 6924.509(i). The interest and penalty amount shall be applied based on the requirement to pay in four equal quarterly installments Tax owed for the year. However, an individual shall not be subject to interest, penalties, or fines if: (1) the individual has paid in each quarterly installment an amount equal to 90% of the Tax owed for the year, divided by 4, minus any Tax payments for the year made by Employer withholding; (2) the individual has paid in each quarterly installment an amount equal to 100% of the Tax owed for the prior year, divided by 4, minus any Tax payments for the year made by Employer withholding; or (3) quarterly installments represent Tax owed on the actual amount of income earned during each calendar quarter.
For additional questions about quarterly filing and quarterly estimated tax payments, you can consult with your tax professional or review the earned income and net profits tax regulations located on the Lancaster County Tax Collection Bureau website, www.lctcb.org.
Matt Landis is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Widener University and works regularly with business owners and entrepreneurs.