Is income earned outside of New York City exempt from corporate tax?

Discussion in 'Tax' started by Ned Hart, Jun 29, 2004.

  1. Ned Hart

    Ned Hart Guest

    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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    Ned Hart, Jun 29, 2004
    #1
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  2. Ned Hart

    Paul Guest

    "Ned Hart" <> wrote

    > 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?


    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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    Paul, Jun 30, 2004
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  3. Ned Hart

    David Woods Guest

    Re: Is income earned outside of New York City exempt from

    "Ned Hart" <> wrote:

    > 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?


    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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    David Woods, Jul 1, 2004
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  4. Re: Is income earned outside of New York City exempt from corporate

    "Ned Hart" <> wrote:

    > 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?


    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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    Benjamin Yazersky CPA, Jul 1, 2004
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  5. Ned Hart

    Katie Jaques Guest

    Re: Is income earned outside of New York City exempt from corporate

    Benjamin Yazersky CPA <> wrote:

    > "Ned Hart" <> wrote:


    >> 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?


    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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    Katie Jaques, Jul 9, 2004
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