What Is a PA Schedule RK-1 & How Do I Report It?

If you are a Pennsylvania resident and an owner in a partnership, S-corporation, or a beneficiary of an estate or trust, you will receive a PA Schedule RK-1. This document is issued by the pass-through entity to report your share of its income, losses, deductions, and credits, calculated according to Pennsylvania’s tax laws. The figures on this schedule are needed to accurately complete your personal Pennsylvania income tax return, the PA-40. The RK-1 is an informational tool and is not filed with your return.

Decoding Your PA Schedule RK-1

To properly use your PA Schedule RK-1, you must understand its layout. The schedule’s Part I, “Distributive Share Items,” breaks down your portion of the entity’s earnings into Pennsylvania’s specific income classes, which may differ from federal classifications. You will find lines for net income or loss from business operations, net gains or losses from the sale of property, interest, dividends, and income from rents, royalties, patents, and copyrights.

Part II of the schedule contains your identifying information. Part III, “Credits,” is an important section, detailing any Pennsylvania tax credits that have been passed through to you. These can include credits for taxes paid to other states on income that is also taxed by Pennsylvania, as well as various business-related credits.

A distinction exists between Schedule RK-1 and its counterpart, Schedule NRK-1. The PA Schedule RK-1 is for Pennsylvania residents and reports your share of the entity’s total income, regardless of where it was earned. In contrast, the PA Schedule NRK-1 is issued to nonresidents and separates the entity’s total income from the income specifically sourced to Pennsylvania. This is important for nonresident filers, as they are only taxed on their Pennsylvania-source income.

How to Report RK-1 Information on Your PA-40

Once you understand the RK-1, you transfer those figures to your Pennsylvania Personal Income Tax Return (PA-40) and its supporting schedules. This process involves matching the income types from the RK-1 to the correct forms. For instance, the amount for “Net income (loss) from business operations” is carried over to PA Schedule C, Profit or Loss From Business or Profession.

Other income items have designated places. Net gain or loss from the sale of property is reported on PA Schedule D, while income from rents, royalties, patents, and copyrights is transferred to PA Schedule E. Interest and dividend income from the RK-1 are combined with your other interest and dividends and reported directly on the main PA-40 form. After completing these supporting schedules, their totals are carried to the main PA-40 form.

Claiming tax credits from Part III of the RK-1 requires using PA Schedule OC, Other Credits. You must attach the Schedule OC to your PA-40 to receive the benefit of these credits. If you are claiming a credit for taxes paid to another state, a common credit on an RK-1, you will also need to complete and attach PA Schedule G-L, Resident Credit for Taxes Paid to Other States.

Navigating the PA Schedule NRK-1 for Nonresidents

If you are not a resident of Pennsylvania but have income from a PA-based pass-through entity, you will receive a Schedule NRK-1. This form is structured differently from the RK-1 for nonresidents. The primary feature of the NRK-1 is its two-column format for reporting income: Column A shows your share of the entity’s total income from all sources, while Column B shows only the portion derived from Pennsylvania sources.

This separation is based on apportionment, where the entity calculates the percentage of its business activity within Pennsylvania. As a nonresident, you are only subject to Pennsylvania income tax on the amounts listed in Column B. This PA-source income is what you must report on your nonresident Pennsylvania tax return, using the figures from Column B to complete your PA-40 and its supporting schedules.

The tax liability for a nonresident is calculated based on this PA-source income at the state’s flat tax rate of 3.07 percent. Any tax paid to Pennsylvania can then be claimed as a credit on your home state’s income tax return, preventing double taxation. This requires you to file a tax return in your state of residence and claim the credit, for which you will need a copy of your completed Pennsylvania return.