Pass-Through Entity Taxable Income

November 29, 2022 Update: New York State has changed its position regarding the addback of PTET payments when computing taxable income for PTET purposes. See our post on November 29, 2022.

 

As discussed on pages 61 through 80 of the Tax Year 2021 M+O=CPE Individual Tax Year-End Workshop Reference Book, entities that elect to be subject to the New York pass-through entity tax (PTET) must compute their pass-through entity taxable income when filing the annual pass-through entity tax return.  New York has provided separate worksheets to be used for S corporations and for partnerships/LLCs.

On row 1 of each of the worksheets that appear on page 65 for S corporations and on page 67 of the Tax Year 2021 M+O=CPE Individual Tax Year-End Workshop Reference Book, entities must include the owners’ share of ordinary income.  We have confirmed with the New York State Department of Taxation and Finance that, for this purpose, use the owners’ share of ordinary income that is reported by the entity on its federal income tax return. 

If the entity made a voluntary PTET estimated tax payment during December of 2021, the ordinary income reported on the entity’s federal income tax return will reflect the deduction for the PTET tax payment.  The entity should not add back the deduction for the PTET estimated tax payment to the ordinary income included on row 1 of the worksheets. 

Our earlier posts that discuss the passthrough-entity tax are: December 16, 2021, December 14, 2021, December 6, 2021, November 11, 2021, September 30, 2021, September 9, 2021, August 26, 2021 and June 3, 2021.