The new New York State pass-through entity tax (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 a partnership or New York S corporation elects to pay PTET – partners, members or shareholders of an electing entity who are subject to tax under Article 22 (personal income tax) may be eligible for a PTET credit on their New York State income tax returns. The PTET was created as a workaround to the $10,000 state and local income tax cap (SALT limitation) imposed under the Tax Cuts and Jobs Act of 2017, which limited the amount of state and local tax an individual could deduct on their federal tax return.
Election
The 2022 PTET election period is now open. Eligible entities may opt-in to the PTET for 2022 no later than March 15, 2022. The election must be made online by using the PTET Annual Election application in the entity’s NYS Business Online Services account. Only an authorized person can make the election on behalf of an eligible entity. The election to opt-in to the optional PTET must be made annually and is irrevocable. If this is the entity’s first time opting in to PTET, we recommend opting in early.
Quarterly Estimates
An electing entity is required to pay estimated tax on the amount of PTET calculated for the current taxable year using their Online Services account. Quarterly 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.
Each quarterly payment should be an amount equal to at least 25% of the required annual payment for the taxable year. The required annual payment is the lesser of:
- 90% of the PTET shown on the return of the electing entity for the taxable year; or
- 100% of the PTET shown on the return of the electing entity for the preceding taxable year.
If the electing entity did not make the election to be subject to PTET for the preceding year, the required annual payment is 90% of the PTET required to be reported on the PTET return for the taxable year.
Consult with your Tronconi Segarra & Associates tax advisor to determine if the PTET election would be beneficial to you.
Author: Melissa S. Howell, CPA, Principal, Small Business Department, Tronconi Segarra & Associates LLP. She may be reached at mhowell@tsacpa.com or 716.633.1373.
