KATHERINE Posted February 19 Report Share Posted February 19 Hi dear team here, May I have a question on PTET deduction? I dont remember where I got the idea that the deduction on Fed on PTET is the lesser of the payment made or the liability is. but, there are people said only go with payment made. can any one provide me some exact what IRS said on this? Thank you so much! Kate Quote Link to comment Share on other sites More sharing options...
KATHERINE Posted February 19 Author Report Share Posted February 19 sorry to mention, I am in NY and client is also in NY. NY wont allow any over payment from PTET to be carried to next tax period. so, when file PTET, any overpayment will be returned as refund. Thank you! Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted February 19 Report Share Posted February 19 Cash basis deducts when paid. MD makes you add back any PTE tax for the year it is passed out to the owners, so if you pay it after year end, you have ghost income at the state level, via the add back, in one year, but a federal deduction the following year when the tax is actually paid, without a corresponding add back. Refunds will be at the individual level, unless refunded to the business. There doesn't appear to be a built in method for the refund to be taxed for federal in the year it is received by the individual, even if the individual is itemizing because the PTE tax was never deducted on the Sch A. 1 Quote Link to comment Share on other sites More sharing options...
Lee B Posted February 19 Report Share Posted February 19 Actually the answer is fairly complicated and can differ depending on state law. Please see the article in The Tax Advisor: https://www.thetaxadviser.com/issues/2022/nov/federal-implications-passthrough-entity-tax-elections.html 1 Quote Link to comment Share on other sites More sharing options...
KATHERINE Posted February 19 Author Report Share Posted February 19 24 minutes ago, Abby Normal said: Cash basis deducts when paid. MD makes you add back any PTE tax for the year it is passed out to the owners, so if you pay it after year end, you have ghost income at the state level, via the add back, in one year, but a federal deduction the following year when the tax is actually paid, without a corresponding add back. Refunds will be at the individual level, unless refunded to the business. There doesn't appear to be a built in method for the refund to be taxed for federal in the year it is received by the individual, even if the individual is itemizing because the PTE tax was never deducted on the Sch A. Thank you for your response. In NY, when the LLC file PTET in the following year for previous closing year (in 2024 to file 2023 PTET), it will be calculate like this: NYS PTET income (fed income with some state adj), applies 6.85%, get PTET tax due (assume all parnters are PTET partners). If the partnership's estimated payments exceeds the calculated PTET due, the overpayment will be returned (not allowed to carry) to the partnership. Now, I thought IRS will only allow the lesser of amount paid or amount liable in 2023 fed F1065. but I saw other people will deduct whole amount and said when the refund comes, they will take as income (or reduction of future PTET tax expenses). I prefer to keep the PTET credit and IRS dedcution the same, so the overpayment amount I would post as prepaid assets on balance without deduct it. The reason I think this way, I thought I read some thing but cannot find it anymore. Thank you! Quote Link to comment Share on other sites More sharing options...
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