Filing Form REV-976 by mistake. Owners searching for "the Pennsylvania S corporation election" find REV-976 — whose title contains the words "Pennsylvania S Corporation" — and file it, believing it is how you elect PA S status. It is the exact opposite: REV-976 is the election NOT to be taxed as a Pennsylvania S corporation. It requires the signatures of 100 percent of the shareholders and, once made, CANNOT BE REVOKED FOR FIVE YEARS. The result is five straight years of PA corporate net income tax (7.49% in 2026) on all the company's income at the entity level, plus tax again to the shareholders on distributions — an entirely self-inflicted double tax, with no unwind. Runner-up: Pennsylvania has no PTET, so PA S corp owners get zero SALT-cap workaround; and a brand-new PA Annual Report obligation started in 2025 (Act 122 of 2022 repealed the old decennial report), with administrative dissolution beginning for reports missed in the 2027 calendar year.
S-corp election in Pennsylvania
In short
Essentially no PA entity-level income tax: the capital stock/franchise tax was eliminated for tax years beginning January 1, 2016 and after, and a PA S corp owes corporate net income tax only to the extent of built-in gains (7.99% for 2025, 7.49% for 2026). The recurring obligations are nonresident shareholder withholding at 3.07% and a $7 Department of State annual report.
Does Pennsylvania recognize the federal S election?
Pennsylvania automatically recognizes the federal S election: "Federal subchapter S corporation elections will automatically be a Pennsylvania S corporation." There is nothing to file to become a PA S corp. The only PA-level filing is the OPPOSITE — Form REV-976, "Election Not to be Taxed as a Pennsylvania S Corporation," which a federal S corp files if it does NOT want PA S treatment. REV-976 must be signed by 100 percent of the shareholders, must be filed on or before the due date (or extended due date) of the RCT-101 PA Corporate Net Income Tax Report for the first tax period the election is to be in effect, and once made CANNOT BE REVOKED FOR FIVE YEARS. PA S corporation shareholders report their shares on their personal income tax returns at the flat PA personal income tax rate of 3.07%.
Tax the entity still owes
(1) CORPORATE NET INCOME TAX: "Pennsylvania S corporations are subject to the corporate net income tax only to the extent of built-in-gains." Rate schedule under Act 53 of 2022: 2023 = 8.99%, 2024 = 8.49%, 2025 = 7.99%, 2026 = 7.49%, 2027 = 6.99%, 2028 = 6.49%, 2029 = 5.99%, 2030 = 5.49%, 2031 and thereafter = 4.99%. (2) CAPITAL STOCK / FOREIGN FRANCHISE TAX: "Eliminated for tax years beginning Jan. 1, 2016 and after" — no PA net worth or franchise tax applies. (3) PERSONAL INCOME TAX: flat 3.07% on the shareholder's share, reported on the PA-40. (4) NONRESIDENT SHAREHOLDER WITHHOLDING: "A PA S corporation with shareholders who are nonresident individuals, nonresident estates, and nonresident trusts (owners) must withhold and pay Pennsylvania personal income tax on each owner's expected share of distributable Pennsylvania-source taxable income" — at the 3.07% PIT rate. (5) DEPARTMENT OF STATE ANNUAL REPORT: $7 for business corporations, LLCs, LPs and LLPs ($0 for nonprofits and not-for-profit LPs/LLCs), filed at file.dos.pa.gov. (6) LOCAL: municipalities and school districts levy Earned Income Tax and Local Services Tax on wages, and Philadelphia levies its own Business Income and Receipts Tax and Wage Tax on entities and employees located there.
Registering for payroll
Three layers, and the third is the one people miss. (1) STATE WITHHOLDING: register with the PA Department of Revenue for an employer withholding account via the PA-100 Enterprise Registration through myPATH. (2) UNEMPLOYMENT COMPENSATION: register with the PA Department of Labor & Industry, Office of Unemployment Compensation Tax Services (the PA-100 covers this as well). (3) LOCAL: PA employers must also withhold the local Earned Income Tax (EIT) and remit it to the tax collector appointed for the employer's work-location tax collection district (Berkheimer, Keystone Collections, Jordan Tax Service, etc.), and must withhold the Local Services Tax (LST) where levied. Employers must obtain a completed Residency Certification Form from each employee to determine the correct EIT rate and PSD code. If the business is located in Philadelphia, register separately with the Philadelphia Department of Revenue for the City Wage Tax and the Business Income and Receipts Tax.
Annual filings
PA-20S/PA-65, PA S Corporation/Partnership Information Return, with PA Schedules RK-1 (resident shareholders) and NRK-1 (nonresident shareholders) — filed for each taxable year in which the PA S corporation earned, received or acquired any gross taxable income (loss) allocable or apportionable to Pennsylvania, or had PA resident shareholders/estates/trusts/other pass-through owners; calendar-year filers file on the PA-40 cycle (April 15). Extension request via REV-276. RCT-101, PA Corporate Net Income Tax Report — required only where built-in gains tax applies (and to close out a corporate tax account); the CNI report for a tax year ending December 31 is due May 15 of the following year per the Department's 2026 Tax Due Date Reference Guide (DPO-05). REV-976, Election Not to be Taxed as a Pennsylvania S Corporation — for a tax year ending December 31 of the prior year, due May 15. Nonresident withholding remittances and reconciliations. PA Annual Report [DSCB:15-146] with the Department of State — business corporations (domestic and foreign) file between January 1 and June 30 each year, $7 fee, online at file.dos.pa.gov; LLCs file January 1 – September 30; LPs, LLPs, business trusts and professional associations file January 1 – December 31. Employer withholding quarterly returns and the annual W-2 transmittal; L&I quarterly UC reports; local EIT quarterly returns and annual reconciliation; LST remittances.
Pass-through entity tax
NO. Pennsylvania has NOT enacted a pass-through entity tax. The Department of Revenue's "Partnerships/S Corporations/LLCs" tax-type page and the PA Personal Income Tax Guide chapter on Pass Through Entities contain no PTET provision, form, election, or credit. PA is one of the very few income-tax states (with Delaware and North Dakota) that has never adopted a SALT-cap workaround, despite repeated bills — the 2024-2025 budget omitted a PTET election, and secondary reporting indicates the final 2026 budget legislation likewise did not include one. Practical consequence: a Pennsylvania S corp owner gets NO state-level SALT-cap workaround, unlike owners in every neighboring state (MD, VA, WV, OH, NY, NJ, DE excepted).
The mistake owners make most often in Pennsylvania
Filing your federal Form 2553
Businesses operating in Pennsylvania send Form 2553 to the IRS Kansas City service center — fax 855-887-7734. Full address and filing checklist for Pennsylvania.
Frequently asked questions
Does Pennsylvania require a separate S-corporation election?
No. Pennsylvania does not require a separate state election. Pennsylvania automatically recognizes the federal S election: "Federal subchapter S corporation elections will automatically be a Pennsylvania S corporation." There is nothing to file to become a PA S corp.
What tax does an S corporation pay in Pennsylvania?
Essentially no PA entity-level income tax: the capital stock/franchise tax was eliminated for tax years beginning January 1, 2016 and after, and a PA S corp owes corporate net income tax only to the extent of built-in gains (7.99% for 2025, 7.49% for 2026). The recurring obligations are nonresident shareholder withholding at 3.07% and a $7 Department of State annual report.
Where do I file Form 2553 from Pennsylvania?
With the IRS Kansas City service center. Fax 855-887-7734, or mail to Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999.
What is the most common S-corp mistake in Pennsylvania?
Filing Form REV-976 by mistake. Owners searching for "the Pennsylvania S corporation election" find REV-976 — whose title contains the words "Pennsylvania S Corporation" — and file it, believing it is how you elect PA S status. It is the exact opposite: REV-976 is the election NOT to be taxed as a Pennsylvania S corporation. It requires the signatures of 100 percent of the shareholders and, once made, CANNOT BE REVOKED FOR FIVE YEARS. The result is five straight years of PA corporate net income tax (7.49% in 2026) on all the company's income at the entity level, plus tax again to the shareholders on distributions — an entirely self-inflicted double tax, with no unwind. Runner-up: Pennsylvania has no PTET, so PA S corp owners get zero SALT-cap workaround; and a brand-new PA Annual Report obligation started in 2025 (Act 122 of 2022 repealed the old decennial report), with administrative dissolution beginning for reports missed in the 2027 calendar year.
Compare with other states: Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah.
Sources
- https://www.pa.gov/agencies/revenue/resources/tax-types-and-information/partnerships-s-corporations-llcs
- https://www.pa.gov/agencies/revenue/forms-and-publications/pa-personal-income-tax-guide/pass-through-entities
- https://www.pa.gov/content/dam/copapwp-pagov/en/revenue/documents/formsandpublications/otherforms/documents/dpo-05.pdf
- https://www.pa.gov/agencies/revenue/resources/tax-rates/corporation-tax-rates
- https://www.pa.gov/agencies/dos/programs/business/types-of-filings-and-registrations/annual-reports
- https://www.pa.gov/content/dam/copapwp-pagov/en/revenue/documents/formsandpublications/formsforbusinesses/businessregistration/documents/rev-976.pdf
File your Form 2553 correctly
Scorply completes your federal election and includes a Pennsylvania guide in your packet, so you know exactly what else you owe here.
Start my Form 2553Researched from official Pennsylvania sources and verified July 30, 2026. State tax rules change. This is general information, not tax advice — confirm with the state or a CPA before you rely on it.