Last updated on January 8th, 2024

Important Deadline Approaching

The PTET election period is open. To opt in, submit the Annual Election Application before or on March 15. For instructions on how to make the election, visit the NYS Department of Taxation and Finance website and click “Election.”

While RBT CPAs is always ready to do whatever it takes to support clients, by law we can’t make your PTET election. However, we can file your return and pay any tax owed if you complete and submit a TR-2000.

For more information or assistance, contact your local RBT CPAs, LLP office.

What is a pass-through entity (PTE)?

When a company’s income taxes are paid solely by its owners (rather than the business), it’s considered to be a PTE. The business doesn’t pay corporate taxes; instead, its owners pay taxes on their share of business income based on their personal tax rates. As a result, business owners avoid having to pay taxes twice – once at the corporate level and a second time on the income they receive as owners.

Are all businesses considered pass-through entities (PTEs)?

No. PTEs are distinguished by which tax form they file. To be considered a PTE, an entity must file a 1065 partnership or a 1120-S S corporation return. A sole proprietorship or LLC owned by a single member and reported via Form 1040, Schedule C, or Schedule E does not qualify as a PTE.

What is a pass-through entity tax (PTET)?

In 2017, the Tax Cuts and Jobs Act (TCJA) limited the deduction business owners could take for state and local taxes on income and property to $10,000. This impacted high tax states the hardest. States realized the same limit didn’t apply to businesses at a corporate level, and the pass-through entity tax (PTET) was born.

What is the NY State PTET election?

The PTET is not automatic; businesses must opt in to take the PTET each year. The opt in election must be made by no later than March 15. If a business does not want the PTET, no action is required.

What is the benefit of opting in to take the NY state PTET?

Businesses that opt in will receive a Federal tax deduction based on the PTET paid, while their owners may be eligible for a PTET credit on their NY state income tax returns.

Is there any potential downside to opting in?

PTEs and their owners should carefully consider whether a PTET election makes sense for them. Review the potential benefit prior to making an election to avoid any unwanted tax consequences for the PTE or its owners.

Who can make the PTET election?

Only an authorized person from an eligible entity – not a tax preparer – can make the election to opt in. For a partnership, an authorized person includes “any member, partner, owner or other individual with authority to bind the entity or sign returns under Tax Law 653.” For a New York S Corporation, an authorized person includes “any officer, manager or shareholder of the New York S corporation who is authorized under the law of the state where the corporation is incorporated or under the S corporation’s organizational documents to make the election.”

How do I make a PTET election?

You must login to your New York State tax account to make the election. (For instructions and more details, visit the New York State Department of Taxation and Finance webpage.)

How does my business pay its PTET?

Businesses will need to go onto their online NYS tax filing account and initiate payment directly to the state. A tax preparer or software cannot do this unless a business owner completes a TR-2000, which provides authorization to log into the account, file a return, and pay any tax owed. RBT CPAs encourages its clients to complete and submit this form and then we’ll handle the rest when it comes to your PTET filing.

My business is in NYC. Does the NYC PTET work the same way for me and my partners?

In order to receive a NYC PTET credit, an S Corporation must have all NYC resident individual owners or a partnership must have at least one NYC resident individual owner. So even if you’re doing business or operating out of NYC, you may not necessarily benefit from NYC PTET.

If you have any questions or need additional information or assistance, please remember RBT CPAs is here to help. Let us know what you need so you can be 100% confident you’re making the right decisions and taking the right actions in relation to the NYS PTET.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.