Effective January 1, 2018 all partnerships; multi-member LLC’s; and S Corporations (known as pass-thru entities) are subject to a new entity level income tax at the rate of 6.99%.
This new 6.99% entity level tax is then converted to a tax credit to be used against the Connecticut personal income tax.
This new entity level tax is in response to the $10,000 state and local tax limitation on the federal return and designed to provide tax relief.
This entity level tax will require pass-thru businesses to make quarterly estimated tax payments. Since CT passed this new tax law on May 31stwithout clear answers or forms they announced that they would be allowing individuals to re-characterize some or all of their personal income tax payments to satisfy the pass-thru estimated payment requirement. Further, Connecticut is offering to waive interest on any underpayments in 2018.
On September 28thCT issued further guidance and the mechanism to make a re-characterization and announced that any payments must be re-characterized by December 31st.
Our office is committed to working with you on this new Connecticut tax on pass-thru entities. Please contact the office to discuss options on navigating this new tax.
Mason, DiMarco & Shaw, CPA’s