S Corp Election in New York

Filing your federal S corp election with the IRS is only half the job when your business operates in New York. The state requires a completely separate election — Form CT-6 — and skipping it means New York will tax your corporation as a C corp regardless of what the IRS says. That catches more people than you’d think.

The Federal Election: Form 2553

Every S corp starts here. You file IRS Form 2553 to elect S corporation status under IRC Section 1362. The deadline is no more than two months and 15 days into the tax year you want the election to take effect — for calendar-year filers, that’s March 15. Miss it and you’re stuck as a C corp for the year unless the IRS grants late-election relief, which they sometimes do if you can show reasonable cause.

Every shareholder has to sign the form. All of them. One missing signature and the IRS sends it back. If you have a shareholder who’s traveling or unresponsive, get the signature problem sorted early. The eligibility requirements under IRC Section 1361 — 100 or fewer shareholders, all U.S. residents, one class of stock — must be met on the date you file.

New York’s Separate Requirement: Form CT-6

Here’s where New York differs from most states. Filing Form 2553 with the IRS does not automatically make your corporation an S corp for New York tax purposes. You need to file Form CT-6 with the New York State Department of Taxation and Finance separately.

The timing matters. Form CT-6 must be filed within the same window as the federal election — by the 15th day of the third month of the tax year. If you already filed your federal 2553 but forgot the CT-6, New York treats your income as C corp income at the state level. That means double taxation on corporate earnings in New York, even though the IRS treats you as a pass-through.

We see this mistake regularly with businesses that incorporate in another state and then register to do business in New York. Their CPA in the other state files the 2553 and assumes the state election follows automatically. It doesn’t.

How New York Taxes S Corporations

New York S corps pay a fixed dollar minimum tax based on New York receipts. The minimum ranges from $25 for receipts under $100,000 to $4,500 for receipts of $25 million or more. There’s no entity-level income tax on the S corp itself — income passes through to shareholders, who report it on their personal New York returns.

But there’s a wrinkle. If any shareholder is a nonresident, the S corp must file a Group Return (Form IT-203-GR) or each nonresident shareholder files their own IT-203. The S corp can also be required to pay a Mandatory First Installment of estimated tax on behalf of nonresident shareholders. This trips up businesses with out-of-state investors.

NYC Unincorporated Business Tax — Does It Apply?

No. S corporations are not subject to New York City’s Unincorporated Business Tax (UBT). That tax hits sole proprietorships, partnerships, and LLCs taxed as partnerships. If your business is a corporation with an S election, the UBT doesn’t apply to the entity. Shareholders who live in NYC will still pay city income tax on their share of S corp income, though.

The General Corporation Tax (GCT) does apply to S corps doing business in NYC, but at a reduced fixed-dollar minimum — typically $25 to a few hundred dollars depending on gross income. It’s not the full GCT rate that C corps face. Compare this to S corp rules in Los Angeles, where California imposes a 1.5% entity-level tax.

When the S Corp Election Makes Sense in New York

The math works best for active businesses earning $80,000 or more in profit where the owner is also an employee. By paying yourself a reasonable salary and taking the rest as distributions, you avoid the 15.3% self-employment tax on the distribution portion. That savings can reach $15,000 to $20,000 per year for a business netting $200,000.

It makes less sense if you’re a single-member operation with low revenue, if the business has significant losses you want to deduct against other income (S corp loss rules are tighter than sole proprietorship or LLC rules), or if your shareholder structure includes non-U.S. persons or more than 100 owners. For the Florida comparison where there’s no state income tax layer, see our Miami S corp guide.

Frequently Asked Questions

Do I need both Form 2553 and Form CT-6 in New York?

Yes. The IRS election (Form 2553) covers federal taxes only. New York requires its own election via Form CT-6. Without both, your business is an S corp federally but a C corp at the state level.

What happens if I miss the CT-6 deadline?

New York taxes your corporation as a C corp for that year. You can file the CT-6 for the following tax year, but there’s no retroactive state-level relief equivalent to the IRS late-election process.

Does New York charge an S corp income tax?

Not in the traditional sense. New York S corps pay a fixed dollar minimum tax based on receipts (ranging from $25 to $4,500). The actual business income passes through to shareholders and is taxed on their personal returns.

Is an S corp subject to NYC taxes?

S corps are subject to the NYC General Corporation Tax at a reduced minimum, but they are exempt from the Unincorporated Business Tax. Shareholders living in NYC pay city income tax on their share of pass-through income.

Can a New York LLC elect S corp status?

Yes. An LLC first elects to be treated as a corporation with IRS Form 8832, then files Form 2553 for the federal S election and Form CT-6 for the New York election. Some practitioners file 2553 directly without 8832, as the IRS treats the S election as an implicit corporate classification election.

What is a reasonable salary for an S corp owner in New York?

There’s no fixed number. The IRS looks at what someone with your experience, in your industry, in your geographic area would earn doing the same work. For NYC-based professional services, that bar tends to be higher than national averages. Setting it too low invites an audit; setting it too high eliminates the tax benefit of the S election.

Sources & References

Need Help With Your S Corp Election in New York?

Our CPA team handles entity elections, Form CT-6 filings, and ongoing S corp compliance for businesses across the five boroughs.

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