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Key takeaways

  • Form CT-3-S is the New York S corporation franchise tax return. It reports the entity's New York receipts, pays a fixed dollar minimum tax, and feeds each shareholder's personal return.
  • Federal S status does not carry over. Without a separate, approved Form CT-6 election, New York taxes the corporation as a C corporation.
  • A loss year still owes the minimum, and New York City ignores the S election entirely. The state return is the simple part. What surrounds it is where the work is.
Form CT-3-S

CT-3-S: The New York S Corporation Franchise Tax Return

Bring the federal 1120-S and whatever New York filed last year, even if the answer is nothing.

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The election

New York does not take the IRS's word for your S election

A federal S corporation becomes a New York S corporation only after filing Form CT-6 and receiving the state's approval.

Only then does it file Form CT-3-S, the New York S corporation franchise tax return, instead of the C corporation’s Form CT-3.

Corporations skip CT-6 constantly, file federal 1120-S returns for years, and discover in an audit or a sale that New York has been owed C corporation franchise tax the entire time.

Whether New York treats you as an S corporation at all

You have a federal S election

Form 2553 is filed and the IRS has accepted it.

Has New York approved a separate Form CT-6?

Yes

New York S corporation

  • Files Form CT-3-S
  • Pays the fixed dollar minimum tax, from $25 to $4,500 depending on New York receipts
  • Attaches Form CT-34-SH, the shareholder schedule
  • No MTA surcharge

No, or never filed

New York taxes you as a C corporation

  • Files Form CT-3, not CT-3-S
  • Owes C corporation franchise tax for every year the election was missing
  • MTA surcharge applies
  • Usually discovered in an audit or a sale, with interest attached

Retroactive relief exists and the state does grant it, but every retroactive election is reviewed, and the paper trail has to show the corporation always behaved like a New York S corporation.

Figure 1. The single decision the whole page turns on. With an approved CT-6 you file CT-3-S. Without one, New York taxes the corporation as a C corporation on CT-3.
Who files

Who files Form CT-3-S

Every approved New York S corporation subject to the state's franchise tax files it: corporations formed in New York, and out-of-state corporations doing business, employing capital, or deriving receipts here.

Two exceptions apply.

A qualified subchapter S subsidiary folds into its parent's return rather than filing its own.

A corporation whose investment income tops half of its federal gross income is treated as having made the New York S election automatically, whether or not anyone filed the form.

What it costs

What the franchise tax costs: the fixed dollar minimum

CT-3-S carries an entity-level charge the federal return does not: a fixed dollar minimum tax scaled to New York receipts.

  • 1

    The minimum runs from $25 to $4,500, depending on New York receipts. It is receipts based, so a loss year still owes it.

  • 2

    Form CT-34-SH is attached, and e-filing rejects the package if the shareholder schedule does not reconcile to the return.

  • 3

    The MTA surcharge does not apply. It burdens New York C corporations, not S corporations.

The calendar

Deadlines and estimated payments

  • For calendar-year corporations the return is due March 15, the 15th day of the third month after year end.
  • Extension: six months, on Form CT-5.4.
  • Why the date is early: shareholders cannot finish their personal returns until the S corporation numbers exist.
  • Nonresident shareholders: an estimated payment layer of their own, which the corporation often handles on their behalf during the year.

The year for a calendar-year New York S corporation

Everything below assumes the CT-6 is already approved. Without it, none of this applies and the corporation files CT-3 instead.

  1. Before the year

    CT-6 on file

    The election has to be approved before the year it applies to.

  2. March 15

    CT-3-S due

    The 15th day of the third month after year end, with Form CT-34-SH attached.

  3. September 15

    Extended deadline

    Six months, requested on Form CT-5.4.

  4. Quarterly

    Shareholder estimates

    Nonresident shareholders carry their own estimated payment layer, often handled by the corporation.

March 15 is earlier than the personal filing deadline because shareholders cannot finish their own returns until the S corporation numbers exist.

Figure 2. The filing calendar, mirroring the dates above. Dates shown are for a calendar-year corporation.
The city layer

New York City ignores the S election

It taxes S corporations under its General Corporation Tax at 8.85 percent of city-allocated income, exactly as if no election existed.

An S corporation operating in the five boroughs therefore files three different returns covering the same year: a federal pass-through, a state S return with a minimum tax, and a city corporate return with a real one.

Electing S for the payroll tax saving without pricing the city side is the most common thing we have to unwind for new clients.

One year, three returns

Federal

Form 1120-S

Nothing at entity level

Income passes through to the shareholders on their K-1s.

New York State

Form CT-3-S

Fixed dollar minimum

Scaled to New York receipts. A loss year still owes it.

New York City

General Corporation Tax

8.85 percent

Of city-allocated income. The S election is ignored entirely.

Figure 3. Federal, state and city side by side, with what each one actually charges.

No charge for the check

Not sure the CT-6 was ever filed?

It is a ten minute check against your state account. If the election is missing we will tell you what retroactive relief involves before you commit to anything.

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PTET

The pass-through entity tax election and the shareholder credit

A New York S corporation can elect the state’s pass-through entity tax, paying shareholder-level state tax at the entity and handing each owner a credit, which restores a federal deduction the SALT cap would otherwise trim. The election is annual, the deadlines are strict, and the interaction with estimated payments confuses even good bookkeepers, so we model it with live numbers every year as part of the business tax work rather than treating it as a set-and-forget checkbox.

The firm

Most CT-3-S work sits inside a relationship that runs for years.

12+

years serving NYC

150,000+

returns filed

5 star

rated on Google and Yelp

All 50

states

Open

evenings and weekends

Client reviews

What our S corporation clients say

“Excellent service and very professional. George and his team have been handling my business taxes for years and I couldn’t be happier with the results. They are always available to answer questions and provide expert advice.”
Michael R. · published client review
“If you’re a business owner, make sure to meet with your accountant and discuss your business structure... Review ahead of time with a tax attorney or a CPA what is your business structure and what’s going to be the one that’s most optimal for the type of income that you earn, the state that you’re located in, and how much you earn.”
George Dimov, CPA
Our most common cleanup

The CT-6 that was never filed

Retroactive relief exists, and the state does grant it, but every retroactive election gets reviewed, and the paper trail has to show the corporation always behaved like a New York S corporation. The earlier that gap is found, the cheaper it is to close. Finding it is a ten-minute check against your state account.

Related

Related guides and services

Frequently asked questions

CT-3-S questions we hear most

New York has been taxing the corporation as a C corporation for every year the election was missing, and the C corporation franchise tax is owed for those years. Retroactive relief exists and the state does grant it, but each request is reviewed, and the paper trail has to show the corporation always behaved like a New York S corporation. The earlier the gap is found, the cheaper it is to close.
CT-3 is the general business corporation franchise tax return and CT-3-S is the S corporation version. Which one you file is decided by whether New York approved a Form CT-6, not by your federal status. A corporation with a federal S election but no approved CT-6 files CT-3.
If the corporation is subject to the franchise tax, the return is still due and the fixed dollar minimum still applies. The minimum is based on New York receipts rather than on profit, so a quiet year and a loss year are treated the same way. Whether the corporation is subject at all turns on where it is formed and whether it is doing business, employing capital or deriving receipts here.
Usually yes, because the New York share of the S corporation income is New York source income to them personally. The corporation often handles estimated payments on their behalf during the year, which is a separate obligation from the CT-3-S itself and one of the things that has to be set up rather than assumed.
It is a state tax paid by the entity, so it is generally deductible in computing federal income, and it reaches the shareholders through the K-1 like any other entity-level expense. It is separate from the pass-through entity tax election, which works differently and produces a credit rather than a deduction at the owner level.
Yes, and it can also be lost without anyone deciding to end it, for example if the corporation stops qualifying federally. The state and federal positions have to be kept in step, because a federal termination does not automatically tidy up the New York side, and the year it happens is usually split between two different returns.

Still have a question? Ask a CPA directly or call (212) 641-0673.

One firm, all three returns

Get the state return in step with the federal one

The CT-3-S itself is a few pages. What surrounds it is where the work is: the election that must precede it, the shareholder schedule that must reconcile, the city return it does not replace, and the PTET decision that changes what everyone pays. One firm holding all of it means the pieces agree with each other, this year and in the audit three years from now.

Not sure the CT-6 was ever filed? That is the first thing we will check.

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Reviewed by George Dimov, CPA, New York, NY. Serving clients in all 50 states, 15+ years advising on New York corporate taxation. President of George Dimov, CPA, a New York City firm serving clients across the five boroughs and nationwide. Profile