The state will waive 2018 pass-through entity tax late penalties and interest, providing full taxes are paid within one year of the original due date.

The state Department of Revenue Services is in the process of notifying nearly 10,000 businesses of the waiver plans.

Lawmakers approved the pass-through entity tax last year as a workaround to lessen the impact of federal tax law changes.

Legislation enacted in June directed DRS to waive any late payment penalties and related interest.

Waiver

DRS will automatically process the waiver of penalty and interest. Pass-through entities are not required to submit any form or documentation to request the waiver.

Connecticut's tax was designed to allow owners and partners of partnerships, S corporations, and LLCs treated as partnerships to circumvent the $10,000 federal cap on state and local tax deductions.

The full amount must be paid within one year of the original due date, otherwise penalty and interest will be reinstituted.

PET is paid at the business level rather than the personal level and is fully deductible from federal income taxes as a business expense.

It is offset by a personal income tax credit that negates the impact of the federal cap.

Connecticut lawmakers reduced that credit to 87% in the 2019 session, effectively hiking small business taxes by $53 million.

Notices

DRS began mailing notices Aug. 23 to 9,984 taxpayers in cases where penalty and/or interest was assessed for the 2018 period.

If a business already paid the penalty and interest, the waiver may result in an overpayment that will be applied to its 2019 estimated PET (if requested on the originally filed return), applied to any outstanding unpaid liabilities, or refunded.

For filers with a balance due after the penalty and interest are waived, DRS will send an adjusted bill.

The full amount must be paid within one year of the original due date, otherwise penalty and interest will be reinstituted at the full statutory rates.

The letters advise filers to allow two to four weeks for DRS to make those adjustments.


For more information, contact CBIA's Eric Gjede (860.480.1784) | @egjede