Pennsylvania Non Resident Income

[jctx]

If anyone can help…we filed a non resident tax return for Pennsylvania. Client received a Qui Tam civil settlement in the Pennsylvania District Court. He received a 1099 Misc from his law office with PA listed as the state but no state income was listed in the box. He lives in Texas. We cannot get an answer from the PA revenue agents via online discussion and can’t get a hold of anyone by phone there. We are trying to see if the non resident PA return was necessary or being a non resident would make it non taxable in PA. Non resident status is what we are trying to find out. Anyone from Pennsylvania can help?  Thank you. John. EA from Texas. 

[sjrcpa]

"He received a 1099 Misc from his law office with PA listed as the state"

Does this mean his lawyer is in PA?

If your client does not live in PA he is a nonresident, so i don't understand "Non resident status is what we are trying to find out"

I am not a lawyer, but my first hit for qui tam showed:

"A qui tam action is a lawsuit brought by a private person on behalf of the government against a party alleged to have violated a statute or a contract with the government, especially involving fraud or false claims. The person who brings the action is called a relator or a whistleblower. The relator may share part of the penalty or recovery with the government. Qui tam actions are created by statutes to encourage citizens to assist the government in enforcing its laws"

What was the nature of the Settlement? Was your client a whistleblower?

[jctx]

We know the settlement is taxable in Pennsylvania as a resident based on a PA Supreme Court decision in 2021. But we cannot get a definitive answer on if a non resident is taxed as well. The 1099 listed PA as the state but the 1099 box for state income was blank. The law firm that handled the settlement was not sure either….at this point. Thanks. 

[sjrcpa]

What do you think makes it PA source income?

[jctx]

The PA Supreme Court ruled a Qui Tam case was taxable in PA at the state and local level.  Don’t know if this person was a resident or not but we can’t get any confirmation of this holds true to a non resident.  This was from 2021 I believe. 

Settlements awarded to a whistleblower via qui tam lawsuits are taxable income, Pennsylvania’s highest court has ruled in a case related to soured mortgages issued by a Bank of America unit.

The Pennsylvania Supreme Court, Western District on Monday reversed a lower court decision, ruling that $34.6 million awarded to whistleblower Edward O’Donnell for his role in a False Claims Act lawsuit against his employer is subject to state personal income tax and local taxes. 

[sjrcpa]

I repeat:

What do you think makes it PA source income?

I agree, if it is PA source income it is taxable in PA and a PA nonresident would be taxed on it.

[jctx]

The 1099 issued listed PA as the State where the trial was but listed no state income in the box. The law firm that issued the 1099 at this point has no opinion. 

[sjrcpa]

I don't think listing PA on the 1099 makes it PA source income. If the issuer of the 1099 has no opinion, why did they put PA on the form?

I think you need to delve into the facts and circumstances of the case and settlement to determine if it is PA source income.

[IRonMaN]

"lawsuit against his employer is subject to state personal income tax and local taxes"

That says it is subject to state personal income tax, it doesn't say subject to "PA income tax".  Are you reading more into something than what is really there?

[jctx]

I believe the court case mandated he pay PA state and local taxes as a resident.  We cannot get any info on non resident status and if the settlement is disregarded for PA purposes as a non resident.  The PA Revenue department has not answered this as well via online back and forth with them.  Just sends me a handout to read, which is already been done and nothing in there to answer this.

[sjrcpa]

"I believe the court case mandated he pay PA state and local taxes as a resident. "

You believe? Get the language.

[jctx]

I already did and he had to pay 

[sjrcpa]

Then what's with the questions here?

[IRonMaN]

I'm glad I'm not the only one confused here 😕