What the New York Form CT-6 (2020) Is For
A federal S corporation uses New York Form CT-6 (2020) to elect treatment as a New York S corporation for state tax purposes. New York does not automatically recognize a federal S corporation election, so filing this form is required to receive pass-through tax treatment at the state level. Without an approved election, the corporation is taxed as a regular C corporation under New York franchise tax rules.
Once approved, the election allows the corporation to file New York S corporation returns and limits the entity-level tax to a fixed dollar minimum amount. Income, losses, and deductions are instead passed through to shareholders and reported on their individual New York tax returns. This election applies only to New York tax treatment and does not replace or modify the federal S corporation election.
When You’d Use New York Form CT-6
A corporation uses New York Form CT-6 when it wants S corporation treatment for New York tax purposes during the 2020 tax year. This applies to both newly formed corporations and existing corporations that already have a valid federal S election in place. The form must be filed by the applicable deadline to take effect for the intended year.
The form is also used when a corporation is making a retroactive election due to IRS approval of a late federal S election. In those cases, additional documentation and shareholder consents are required. Corporations that fail to file Form CT-6 remain subject to New York C corporation taxation, even if they are treated as an S corporation for federal tax purposes.
Key Rules or Details for 2020
To be eligible, the corporation must be a valid federal S corporation or have a pending federal election. It must also be taxable under New York Tax Law Article 9-A, as corporations taxed under other articles are excluded from making the election. All shareholders must provide unanimous consent for the election to be valid.
For the 2020 tax year, calendar-year corporations generally had to file Form CT-6 by March 15, 2020, for the election to be effective that year. New corporations had 2½ months from the date of incorporation or the date they began doing business in New York. If the election was filed late, it did not take effect until the following tax year unless retroactive approval applied.
Step-by-Step (High Level)
Step 1: Confirm Eligibility
The corporation should confirm with the IRS that its federal S corporation election is valid or pending. It must also prove that it is subject to New York Article 9-A taxation. All shareholders must agree to the election before proceeding.
Step 2: Complete Corporate Information
The form requires the corporation’s legal name, Employer Identification Number (EIN), and mailing address. It also requests the state and date of incorporation, the date the business commenced operations in New York, and the start of the tax year. All information must match state and IRS records precisely.
Step 3: Report Ownership Details
The corporation must report the total number of issued shares or ownership percentages. It must also disclose the total number of shareholders and the number of nonresident shareholders. Accurate ownership information is required for approval.
Step 4: Obtain Shareholder Consents
Each shareholder must provide their consent by signing the form or by attaching a consent statement. The form requires the name, address, identification number, ownership interest, and acquisition date of each shareholder. Missing signatures invalidate the election.
Step 5: Sign and Submit the Form
An authorized corporate officer must sign the certification section. The completed form is submitted to the New York State Department of Taxation and Finance by fax or mail. The filing date is determined by the postmark or the date of accepted delivery.
Common Mistakes and How to Avoid Them
- Assuming New York automatically accepts the federal S election: File New York Form CT-6 separately and wait for approval before filing New York S corporation returns to avoid C corporation taxation.
- Filing New York S corporation returns before CT-6 approval: Hold the S corporation return until the election is approved so the filing matches the corporation’s actual New York tax status.
- Missing shareholder signatures: Identify every required consenting party, including spouses in applicable ownership situations and former shareholders in certain first-year cases, and collect signatures before submitting.
- Submitting incomplete or inaccurate ownership information: Verify ownership percentages, dates, and supporting records before filing to prevent delays or rejection.
- Skipping a final review of CT-6 instructions: Use the CT-6 instructions as a checklist for signatures, required attachments, and filing steps before submission.
What Happens After You File
After submission, the New York State Tax Department reviews the election for completeness and eligibility. The department issues a written notice approving or denying the election, specifying the effective date if the election is approved. This notice should be retained with permanent corporate records.
Once approved, the corporation must begin filing New York S corporation franchise tax returns for applicable years. It must also provide shareholders with the necessary information to report their share of income on their individual tax returns. If approval is delayed, the corporation must continue filing as a C corporation until confirmation is received.
FAQs
Who must file New York Form CT-6 (2020)?
Any federal S corporation that wants S corporation treatment for New York tax purposes must file the form. This applies to both new and existing corporations subject to Article 9-A.
Is unanimous shareholder consent required?
Yes, every shareholder must consent to the election for it to be valid. Missing even one consent renders the election invalid.
Can the form be filed if the federal S election is pending?
Yes, the corporation may file while the federal election is pending, but the New York election does not become effective unless the IRS approves the federal election.
What happens if the form is filed after the deadline has passed?
A late filing generally causes the election to take effect in the following tax year. Retroactive treatment is only possible if the IRS grants retroactive federal approval.
Does the election have to be renewed each year?
No, once approved, the election remains in effect until it is formally terminated using the appropriate New York form.
What tax does a New York S corporation pay?
The corporation pays a fixed dollar minimum franchise tax based on New York receipts. Income is passed through and taxed at the shareholder level.
Can the election be terminated later?
Yes, a corporation can terminate its New York S election by filing the required termination form with the state.
