The PTET is an optional tax that partnerships or New York S corporations may annually elect to pay on certain income for tax years beginning on or after January 1, 2021.
If an eligible partnership or eligible New York S corporation (electing entity) elects to pay the PTET, its partners, members, or shareholders subject to tax under Article 22 (personal income tax) may be eligible for a PTET credit on their New York State income tax returns.
Please visit the NYS PTET Webpage for further guidance. In addition, please note the following:
How to make the election? The Pass-Through Entity Tax (PTET) Annual Election Web application is now available per the NYS PTET Webpage. An authorized person can opt into the PTET on behalf of an eligible entity through the entity’s Business Online Services account. If the entity does not have a Business Online Services account, the authorized person will need to create one. The authorized person must electronically sign and attest to having the electing entity’s authorization. Tax professionals may not make this election on behalf of their clients. SEE ATTACHED STEP-BY-STEP INSTRUCTIONS ON HOW TO MAKE THE ELECTION.
When to make the election? An entity may opt into the PTET on behalf of an eligible partnership or S corporation for the 2021 taxable year no later than October 15, 2021. Also, please note the election for the tax year 2022 is due March 15, 2022.
Irrevocable? The election to opt into the PTET must be made online on an annual basis and is irrevocable. (Note: Once elected, it cannot be revoked).
2021 Estimates: The electing pass-through entity will not be required to make estimated payments for 2021. As such, PTE owners are still required to make estimated payments without taking into account of the PTE credit.
Federal tax deduction considerations: For taxpayers deemed to require a PTE tax payment by December 31, 2021, in order to take the state and local tax (SALT) deduction on their federal return, taxpayers will be provided the option to make estimated tax payments. New York’s webpage explains that an online estimated tax application for the PTET will be available by December 15, 2021.
Annual Return: Per NYS PTET Webpage, an electing entity must file an annual PTET return using the online return application to report the information required under Article 24-A for the PTET taxable year.
Extension: Electing entity can request a six-month extension of time to file through its Business Online Services account. The extension is an extension of time to file the annual return; it is not an extension of time to pay any tax due. The electing entity must pay all the PTET by the original due date of the return, or penalties for failure to pay taxes due are applicable.
Resident State Credit for PTET Paid: If there are nonresidents owners, it is important to consider the election to pay tax at the PTE level may result in the loss of resident credit for taxes paid for New York nonresident. States may not permit their residents to use resident credits for the nonresident PTE-level tax imposed on pass-through income in New York. Therefore, it’s important to consider the potential loss of a resident credit, resulting in possible double state taxation.
Have questions, Contact:
Sebastiano Banchitta, CPA, CGMA
T (732) 828 1614
D (732) 379 5215
M (718) 877 1476