The deadline to pay pass-through entity election taxes for the second quarter is June 15.
If you’re unsure if this applies to you, here we explain what the pass-through election tax is and how it can benefit you.
What is a Pass-Through Entity?
A pass-through entity is a business that files income and losses on the individual owner’s personal tax return instead of on a separate company tax return. This allows the income from the business to be taxed at the individual tax rate instead of at the business tax rate. The most common examples of pass-through entities are sole proprietorships, partnerships, and S-corporations.
Why Would a Pass-Through Entity Choose to Pay the Quarter Entity Election Tax?
For some pass-through entities, choosing to pay quarterly taxes at the entity level instead of at the individual tax rate may be beneficial. These benefits include:
- Simplifying tax filing: By keeping business income separate from individual tax returns, it can make the process of filing taxes simpler since there is no combining of files and figures.
- Reduce state tax liability: choosing to pay quarterly entity election taxes may reduce the amount you pay in state taxes, especially if the business operates in several different states that have different state tax rates for entities (some may be lower than others).
- Primary residence is out of state: If you are not a resident of the state where you run your business, paying quarterly entity taxes in the state where your business operates may reduce your tax liability.
Contact Root Tax With Your Questions
If you’re still unsure if you’d like to file pass-through quarterly entity election taxes, or if you know you want to take this step, contact Root Tax to walk you through the process and get it done quickly and efficiently.