16 Aug 2022

What Your Clients Should Know About S Corps and State Tax

Corporations and LLCs that have been approved by the IRS for federal S Corporation status (by filing Form 2553) are—in most states—given S Corp pass-through income tax treatment at the state level, too. It’s critical that your clients understand how this can affect their businesses, so let’s take a closer look at where various states stand with S Corporations.

State-Level S Corporation Election Requirements

S Corporation Election in New Jersey

In New Jersey, state-level S Corporation tax treatment requires filing a New Jersey S Corporation Election form (Form CBT-2553). The state will only consider the election valid if all of a corporation’s shareholders consent to the election and other state requirements.

S Corporation Election in New York

According to the New York State government website, “If your shareholders have made an S election for federal purposes, you should be aware that New York State does not automatically treat your company as a New York S corporation unless you are mandated to file as an S corporation under Tax Law section 660(i).”

New York requires a corporation to file Form CT-6 (Election by a Federal S Corporation to be Treated As a New York S Corporation) to apply for S Corporation tax treatment at the state level.