Would the state withholding on the S-corp owner salary come into play here? Like would it make sense to minimize state withholding on the salary or would the PTET calculation be limited to just the S-corp earnings portion?
Hi Tom, Thank you for the excellent article on PTET!
I have CA Resident LLC members who own rental properties in AZ & ILL. The LLCs have been filing AZ, & Illinois state tax returns, as well as CA 568 and pay the annual $800s to FTB.
All income are obviously sourced in AZ & ILL. However, FTB considers these LLCs to be managed from CA & therefore "Doing business" in CA
If the entities were to elect PTET, would the election be with the states of AZ and ILL, or with CA @9.3% since LLC members are CA residents. Otherwise the low AZ & ILL tax rates wouldn't make too much sense to go through the trouble of electing PTET. Your thoughts please.
Off topic, watching a financial planner explain this method to eliminate the penalty for under withholding of taxes at the end of the year. Take a withdrawal from your IRA for the amount of taxes owed and have it all withheld for taxes. This allows that amount to be applied equally over the 4 quarters. Then pay back the IRA within the 60 day window. This also assumes you don't have one of these IRA withdrawals within 365 days of each other. Any reason this wouldn't work?
This works - late extra withholding is a good way to avoid estimated tax penalties.
Would PTET be a reason for an LLC to make the S election?
Would the state withholding on the S-corp owner salary come into play here? Like would it make sense to minimize state withholding on the salary or would the PTET calculation be limited to just the S-corp earnings portion?
Hi Tom,
Thank you for clarifying. Really appreciate you.
Hi Tom, Thank you for the excellent article on PTET!
I have CA Resident LLC members who own rental properties in AZ & ILL. The LLCs have been filing AZ, & Illinois state tax returns, as well as CA 568 and pay the annual $800s to FTB.
All income are obviously sourced in AZ & ILL. However, FTB considers these LLCs to be managed from CA & therefore "Doing business" in CA
If the entities were to elect PTET, would the election be with the states of AZ and ILL, or with CA @9.3% since LLC members are CA residents. Otherwise the low AZ & ILL tax rates wouldn't make too much sense to go through the trouble of electing PTET. Your thoughts please.
Thank you!
Off topic, watching a financial planner explain this method to eliminate the penalty for under withholding of taxes at the end of the year. Take a withdrawal from your IRA for the amount of taxes owed and have it all withheld for taxes. This allows that amount to be applied equally over the 4 quarters. Then pay back the IRA within the 60 day window. This also assumes you don't have one of these IRA withdrawals within 365 days of each other. Any reason this wouldn't work?