The S corporation is a popular option of tax classification for business owners.  As a pass-through entity S corporations are subject to a single layer of tax. In addition, the earnings and owner distributions are not subject to Social Security or Medicare taxes.  These are attractive prospects for owners looking to improve cashflow.  However, there are some key issues that can be overlooked when establishing and operating an S corporation.  

Ownership Restrictions

In 2021, New York State introduced the pass-through entity tax (PTET), which allowed owners of electing pass-through entities to circumvent the $10,000 state and local tax deduction limitation on their individual tax returns.  As a result, many shareholders and partners of the entities which elected PTET enjoyed significant tax savings.  If your pass-through entity missed out on the 2021 PTET, have no fear - it is not too late to elect for 2022: the 2022 election deadline has been extended to September 15, 2022.