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What are the New York City filing requirements for a single member LLC that has elected to be treated as an S-corporation for Federal and NYS tax purposes

Forum|Forum|6 years ago
December 6, 2019
2 replies
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A single-member LLC that was formed in 2017 made a federal election on form 2553 and NYS election of form CT-6 to be treated as a S-Corp for federal and NYS tax purposes. I am now trying to determine how New York City taxes for this corporation should be filed.

With the election to be treated as an S-Corporation, the entity will not be paying federal income taxes. Instead will receive pass-through treatment and pay taxes on all income earned on the 100% shareholders individual tax return. For New York State purposes, I believe that treatment will be the same. However, I am now trying to understand the New York City filing requirements.

Is the S-Corporation also subject to the NYC General Corporation Tax and if so how does that tax get reported on the 100% shareholders NYS individual tax return. The income from that corporation would already be included in the 100% shareholders personal income tax return as a pass through entity for NY so I am trying to determine the correct way to file this persons NYC and Individual tax return for both the pass-through-entity and as the 100% shareholder of the pass through entity. Is this pass-through entity (for federal and NYS purposes) required to file and pay taxes as a separate NYC entity and then also pay NYC taxes on this income in the 100% shareholders personal return? If so, that does not seem to make sense as there would appear to be a credit back somewhere to avoid the double taxation that S-Corp staus is supposed to prevent

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Best answer by itonewbie

NYC does not recognize S corp, which means there would be double taxation if the shareholder is a NYC resident:

http://www1.nyc.gov/site/finance/taxes/business-general-corporation-tax-gct.page

You may also find a somewhat dated discussion thread helpful:

https://accountants-community.intuit.com/questions/182770-nyc-s-corporations-and-their-shareholders

itonewbieAnswer

Level 15

NYC does not recognize S corp, which means there would be double taxation if the shareholder is a NYC resident:

http://www1.nyc.gov/site/finance/taxes/business-general-corporation-tax-gct.page

You may also find a somewhat dated discussion thread helpful:

https://accountants-community.intuit.com/questions/182770-nyc-s-corporations-and-their-shareholders

---------------------------------------------------------------------------------Still an AllStar

R

ronald

Level 2

Came across your post. I wanted to ask you more regarding your thoughts on the S corp in NYC. What some CPA's do is process salary to reduce NYC S corp tax while keeping in mind the AMT.

I know some have different views, since by processing you are also paying FICA.

So on one hand you are reducing NYC tax but you are also increasing your FICA tax (obviously if your payroll is not at a certain point).

Wanted to know your take on this.

qbteachmt

Level 15

@ronald

"Wanted to know your take on this."

An S corp is required to pay through Payroll to those providing services per IRS requirements. It isn't optional as you seem to indicate here: "What some CPA's do is process salary to reduce NYC S corp tax while keeping in mind the AMT. "

Here: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues

"Reasonable Compensation

S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee. The amount of reasonable compensation will never exceed the amount received by the shareholder either directly or indirectly.

The instructions to the Form 1120S, U.S. Income Tax Return for an S Corporation, state "Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation."

Under section 7436 of the Internal Revenue Code, the IRS has the authority to reclassify payments made to shareholders from non-wage distributions (which are not subject to employment taxes) to wages (which are subject to employment taxes). Several court cases support the authority of the IRS to reclassify other forms of payments to a shareholder-employee as a wage expense which are subject to employment taxes."

Don't yell at us; we're volunteers

N

NJNYCPA

Level 3

An S-Corp Shareholder who is a NYC Resident will get a credit for their share of the NYC Corporate tax paid on the S-Corps Income. See Form IT-219 NY City UBT Credit. This amount flows to line 53 (2017 form IT-201) of the NY Resident tax return and this is how double taxation is avoided

M

Musictax

Level 2

I'm looking at Form IT-219 right now... what line would NYC Corp tax go on?

I only see the option to claim taxes from NYC-204 , NYC-202, or Beneficiaries.

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NJNYCPA

Level 3

For NYC IT-204 is the NYC Unincorporated Business tax return that the Partnership, S-Corp or Sole Proprietorship must file if they generate revenue in NYC. The tax that is calculated on the form is then put on for IT-219 and the owner gets a credit for a percentage of the NYC UBT tax paid.

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