For tax years beginning on or after January 1, 2021, eligible partnerships and S corporations may annually elect to pay the “pass-through entity tax” (PTET). This is an optional election.
The benefit of doing so is that NYS income taxes normally limited to the state and local tax deduction of $10,000 on Schedule A can, with this election, be deducted in full through a tax deduction reducing the ordinary income pass-through to the NYS partners and S corporation shareholders.
The election to opt into PTET for the tax year beginning on or after January 1, 2021 must be made through the entity’s NYS Business Online Service account no later than October 15, 2021. For tax years beginning on or after January 1, 2022, the annual election may be made online no later than March 15.
On or before March 15, an electing entity must file an annual PTET return using the online return application to report the necessary information, what estimates were paid if any, and the balance due if any. An electing entity may make an online request by March 15 for a six-month extension to file its annual PTET return. Once an annual PTET return is filed, it may NOT be amended.
Eligible taxpayers that receive a PTET credit from an electing entity may claim the credit on Form IT-653, with such credit becoming an addback on their personal tax return.
While no estimates are required for 2021, both accrual and cash basis taxpayers may choose to make an optional online estimate by December 31 in order to obtain the tax deduction in the current year. An online estimated tax application for PTET will be available by December 15, 2021. For 2022 and later years, online quarterly estimates of PTET are required. Estimated payments are due on or before March 15, June 15, September 15 and December 15.
This is a complicated area that will benefit certain taxpayers. Please reach out to LVBW with any questions.