Benjamin Yazersky CPA <BYaz55DoNotHitReply[at]netscape.net> wrote:

- quote -

To elaborate a bit on Ben's post:

Assuming your S corporation is not incorporated in NY, and
that it does no business in NY (for example, you never
perform any services for the corporation in NY, such as
record keeping, correspondence, etc.), the corporation
itself is probably not subject to the NY corporate franchise
tax. In any event, if all of the corporation's property,
payroll and sales are in NJ, it will probably owe only the
fixed-dollar minimum NY corporate franchise tax, which
ranges from $100 to $1,500, depending on the size of the
corporation's payroll.

You state that you (the corporation?) do 100% of your work
in NJ. If so, then the corporation is no doubt subject to
the New Jersey corporate level tax on S corporations, which
is 1.33% of net income apportioned to New Jersey, with a
minimum of $200. No measured tax is due, however, if your
corporation qualifies as a small business S corporation,
which means it has entire net income (before apportionment)
of $100,000 or less. A small business S corporation is
still subject to the $200 minimum tax, however.

As an individual stockholder and a NY resident, your entire
distributive share of the corporation's net income is
subject to NY individual income tax. In addition, your
distributive share of the corporation's net income
apportioned to NJ is subject to NJ individual income tax as
a nonresident. NY will allow you credit for the tax you pay
to NJ on that income, limited to the proportion of your NY
tax liability that relates to that income. The net result
is that you will pay the greater of the two states' average
rates on the income that is subject to tax in both states.

Does the corporation pay you a salary? If it earns its
income through your performance of services, it should. If
you receive a salary from the corporation, it is deductible
by the corporation for purposes of the corporate level taxes
in both NY and NJ. It is 100% taxable to you, as an
individual, in NY, and taxable to you in NJ to the extent
that you performed the services to earn it in NJ. Again, NY
will allow you credit for the tax you pay to NJ on your
salary, subject to the limitations described above.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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"Ned Hart" <nedhart[at]hotmail.com> wrote:

- quote -

If you are a NY corp, or are located in NY, then you are
subject to NYS & NYC corp taxation. However, if you do work
out of NY, you may be able to allocate your income out of
NYS. NYC however has different rules than the state
regarding allocating income.

As you mention that you do business in NJ, you also should
find out if you have nexus in NJ and required to register to
do business and file tax returns there.

An S corp being a pass through entity passes its income
through to its owner/shareholders. The shareholders also
have to deal with picking up the income in the proper
jurisdictions.

--
<<< Benjamin Yazersky CPA [NJ & NY] > >
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"Ned Hart" <nedhart[at]hotmail.com> wrote:

- quote -

Probably (in terms of how multiple state business allocation
works), but it will certainly be subject to New Jersey tax.
I strongly suggest you have a professional work on this as
non-professionals have difficulty with just one state, never
mind two.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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"Ned Hart" <nedhart[at]hotmail.com> wrote

- quote -

I believe what you'll find, as is the same in most every
state, is that your "S" profits are taxable on your
individual income tax return (federal and state) and since
you have nexus in Jersey, you'll file both a "S" corporate
(foreign corporation) tax return with Jersey, generally no
income tax due, but also generally some kind of fee/tax is
due (net worth, franchise, etc), and you'll file a personal
non-resident income tax return in Jersey, paying Jersey
income tax on your Jersey "S" corporate earnings.

You'll also have to file a New York "S" corporate tax
return, showing that all the income is derived from sources
out-of-state. Again, generally no income tax due, but also
generally some kind of fee/tax is due (net worth, franchise,
etc).

Then New York taxes ALL your income from all sources, but
gives you a tax credit. Generally it's for the lower of
taxes actually paid, or the amount of the New York taxes on
that income.

The net effect is that you'll owe New York only for income
from New York and Jersey only on Jersey income (that's my
story and I'm sticking to it).

--
Paul A. Thomas, CPA
taxman at negia.net

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My company is an 'S' corp in Brooklyn New York and I do 100%
of my work in New Jersey. Can anyone tell me if this income
is exempt from New York corporate tax?

Thanks
NH

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