Entity Reporting for Small Business Modification

Beginning with the 2023 tax year, entities must report to their owners if the owner will be eligible for the small business modification on their personal New York income tax return in connection with the income reported to the owner by the entity.

For owners to be eligible for the small business modification, an S corporation, partnership or LLC must employ at least one person and have gross business income (i.e., gross receipts) of more than zero and less than $1.5 million. In addition, each owner’s share of net business income from the entity must be less than $250,000.

The 2023 version of the instructions for Form CT-34-SH, New York S Corporation Shareholders’ Information Schedule, indicates that S corporations that meet the qualifications for their shareholders to take the small business modification on the shareholders’ personal New York income tax returns must provide each shareholder with verification that the S corporation qualifies for the small business modification.

The 2023 version of the instructions for Form IT-204, Partnership Return, indicate that partnerships and LLCs that meet the qualifications for their owners to take the small business modification on the owners’ personal New York income tax returns must provide each owner with verification that the entity qualifies for the small business modification.

Shareholders, partners or members of eligible entities report the small business modification on their personal New York income tax returns on Form IT-225, New York State Modifications, using Code S-201.

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