TRENTON, N.J. – The requirement to register as an S-Corporation separately for federal and state purposes means extra work and possibly extra taxes and penalties for many businesses. Assemblyman Ron Dancer introduced a bill (A5771) to eliminate that risk by allowing the federal election of S corporation status to be automatic at the state level.
“Many states already allow the federal election to flow through to the state, and that small difference makes their business environment friendlier,” said Dancer (R-Ocean). “The requirement to separately register as an S-Corporation with New Jersey is easily overlooked and can lead to double taxation.”
Currently, if businesses do not file as an S corporation in New Jersey, they are considered a C corporation, regardless of S-Corporation elections with the federal government. S corporations are considered a pass-through business, which only pays minimum taxes and Gross Income Taxes on behalf of the owner, employees and non-consenting shareholders. A C corporation pays taxes on business income as well as Gross Income Taxes of those who work for or are officers of the company.