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New York’s Pass-Through Entity Tax (PTET) for S Corps and partnerships

New York’s Pass-Through Entity Tax (PTET) for S Corps and partnerships

The New York PTET is a relatively new tax elective, which was initially implemented in the 2021 tax year, and serves to help certain individuals bypass the $10,000 federal limitation on personal state and local tax deductions, by making deductible tax payments through the business.

S corporations and partnerships pay an entity-level tax to New York State, which is deductible as a business expense for federal tax purposes. The federal deduction reduces the taxable income passed through to the shareholders and partners and reduces adjusted gross income subject to federal income tax. The tax payment is eligible as a credit on the personal state income tax returns of the shareholders and partners of the entity.

If your New York S-Corporation or Partnership anticipates a profit in 2022, you may benefit from electing into the PTET.

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The deadline to elect into New York’s PTET for 2022 is March 15, 2022. To opt-in by filing the election, S corporations and partnerships must use their Business Online Accounts with the Department of Taxation and Finance. Note that, only an authorized person can make the election on behalf of an eligible entity. Tax professionals may not make the election on behalf of their clients. Once the election is made it is irrevocable for that tax year.

Electing entities can opt-in on their Business Online Account using the link below:

https://www.tax.ny.gov/online/

For those pass-through entities electing in, PTET estimates will be due on the following dates in 2022:

March 15, June 15, September 15 and December 15.

Estimates must equal 90% of the current year’s tax due or 100% of the prior year’s PTET (if opted in), to avoid underpayment penalties. If you elect to opt-in and need assistance calculating estimated payments, please contact us at rcedenco@fibrick.com.

The due date of the 2022 PTET return is March 15, 2023, although electing entities can apply for a six-month extension.

For more information on the New York PTET, please visit the link below:

https://www.tax.ny.gov/bus/ptet/#optin

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