NY nonresident taxes

Technical topics regarding tax preparation.
#1
timyt  
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Hi Tax Pros, I hope you are well. We have a client who has an S corp, and the location of the business and work provided is in Brooklyn, NY. We trying to figure out what income taxes needed to be paid. This person lives in VA. We saw it had to pay NY Corp taxes. Does it also need to pay nonresident taxes as an individual? Or since it pays corporate taxes, there is no nonresident return? This is the this person’s only source of income in NY. It is a bar in NY. He is a resident of VA though.
 

#2
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I am thinking the NY S Corp pays estimated taxes on behalf of the shareholder, but the shareholder would need to still file a non-resident tax return if there is sufficient income to require it. You would need to read through the NY tax return instructions for the S Corp and for the non-resident individual instructions to confirm this. If still unsure, I would call the NY Dept. of Revenue to confirm.
 

#3
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I believe for NYC purposes, this entity is a C Corp and you have to make a separate S election for state purposes.
 

#4
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I think you are correct Sumwun. I was assuming that had already been done.
 

#5
HowardS  
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Yes, a separate S election for NYS but NYC does not recognize S-corps. The General Corporation Tax rate imposed on S-corps by NYC is a whopping 8.85%! This is on top of individual nonresident taxes.
Retired, no salvage value.
 

#6
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HowardS wrote:Yes, a separate S election for NYS but NYC does not recognize S-corps. The General Corporation Tax rate imposed on S-corps by NYC is a whopping 8.85%! This is on top of individual nonresident taxes.


Isn't there a tax credit for an individual on the NYC return for NYC income taxes paid by the S Corp? I'm pretty sure there is...
 

#7
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There is an income cap and last time I looked it wasn't very high.
 

#8
zl28  
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Isn't there a tax credit for an individual on the NYC return for NYC income taxes paid by the S Corp? I'm pretty sure there is...

that credit is limited and just for resident i believe

https://www.tax.ny.gov/pdf/current_form ... ill_in.pdf
 

#9
novacpa  
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Full Year NY residents qualify for the credit - OP says owner is a VA resident - so the "bad news" appears to be 8.85%
S-Corp tax, 8.75% NYS non-resident tax & 5.75% Virginia Income Tax. VA will "resist" allowing a "credit" for NY taxes paid, I've had that fight before.
 

#10
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Strategic question here. Could it be more advantageous if the company was a Sch C versus S corp. Does it then only pay the nonresident tax, and no S corp tax? Thank you.
 

#11
HowardS  
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Unincorporated Business tax in NYC is 4%. Non-residents still pay NY tax on NY source income.
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#12
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Thank you Howard. There is one more option here. I wanted to get your thoughts. We could bleed out income to the VA w2. Your thoughts? Thank you.
 

#13
HowardS  
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I think you should read this first and see how it applies to your client:
https://www.nysscpa.org/news/publications/the-trusted-professional/article/new-york-s-corporate-nexus-apportionment-rules-overview-update

Entity choice, residency, source of income make NY taxes perhaps the most complex of all the states. (IMHO)
Your W-2 should reflect where the income was earned and that is not clear from your post...inappropriately weighting it away from NY would not be recommended.
Retired, no salvage value.
 

#14
Noobie  
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You will have fun with New York State and City if you try that move without proper evidence that W-2 wages were legitimate, and reasonable.
 

#15
zl28  
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nyc has an alternative tax for it's corporations where they addback the wages to net income and then subtract 40k

there may be some benefit to increasing wages if merited, but it won't be an eradication of the nyc tax
 


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