NJ PTE BAIT
(New Jersey Pass-Through Entity Business Alternative Income Tax)
As a small business owner, you are always looking for ways to reduce your tax liability and keep more of your hard-earned money in your pocket. Well, we have some good news – the state of New Jersey has introduced a new tax benefit that could help you do just that! Keep reading to learn more about this exciting new opportunity.
If your business is an S-Corp (1120S filer) or Partnership/Multi-Member LLC (1065 filer) this piece is for you.
If you are getting ready to pay New Jersey 2nd quarter estimated taxes, please make sure to read this and decide whether to make a move.
As you all know most small businesses are pass-through entities which means the business income flows through to the owner’s personal tax return and the owner pays taxes on the combined gross income including W2 salary, business income and other miscellaneous income.
If your S-Corp or partnership made a profit, federal and state tax liabilities are on you, the business owner, so you would pay taxes on the business income.
The state of New Jersey now lets pass-through entities pay Business Alternative Income Tax (BAIT) and then the owner can use the BAIT paid by the business as a credit for their personal state income tax.
The business can legally deduct BAIT paid as a business expense.
What does this mean for you?
You can now have the business to pay NJ BAIT (Business Alternative Income Tax) instead of paying your state estimated taxes. You personally will receive a credit for the tax that your business paid.
What do you need to do?
- Send us an email indicating you would like for the business to pay NJ BAIT.
- Stop paying your PERSONAL NJ quarterly estimated taxes and work with us to make BAIT payment from the business.
What if your business does not have a profit? Can you still take advantage of BAIT payment?
No, BAIT is calculated/based on annualized business profit. Zero profit means zero BAIT can be paid.
What if you did not owe New Jersey tax for 2021 therefore do not need to make NJ quarterly estimated tax?
We will review your 2022 Profit & Loss in the 4th quarter and determine if BAIT should be paid to maximize the benefit for you.
When is 2022 BAIT payment due?
2022 BAIT has to be paid before 12/31/2022 for the business to deduct the tax payment and the owner to receive the credit for 2022 tax.
How much is BAIT?
5.675% of annual business net income between $1 and $250,000
6.52% of annual business net income between $250,000 and $1,000,000
9.12% of annual business net income over $1,000,000
If you have any questions about the NJ PTE BAIT, please don’t hesitate to reach out to us. You can call our office or shoot us an email at info@rschwartzcpa.com and we would be happy to answer any of your questions. We want to make sure that everyone who would like to take advantage of NJ BAIT has all the information they need to make the most of it. Thanks for reading and stay safe!
HOW SCHWARTZ IS HELPING SOUTH JERSEY SMALL BUSINESS OWNERS
Navigating these legal changes and what it means for your small business in New Jersey can be one of the biggest challenges you face in the coming years. Fortunately, Schwartz & Associates is already familiar with relevant tax laws and regulations you need to comply with, including the impact of the Biden Administration's new tax proposals. The American Families Plan (AFP) and American Jobs Plan (AJP) will bring with them new taxes on businesses in the coming year, and Schwartz is prepared to ensure your South Jersey business is not only in compliance but maximizing its benefits.
Contact us for more insight into what these changes may mean for your business specifically and what we can do to ensure you're getting the most out of your deductions.
