New Jersey’s voluntary pass-through entity-level tax went into effect in 2020. Pass-through entities (PTEs) electing to pay the tax must file an annual return by March 15th for calendar year filers. Estimated tax payments are also required, although penalties are waived if taxpayers fail to make the 2020 payments on time since it is the first year the new tax is in effect.
What is the Pass-Through Business Alternative Income Tax?
Under the pass-through entity-level tax, the entity pays the taxes due on the sum of each member’s share of distributive proceeds. A tax credit may then be claimed by the members for taxes paid by the PTE on their share of distributive proceeds.
When is the Pass-Through Business Alternative Income Tax Due?
The Pass-Through Business Alternative Income Tax is paid by filing Form PTE-100 on or before the 15th day of the 3rd month after the end of the taxable year, which is March 15th for calendar year taxpayers. The PTE must give each member a Schedule PTE-K-1 with the amount of the member’s share of distributive proceeds and Business Alternative Income Tax.
Is an Extension Allowed?
The taxpayer can request a six-month extension by electronically filing Form PTE-200-T by the original due date of Form PTE-100. However, 80% of the tax due for the current year must be paid. No extension of time to pay the tax due is allowed.
Are Estimated Payments Required?
Estimated tax payments are paid on a quarterly basis. The payments are made electronically using the NJ Pass-Through Business Alternative Income Tax (PTE) Online Filing and Payments website.
When are Estimated Payments Due?
Estimated tax payments are due quarterly on or before the 15th day of the 4th, 6th, and 9th months of the tax year and the 1st month of the following tax year. For calendar year taxpayers, the due dates are:
- 1st quarter payment is due April 15th;
- 2nd quarter payment is due June 15th;
- 3rd quarter payment is due September 15th; and
- 4th quarter payment is due January 15th of the following tax year.
If a due date falls on a weekend, the due date is the next business day.
Are Penalties Imposed for Late Payments?
Penalties may be imposed if payments are not made on or before the due dates. However, penalties are waived for 2020 if a taxpayer fails to file or make estimated tax payments.
By Tralawney Trueblood, J.D., M.B.A.