It’s Not Too Early to Consider a 2022 NY PTET Election

While most businesses are focusing on closing their books for 2021 and turning their attention to tax filing season, it’s not too early to start thinking about 2022 taxes, specifically New York’s Pass-Through Entity Tax (PTET). This elective tax regime, which was first implemented in the 2021 tax year, serves to help certain businesses bypass the $10,000 federal limitation on state and local tax deductions. Electing S corporations and partnerships pay an entity-level tax to New York, which is deductible as a business expense for federal tax purposes. The state tax payment is passed through to the shareholders and partners of the entity and is eligible as a credit on their individual state tax returns. Moreover, the federal deduction reduces the taxable income passed through to the shareholders and partners, thereby reducing adjusted gross income subject to federal income tax.

While the deadline to elect into the PTET for 2021 has passed, the deadline to elect into New York’s PTET for 2022 is March 15, 2022. To opt in by filing the election, S corporations and partnerships must use their Business Online Accounts with the Department of Taxation and Finance. Note, once the election is made it is irrevocable for that tax year.

For those pass-through entities electing in, PTET estimates will be due on March 15, June 15, September 15 and December 15, 2022 and must equal 90% of the current year’s tax due or 100% of the prior year’s PTET, if opted in, to avoid underpayment penalties. The due date of the 2022 PTET return is March 15, 2023, although electing entities can apply for a six-month extension.

Many New York pass-through entities that elected into the tax regime for 2021 will soon be realizing the financial benefits as they begin to file their 2021 tax returns with reduced federal income coupled with a state tax credit. These benefits may continue to serve taxpayers well in 2022. If you have questions about how New York’s PTET may benefit you, or the process of electing into the regime, please contact Alan Goldenberg, Practice Leader of Anchin’s State and Local Tax and Tax Controversy groups, or your Anchin Relationship Partner.