OVERVIEW:
New York’s 2021-2022 Budget Act included a new elective pass-through entity tax (PTET), offering taxpayers an opportunity to reduce their overall tax burden annually. This is largely seen as a win for business owners who were adversely affected by the cap of the SALT deduction. As we wrote about back in July, each business will need to evaluate the benefits and determine whether the election is beneficial to them.
WHO:
Authorized persons on behalf of eligible Partnerships and S Corporations can make the PTET election. According to the NYS website, tax professionals may not make this election on behalf of their clients.
WHAT:
The New York PTET allows the business the option to pay the individual partner/shareholders’ New York tax at the entity level which provides a payment offset against the partner/shareholders’ New York tax liability when they file their personal NYS tax returns for the year the PTET is elected.
WHEN:
Business owners must opt-in for the 2021 tax year no later than October 15th, 2021. For tax years beginning on or after January 1, 2022, the entity may opt-in no later than March 15th of that year. There are no known extensions of these deadlines known at this time. All businesses must pay the tax in 2021 online to receive the benefit of the PTET. At this time, NYS does not have the ability to accept payments online but expects to be up and running by December 2021.
WHERE:
The election can only be done through the entity’s NYS Business Online Services account (https://www.tax.ny.gov/online/createaccount.htm#bus). If you need assistance, please call our office (516-5641-6549) and speak to our in-house specialist who can walk you through the process.
WHY:
The Federal Tax Cuts and Jobs Act (TCJA) of 2017 placed a $10,000 cap on state and local itemized deductions starting with the 2018 tax year-the notorious SALT Cap. The PTET is designed to eliminate the adverse impact that the SALT cap had on a pass-through owners’ federal income tax liability. Each business will need to evaluate the benefits and determine whether the election is beneficial to them.
Please give us a call at our offices (516-541-6549) or email us so we can help you take advantage of this tremendous opportunity!