01 Mar New York State Pass-Through Entity Tax Considerations for 2022
This upcoming year will be the first full year of the New York State Pass-Through Entity (PTE) Tax and there are new procedures that need to be considered. If you are interested in more information from when this was first introduced, please read our previous news blasts. Click here to access.
Clients who made PTET Election for 2021
The first item to be addressed is the filing of the PTE Return for 2021. As Tax Preparers, we are allowed to file this return on your behalf. To do so, we will first need authorization from you by signing an E-ZRep form (if one is not already on file). Clients have to sign an E-ZRep Form or watch this video to learn how to add Fuller Lowenberg as your Tax Professional on your NYS Online Services Account. Click here to access.
Once Fuller Lowenberg has access to the NYS Online Services Account, we will be able to prepare and file the 2021 PTE Return. The deadline to file this return is March 15, 2022. New York State does allow for this return to be extended an additional six months. However, this is only an extension to file the return, not an extension of time to pay. If an estimate payment was made back in December 2021, this will appear on the return to calculate a net amount due or refund. Unfortunately, New York state is currently not allowing the refund to be applied as an overpayment to future periods and instead are issuing paper checks. The state currently estimates that the process of mailing out checks could take anywhere from 60-90 days.
Once the PTET return has been filed, each partner’s proportionate portion of the PTET Credit will be reported on their New York State K-1 who will claim the credit on their individual tax return that is due April 18, 2022.
Clients who plan on making PTET Election for 2022
The next item to address is the election for the 2022 return and corresponding quarterly estimates. The deadline to make the Pass-Through Entity Election is also March 15, 2022. New York State still does not allow tax practitioners to make this election on behalf of their clients. Because of this requirement, you must have a NYS Online Account for each entity making the PTET Election. The business must have a representative log into their Online Business Services Account and make the election. We have provided a tutorial video below that can be used as a walk-through/guide on making the election.
Once the election is made, this signals to the state that the business will now be required to make four quarterly estimate tax payments during the year. This is different than the 2021 process. In order to avoid underpayment penalties, the entity must make four quarterly tax payments equal to at least 25% of the required annual payment for the taxable year. The total quarterly estimates must equal the lesser of: 90% of the PTET shown on the return for the current taxable year, or 100% of the PTET shown on the return for 2021 tax year. If the entity did not opt in for the PTET during 2021, then the required annual payment is 90% of the tax to be reported on the PTET for the current year.
We have provided a tutorial video below that can be used as a walk-through/guide on making the quarterly estimate payments. Click here to access. Please notify us once the election has been made. You must make the election followed by an estimated payment prior to March 15, 2022.
Even though individuals claim the PTE Tax Credit on their individual tax return, they must still make quarterly estimate payments based on their other income items (Interest, Dividends, Rental income) because New York State considers all tax credits to be paid at the year end. If an individual does not make quarterly estimate tax payments, they may be subject to underpayment penalties.
Recap of important Tax Deadlines:
March 15, 2022
- 2021 Pass-through Entity Return (or extension, if needed)
- 2022 Pass-through Entity Election
- 2022 1st Quarter Estimate for Pass-Through Entity Tax (if election is made)
June 15th, 2022
- 2022 2nd Quarter Estimate for Pass-Through Entity Tax (if election is made)
September 15th, 2022
- 2022 3rd Quarter Estimate for Pass-Through Entity Tax (if election is made)
- 2021 Pass-through Entity Return (if extension was granted)
December 15th, 2022
- 2022 4th Quarter Estimate for Pass-Through Entity Tax (if election is made)