California Pass-Through Entity (PTE) Tax Payment Deadline Approaching

June 15th is an important deadline for partnerships, LLCs, and S-Corps. The first installment of the 2022 California PTE tax is due on this day, and if a PTE misses the payment, it will not be eligible for the 2022 PTE tax election.

California passed AB 150 in July of 2021 (modified by SB 113 in 2022) which allowed PTEs to elect to pay California income taxes at the entity level; therefore, allowing for Federal deductibility of state taxes on PTE owners’ individual returns above the $10,000 limit set by the 2017 Tax Cuts and Jobs Act.  The rules for 2021 stated that an election was made by calculating and paying the PTE tax on a timely-filed tax return (inclusive of extensions). For the 2022 through 2025 tax years, a proper election must also include an ‘initial payment’ due by June 15th.

This initial payment is the greater of $1,000 or 50% of the PTE tax paid for 2021, and paying it allows the opportunity to make a PTE tax election on the 2022 California return. If the payment is missed, the entity will not be eligible to make the PTE tax election for 2022. The remaining amount of PTE tax due must be paid by the entity’s original filing date deadline (March 15 for calendar-year taxpayers).

The PTE tax rules are complex and impact each taxpayer differently. Taxpayers should start planning now to avoid missing the June 15th payment deadline and losing important tax deductions. Contact our expert tax team at (408) 287-7911 or info@ppandco.com for assistance with your unique situation.