Accrual Basis and Pass-Through Entity Tax

We have discussed the New York pass-through entity tax (PTET) in several earlier posts listed below.

IRS Notice 2020-75 indicates that an entity’s federal deduction for the pass-through entity tax is allowed for the entity in the taxable year in which the payment of the pass-through entity tax is paid.

The notice does not provide an exception for accrual basis taxpayers, so it appears that no deduction is allowed by an accrual basis taxpayer until the year in which the pass-through entity tax is actually paid. 

As a result, accrual basis entities need to make an optional estimated tax payment for the pass-through entity tax for the 2021 tax year during December of 2021 if they want to obtain a federal deduction for the pass-through entity tax for the 2021 tax year. 

As discussed in our post on December 6, 2021,  the New York estimated tax system is now open and available to make optional estimated tax payments for the 2021 tax year.

Our earlier posts that discuss the New York pass-through entity tax include: November 11, 2021, September 30, 2021, September 9, 2021, August 26, 2021 and June 3, 2021.

If you have not already taken our seminar, our upcoming seminars in January provide in-depth information, strategies and considerations related to the New York pass-through entity tax and illustrate the new Form IT-653 Pass-Through Entity Tax Credit.  If you are not already registered, register here.