Pay Your New York Small Business Taxes

As a small business owner, you likely already know how important it is to pay your taxes on time. Failure to do so means that your business isn’t legally compliant. This could incur penalties, fines, and other possible negative consequences. It’s time consuming keeping track of all the necessary information to calculate the correct tax amount that you owe. Read on to learn about the types of state taxes you might face as a New York business owner and when and where to pay them. You’ll also learn how we can help make things easier when tax time rolls around.

Step 1: Establish your New York business’s corporate income tax obligations

Knowing how to file small business taxes in New York goes a long way in having a successful business. Although it’s confusing at times, we’ll help you through the process, describing everything you need to learn and consider. If your business is incorporated in New York or does business in the state, you have to file an annual New York state corporation tax return. Your business’s corporate structure will determine the amount of New York small business taxes you must pay. 

The New York state business tax rate for corporations is 6.5% to 7.25%; this is known as the corporation franchise tax. Other business structures are taxed as pass-through entities, where profit is passed through to the owners, who are responsible for personal income taxes on the money. Statutory business entities such as S corporations, limited liability companies (LLCs), partnerships, and sole proprietorships are pass-through entities that would not be subject to a corporation tax.

For most New York small businesses, corporate taxes are due by the 15th day of the 3rd month following the close of each tax year. For businesses with a tax year ending on December 31, the due date is April 15 of every year.

New York has an electronic filing mandate for certain businesses. For corporations, you must file all your tax payments electronically if you meet the following criteria:

• Prepare tax documents yourself, without the assistance of a tax professional
• Use approved e-file tax software to prepare your return, extension, mandatory first installment (MFI), or estimated tax payment
• Have broadband Internet access

If you file your taxes incorrectly pursuant to the mandate, you could face financial and legal penalties.

S Corporations

New York S corporations (like C corporations) are subject to the fixed dollar minimum tax. The fixed dollar minimum tax is a franchise tax, which is a tax for the benefit of doing business in the state. The tax is based on the corporation’s portion of gross receipts produced in New York. The minimum amounts range from $25 for gross receipts under $100k to $200k for corporations with over $1 billion in New York gross receipts. Additionally, there are different (lower) minimum tax amounts for manufacturers and emerging technology companies that range from $19 to $3,750, as well as different rates for certain kinds of investment companies.  

S corporation taxes are due on or before April 15 for most filers and by the 15th day of the 3rd month following the close of each tax year for those who use a different fiscal calendar other than the calendar year.

Pass-Through Entity Taxation in New York State

In New York State, pass-through entities such as LLCs, partnerships, and S corporations are subject to unique taxation rules that distinguish them from traditional C corporations. Unlike C corporations, which are taxed at both the corporate and shareholder levels, pass-through entities are not taxed at the business level. Instead, the income, deductions, losses, and credits of these entities “pass through” to their individual owners or partners, who then report these amounts on their personal income tax returns.

The essence of pass-through taxation is to avoid the double taxation common with C corporations, ensuring that business income is taxed only once at the individual level. This structure is generally seen as a tax advantage, particularly for small to medium-sized businesses, as it can lead to lower overall tax rates on business income. In New York, owners or partners of pass-through entities report their share of the business’s income on Form IT-204-IP, New York Partner’s Schedule K-1, and include it on their Form IT-201, Resident Income Tax Return, or Form IT-203, Nonresident and Part-Year Resident Income Tax Return, as appropriate.

However, New York introduced the Pass-Through Entity Tax (PTET) as an optional tax regime in response to the federal Tax Cuts and Jobs Act of 2017, which capped the state and local tax (SALT) deduction at $10,000 for individual taxpayers. The PTET allows eligible pass-through entities to elect to pay state income tax at the entity level, potentially enabling individual owners to bypass the SALT deduction cap and deduct those taxes as a business expense. This election can offer a significant tax benefit to individuals in high-tax brackets or with substantial business income.

It’s important for pass-through entities to consider the PTET election carefully, weighing the potential tax benefits against the entity’s overall tax strategy. The election is made annually, and once made, it is binding for that tax year. Entities that opt into the PTET are required to make estimated tax payments throughout the tax year, and the tax paid is reflected on a modified K-1 issued to each owner, indicating their share of the PTET payment.

Pass-through entity taxation in New York, particularly with the option to elect into the PTET, presents a valuable planning opportunity for small businesses. However, navigating the complexities of this tax structure requires careful consideration and, often, guidance from tax professionals familiar with New York tax law and the specific circumstances of the business and its owners. By staying informed and consulting with experts, pass-through entities can optimize their tax positions and leverage the benefits of New York’s tax environment.

Step 2: Determine your New York business’s withholding taxes

Businesses are required to withhold and pay New York small business withholding taxes. These are personal income taxes on wages, salaries, bonuses, commissions, and other similar income paid to their employees. The current New York withholding tax percentage varies based on the employee’s earnings and claimed allowances and based on payroll periods, filing statuses, and the employee’s gross wages and exemptions. 

You must electronically file and pay your withholding tax returns. Filers of paper returns may be subject to penalties and delays in processing. You can find more information on how to e-file your withholding taxes at the Department of Taxation and Finance website.

Step 3: Establish your New York business’s additional state tax obligations

There are many other potential New York small business taxes that you might have to calculate and pay.

Sales Tax

Sales tax applies to retail sales of certain tangible personal property and services. How often and where you file will depend upon your company’s locality. You can find the appropriate tax office by using the search tool on the Department of Taxation’s website.

Unemployment Insurance Tax

If your company has employees, it must pay the state’s unemployment insurance tax. See the Department of Taxation’s website for the current unemployment insurance tax rate.

State Disability Insurance Tax

The New York State Disability Insurance Program allows employers to pay employees’ disability premiums. The law also allows an employer to choose to withhold .5% to 1% of employee wages up to $.60 maximum in order to offset the cost of providing benefits.

Step 4: Prepare to file and pay your New York small business taxes

The final step is to prepare your tax filings and file them along with your payments. You can file your business taxes with New York online, by mail, or in person by dropping off your tax filings along with a check or money order at your nearest tax office.

To stay organized and compliant with your New York small business taxes, you need to keep all your business documents organized and easily accessible. We can help you stay organized and keep track of your receipts, accounting records, legal documents, and business papers. With our ZenBusiness Money tool, we make it easy for New York businesses to have a streamlined invoicing process to get paid quicker and keep track of important financial documents in one place.

Do I need an accountant?

Hiring a certified tax professional to help with filing your New York small business taxes is a smart move. By using an experienced accountant, you can help ensure that you’ll take advantage of all the allowed tax breaks and that your tax filings will be done properly and on time.

How we can help

Our mission is to help small businesses like you with the red tape involved in starting and running a business. Our ZenBusiness Money tool can help you to have an organized and profitable New York state small business. If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses.

If your business is still in the formation phase, our New York New York LLC formation services or corporation formation services can help you get started.

No matter where your business is in its life cycle, we have the tools and services you need to help your business thrive.