2019 Tax Benefits For S-Corps In NY
If not for anything else, New York is spectacularly known for its often complicated and lofty business tax code. Despite the ‘noble’ tax rates, the state has shown a great deal of energy to make the weather favorable for small business owners. As the state is the focal point of most commercial activities in the world, many people from all walks of life keep on migrating to the city, in view of achieving the American dream. To further encourage the establishment of more businesses, the state has made a vast array of benefits close to the reach of all prospective small business owners.
The tax advantages so provided to the S-corporations, is so immensurable, making it one of the hottest business structures in the city and the state as a whole. Although, there are numerous advantages accrued to forming an S-corps, the downsides also abound. You might consider consulting with an experienced Accountant for S-Corps to guide you through this voyage.
What Is An S-Corps?
The Internal Revenue Service (IRS) defined an S-Corps as a corporation that has been elected to pass corporate income, losses, deductions, and credits to their shareholders for federal tax purposes. They are to be taxed, only under Subchapter S of the Internal Revenue Code.
The S-Corporations is quite similar to other business structures that offer owner(s) limited liability protection. The business is a separate legal entity that can take part in all business dealings. Personal assets of the owner are given coverage from business obligations.
Tax Benefits For S-Corps In NY
Operating an S-Corps seems to be more affordable, compared to running an LLC. The structure of the S-Corps seems so familiar, but never take it for granted; anyone can still cause major havoc to their S-status. Knowing when to consult with an S-Corps accountant is a necessity.
The S-Corps structure permits a decrease in one’s self-employment taxes. Also, income gets to pass through the company to its owners. In some states, given to the fact that the business owner is required by the law to make personal income tax on the money earned, the business owner is therefore not subject to pay any tax on the S-Corps. This is, however, not feasible in New York. The New York legislature requires that S corporations pay for the corporation franchise tax. Nevertheless, the S-Corps is given the rare chance of opting to use the gross receipt method to calculate taxes, the tax bills are lowered than those in C-corporations, and in the event of any corporate loss, each owner’ can remit a lower tax payment.
In general, the tax advantages offered to S-Corporations include;
No Double Taxation
In S-Corps, the owners are taxed on the net income on their tax returns. This quite unlike the income of C corporations, which is subject to been taxed twice; at the corporate level and the shareholder level when the C corporation pays out dividends. However, in New York, the S-Corps are subject to double taxation and must pay NYC’s general corporation tax.
No Self-Employment Taxes
The shareholders of the S-Corps are required to pay the personal income tax but are shielded from the self-employment tax.
In the event of the corporation been faced with an uncomfortable net loss, the loss will be shifted to the owners. This creates an avenue for owners to file for loss, thereby lowering their tax bills.
S-Corporation often comes as the recommended business structure for most newbie entrepreneurs. Irrespective of how easy it may sound, it can get very tricky as well. It is, therefore, prudent to hire the services of an S-Corp accountant to assist you in keeping track of income and expenses.