New York introduced a new, elective Pass-through entity tax (PTET) that partnerships or New York S-corporations may want to take advantage of. The PTET tax gives eligible partnerships and New York S-corporations the option to elect into the new pass-through entity tax. This allows owners of eligible entities to deduct a larger portion of their NYS income taxes paid against their federal income. The deduction was limited by the federal Tax Cuts and Jobs Act of 2017 which limited the deduction of state and local income tax to $10,000. Important items to know about the New York PTET.
When is the deadline to opt in?
An election must be made annually and is irrevocable for the year of the election. The deadline for 2021 is coming quickly. Pass-through entities electing-in to the tax for 2021 must do so by October 15th.
The PTET election is available for tax years beginning on or after January 1, 2021. If a partnership or S-corporation’s fiscal year starts prior to January 1, 2021, they are ineligible to take the election for tax year 2021.
For subsequent years, the election must be made by March 15th of the tax year.
Who is eligible?
An eligible partnership is any partnership that files form 1065 and is not a publicly traded partnership. Even if the partnership has partners that are not eligible for a PTET credit, including corporate partners, the partnership is still eligible to make the election.
An eligible S-corporation is any New York S-corporation that files a form 1120S.
Who can make the election?
Only an authorized person may make this election on behalf of an eligible partnership or S-corporation. Tax professionals are not allowed to make this election for their clients.
Which businesses CANNOT make the election?
• Corporations that are not New York S-corporations
• Non-profit corporations
• Sole proprietorships
• Single-member LLCs
How to make the election:
The election to opt into PTET must be done online annually and is not revocable for that year. An authorized person can opt in through the eligible entity’s Business Online Services account. If the entity does not have an account, the authorized person will need to create one on the New York State Department of Taxation and Finance website.
Estimated tax payments for PTET:
For tax year 2021:
An entity is not required to but may choose to make optional online estimated tax payments December 31, 2021. An online estimated tax application form will be available by December 15, 2021.
For tax year 2022 and after:
An electing entity is required to make estimated tax payments for PTET. Estimated payments are due on or before March 15, June 15, September 15, and December 15 in the calendar year prior to the year in which the due date of the PTET return falls.
Contact Us for Assistance
If you have any questions about election and/or questions regarding eligibility, please contact our professionals at The Innovative CPA Group at 203-489-0612 or via our contact form.