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02/12/2014

New York State Withholding Tax Required Unless Exemption Filed by Nonresident Owners

    Synopsis

    S corporations and entities taxed as partnerships doing business in  New York State are required to make estimated tax payments on behalf of their nonresident partners, unless Form IT-2658-E or Form CT-2658-E, as appropriate, is timely completed by the nonresident partner.

    Issue

    New York requires that all S corporations and entities taxed as a partnership that have income, gain, loss, or deductions from New York sources to make estimated tax payments on behalf of nonresident shareholders or partners. Affected entities include:

    • New York S Corporations
    • Partnerships (other than publicly traded partnerships)
    • LLCs and LLPs treated as partnerships for federal income tax purposes 

     

    Such entities, if they have any nonresident owners, must file, as appropriate, Form IT-2658 (for nonresident individual partners or S corporation shareholders) and Form CT-2658 (for nonresident corporate partners), quarterly to remit the applicable withholding tax due. However, estimated tax payments are not required for any partners or S corporation shareholders:

    • With $300 or less in estimated New York State tax for the year,
    • That have elected to be included in a group return for an entity that is authorized to file a group return, or
    • Who timely completed and submitted to the flow-through entity:
      • For individuals: Form IT-2658-E, Certificate of Exemption from Partnership or New York S Corporation Estimated Tax Paid on Behalf of Nonresident Individual Partners and Shareholders or
      • For corporations: Form CT-2658-E, Certificate of Exemption from Partnership Estimated Tax Paid on Behalf of Corporate Partners. 

     

    The exemption from partnership withholding forms are required to be submitted by the nonresident partner to the flow-through entity prior to the date the quarterly estimated tax payment is due and are valid for the 2014 and 2015 tax years.

    For calendar year taxpayers, estimated payments for the 2014 tax year are due on April 15, 2014, June 16, 2014, September 15, 2014, and January 15, 2015.

    What Does CohnReznick Think?

    Individuals and entities who are shareholders or partners of flow-through entities doing business in New York should review their specific position to determine whether they want withholding tax paid on their behalf. Flow-through entities must remit estimated tax unless the appropriate exemption form was timely submitted to them by their non-resident partners.

    For more information, please contact Patrick Duffany, Partner and State and Local Tax Practice Leader, at 860-368-3607, or Corey Rosenthal, Principal in the State and Local Tax Practice, at 646-625-5729.

    Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

    This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.