EP40 - Is Your NYC S-Corp Secretly Losing Money? Discover the Hidden Tax Trap!

Show Notes

Most S-Corp owners in New York City don't realize they owe a completely separate city-level corporation tax—and it's costing them thousands. The NYC General Corporation Tax hits at 8.9% of your profit, requires quarterly estimated payments, and comes with massive late fees if you miss them. If you're running an S-Corp in one of the five boroughs and your tax preparer hasn't mentioned this, you could be facing a surprise \$6,000+ tax bill with penalties.

In this episode, CPAs Anastasia and Myiesha break down the NYC General Corporation Tax that catches creative entrepreneurs off guard every year. You'll learn exactly how this tax works, why single-member LLCs don't pay it, how to calculate whether an S-Corp still makes sense with this additional 8.9% burden, and the critical quarterly deadlines you cannot miss. Whether you're already an S-Corp in NYC or considering the switch, this episode gives you the numbers and strategy you need to make informed decisions and avoid costly surprises.

If you're tired of discovering new tax obligations after it's too late, or if you're weighing whether an S-Corp makes financial sense in New York City, this episode delivers the clarity and action steps you need right now.

⏱️ Timestamps:

00:00 Introduction to NYC General Corporation Tax

00:36 Meet Your Hosts: Aisha and Anastasia

01:01 Understanding S-Corporation Tax Nuances

01:34 NYC General Corporation Tax Explained

04:10 Comparing Tax Implications: S-Corp vs. LLC

08:55 Practical Tips for Managing NYC Taxes

12:45 Final Thoughts and Professional Advice

20:10 Conclusion and Contact Information

Why subscribe? Every week, Let's Get Fiscal shares tax strategies and business finance advice that actually work for real entrepreneurs—not corporate-speak you can't use. You'll get specific, actionable tactics, real client scenarios, and answers to the money questions keeping you up at night. The goal is simple: make business finances less intimidating and more profitable.

🔗 Listen everywhere:

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📊 Helpful resources:

Got a question for the show? Submit it here: https://www.coterietax.com/qa

Want to listen to more episodes? Start here: https://www.coterietax.com/podcast

Need personalized help with your business finances? Visit: https://www.coterietax.com

What's your biggest tax or money question right now? Drop it in the comments below—Anastasia and Myiesha read every comment and love helping with real-world situations.

#NYCBusinessTaxes #SCorpTaxes #NewYorkCityTaxes #GeneralCorporationTax #SmallBusinessTaxes #NYCEntrepreneur #SCorpStrategy #BusinessTaxPlanning #CreativeBusinessTaxes #NYCBusinessOwner #LetsGetFiscal #TaxSurprises

Creators and Guests

Host

Anastasia Aiello

Host

Myiesha Fisher

What is Lets Get Fiscal?

Let’s Get Fiscal is the money podcast for creative entrepreneurs who want to keep more of what they earn and grow their business with confidence. Hosted by CPA and tax strategist Anastasia, each episode makes taxes, bookkeeping, and money management simple, practical, and even fun. We cover topics like tax deductions, small business finances, creative business strategies, and how to avoid costly mistakes—without boring jargon. Whether you’re a filmmaker, designer, artist, or small business owner, you’ll get actionable tips, real-world examples, and a few laughs along the way. If you want to stress less about money and focus more on doing what you love, this is the podcast for you.

[SPEAKER_00]: Most escorp owners in New York City don't realize they owe a completely separate city-level corporation tax.

[SPEAKER_00]: Today we break down the New York City general corporation tax and why it catches so many creatives off guard.

[SPEAKER_01]: You're creative genius deserves the same precision behind the numbers.

[SPEAKER_01]: Welcome to Let's Get Fiscal, hosted by Anastasia Maisha and Danielle, part of the Women Lead Team at Cotary Tax.

[SPEAKER_01]: From SmartTex moves to cash flow strategy, weeds accode everything it takes to run a thriving creative business so you can scale with confidence and sleep easy at night.

[SPEAKER_01]: Press play and let's grow your business.

[SPEAKER_01]: Hi, guys.

[SPEAKER_00]: Welcome back.

[SPEAKER_00]: I'm Aisha and I am Anna Sasia and a CPA and an enrolled agent.

[SPEAKER_00]: I did decide that I can be more than just the vibes.

[SPEAKER_04]: Oh, okay.

[SPEAKER_04]: That's true.

[SPEAKER_04]: I mean, technically, to count it, I've done stuff, you know, I've been in the business for a little bit.

[SPEAKER_02]: but I also bring vibes.

[SPEAKER_02]: I did think about that later.

[SPEAKER_03]: So today, I wanted to talk about, we talk a lot about asked corporations and things like that, but there's also a little bit of nuance as there is two everything.

[SPEAKER_03]: So that's kind of like my frequently used word, I guess.

[SPEAKER_03]: There's no yes or no, the answer is always maybe.

[SPEAKER_03]: So when you are deciding whether or not you want to be an S corporation, you do have a few other considerations if you are in New York City.

[SPEAKER_03]: Or one of the burrows.

[SPEAKER_03]: Okay.

[SPEAKER_03]: So in New York City, there is an additional tax filing that the business would have to do.

[SPEAKER_03]: Why not?

[SPEAKER_03]: Yeah, okay.

[SPEAKER_03]: So what is it, right?

[SPEAKER_03]: Because you do have, you know, on the personal level, you have the state income tax and also have the New York City income tax.

[SPEAKER_03]: So the same thing happens on the business side.

[SPEAKER_03]: So normally a pass through entity, which is an S corporation, doesn't pay any income taxes.

[SPEAKER_03]: because the income goes on to the K-1, and then you include that when you file your personal tax return, and then you're kind of paying that business income tax on your personal tax return when you file your personal return.

[SPEAKER_03]: So in most cases, an S Corporation isn't paying taxes, but the exception is the states.

[SPEAKER_03]: Okay, so some of the states will still tax the business, even though it's all a pass through entity.

[SPEAKER_00]: Okay, so it's very state and specific though.

[SPEAKER_03]: Okay, yep.

[SPEAKER_03]: So in New York, New York City has an additional filing, which is another reason why you know a lot of people want to lean towards a tax preparer that works in there.

[SPEAKER_03]: area that's found so that they're aware of this extra filing that needs to happen.

[SPEAKER_03]: But it is called the general corporation tax and is for corporations and technically the

[SPEAKER_03]: This is going to be a corporation, so it's going to be subject to this additional tax.

[SPEAKER_03]: And so the tax is about 8.9% of what the profit of the company is, okay?

[SPEAKER_03]: So it can get relatively high.

[SPEAKER_03]: That sounds like it could.

[SPEAKER_03]: Yeah, okay.

[SPEAKER_03]: So normally I say like you want to budget for like 10%.

[SPEAKER_03]: Just to make it really nice and easy instead of saying like 8.85%.

[SPEAKER_03]: I just call it an intent.

[SPEAKER_03]: And you do need to make quarterly estimated payments.

[SPEAKER_03]: Okay.

[SPEAKER_03]: So you need to make sure that you have an account set up with New York City and make sure that you're paying the estimates because there is kind of a rather large leap fee if you aren't making those.

[SPEAKER_00]: Okay.

[SPEAKER_00]: And this is his business making the estimated paper correct.

[SPEAKER_03]: Okay.

[SPEAKER_03]: Okay.

[SPEAKER_03]: Okay.

[SPEAKER_03]: So it doesn't need to happen under the business EIN.

[SPEAKER_03]: Okay.

[SPEAKER_03]: All of that fun stuff.

[SPEAKER_03]: And I mean, you still need to make your personal ones.

[SPEAKER_03]: But so this is all on top of it.

[SPEAKER_03]: Okay.

[SPEAKER_03]: Um, so if you are single member LLC, you don't have to pay this tax.

[SPEAKER_03]: So, okay, that's one of the things where you have to consider.

[SPEAKER_03]: Okay, if I convert over to an S corporation or the tax savings that I'm going to get,

[SPEAKER_03]: greater than the additional 10% tax that I'm going to have to pay when I file in New York City.

[SPEAKER_03]: And so in some cases, I would say the answer is still yes.

[SPEAKER_03]: Because a single member LLC,

[SPEAKER_03]: you are charged social security and medicare on your full profit, which is going to be 15.3% so we're kind of comparing 10% versus 15% okay there.

[SPEAKER_00]: I just want to say for the listeners that you're making solid eye contact with me and you're just pulling out percentages and I just like we should just we should you know just acknowledge the fact that you now know quite a few

[SPEAKER_00]: Go ahead, yes.

[SPEAKER_02]: Okay, so they do this.

[SPEAKER_02]: There's a lot in that brain of yours.

[SPEAKER_03]: Yes, yes, don't ask me how many digits of mine I can say.

[SPEAKER_03]: So

[SPEAKER_03]: Kind of, you know, you think if you are the single member LLC and you have the profit of the $50,000, then you're going to pay 15% of that.

[SPEAKER_03]: Yes.

[SPEAKER_03]: You know, and that's going to go towards your social security and Medicare.

[SPEAKER_03]: But if you are an S corporation,

[SPEAKER_03]: You only pay the 15% on the amount that is your reasonable compensation.

[SPEAKER_03]: Okay.

[SPEAKER_03]: So anything above that, you wouldn't be charged 15%.

[SPEAKER_03]: Okay.

[SPEAKER_03]: But under the S corporation, you would be charged 10%.

[SPEAKER_03]: on that profit, but because your salary counts as an expense to the business.

[SPEAKER_03]: So it decreases your profit.

[SPEAKER_03]: Okay.

[SPEAKER_03]: And then what you're left with is that remaining balance, which under the single member LLC would be charged 15%, but under the S Corporation is going to be charged 10%.

[SPEAKER_03]: got chat.

[SPEAKER_03]: So there is still a difference in those numbers that you can kind of feel like it to be advantageous.

[SPEAKER_00]: But it's really just about looking at the bigger picture and like, does this fit for you right now?

[SPEAKER_03]: Right.

[SPEAKER_03]: And you know, a lot of that comes into, you know, how much money are you actually earning because you want to look at the profit.

[SPEAKER_03]: You want to look at what is your reasonable compensation?

[SPEAKER_03]: So that's how much would

[SPEAKER_03]: someone pay you to do this job as an employee or if you were to go on vacation and you hired someone how much would you pay them?

[SPEAKER_03]: You know to do your job and so we want to take all of those numbers into account and then also the cost.

[SPEAKER_03]: of the S corporation, because it's an extra tax return, normally they're a little bit more complicated.

[SPEAKER_03]: You have to do your financials to make sure that there's a separate business bank account, and you're keeping everything completely separate, and you have to run payrolls.

[SPEAKER_03]: You have the cost of the payroll service, things like that.

[SPEAKER_03]: So especially if you're comparing a sole proprietorship, which doesn't have, they don't need to file the biennial statement

[SPEAKER_03]: You don't have to file with the state at all.

[SPEAKER_03]: You want to take into account the costs that it's going to be to shift upwards into that escorporation where you have to either file the articles of organization, all of that fun stuff.

[SPEAKER_03]: So this is just another one of those things that kind of adds to the calculation.

[SPEAKER_03]: Maybe if you're within one of those five furrows, that number to get to an ask corporation for it to make sense for you is going to take a little bit longer because you really only have that 5% difference.

[SPEAKER_03]: Yeah, between the two.

[SPEAKER_03]: So is that 5% savings more than what all of these additional costs are?

[SPEAKER_03]: That's fair.

[SPEAKER_03]: Okay.

[SPEAKER_03]: If you were, you know, maybe an upset New York and Buffalo or something like that, you might not.

[SPEAKER_03]: You know, need to pay such a high corporate income tax to the business.

[SPEAKER_03]: So then you have a difference of 15% and then when the difference between the two is 15% then you have a much larger opportunity for those costs to, you know, be negligible compared to the savings that you'll have.

[SPEAKER_00]: okay cool um is it similar to like how do you like considered is it like zip code specific of like where you are and where your business is in order to know if you have to do this like extra thing with your uh the general corporation tags okay is it?

[SPEAKER_03]: I mean so a lot of it

[SPEAKER_03]: You know, we want to think about where are you doing the business?

[SPEAKER_03]: The little way is it actually happening?

[SPEAKER_03]: Okay.

[SPEAKER_03]: And kind of who is benefiting from this.

[SPEAKER_03]: So again, it's one of those things where if you have one office in California and one office in New York City, you want to keep the income in the two locations separate.

[SPEAKER_03]: Because New York City is only going to charge this tax on the income that's earned.

[SPEAKER_03]: within the city.

[SPEAKER_03]: Okay, so again, it's really important if you're traveling around or you have multiple locations That there's an easy way for you to be able to differentiate where all of that income is being earned because you know again you don't want to you know

[SPEAKER_03]: earn money in Texas and then have to pay this extra 10% because your your documentation isn't separate enough to be able to show that it was actually earned in a different area for a completely different client that's not associated with New York City at all.

[SPEAKER_00]: Yeah, okay, so there's definitely some some specificity And just being intentional like where you are doing the things that you're doing and right.

[SPEAKER_03]: Yeah, okay.

[SPEAKER_03]: So I mean, it's really easy if you are, you know, like a web designer and you're working remotely from home and you're in, you know, you're in Brooklyn And then that's really easy to see, but like I said, you know, if you're doing event work and you're, you know, going all across the country

[SPEAKER_03]: then you want to be a little bit more intentional with where all of this money is coming from and then also where your clients located because sometimes the states will say, you know, the income is taxed based on where the person that benefits from the service is, you know, not necessarily where you are.

[SPEAKER_03]: Um, so just be a little bit careful if you, you know, um, if you have some clients that are in New York, you know, um, even if you're outside of New York.

[SPEAKER_03]: There are certain scenarios where you would still be subject to that New York tax, which is kind of what we saw in COVID.

[SPEAKER_03]: Everybody moving around.

[SPEAKER_03]: So that was really fun.

[SPEAKER_00]: So, okay, like let's say you've been as corp and you are within one of the burrows so you know that you're going to have to do that general corporation tax I think I'm saying that right right general corporation tax so it does it does it makes sense to also still do your pass through entity tax is that just like an additional thing on top of that and then okay okay so it's really like being intentional like okay if I'm going to have this tax already does this save me enough in order to want to do the pass through.

[SPEAKER_00]: Right.

[SPEAKER_00]: Okay.

[SPEAKER_03]: Okay.

[SPEAKER_03]: A lot of times because these or taxes on your income, so they don't affect your profit.

[SPEAKER_03]: Oh.

[SPEAKER_03]: So the password entity tax payment doesn't decrease your quarterly estimated payments for this general operation tax and the general corporation tax doesn't necessarily decrease your past through entity tax payment.

[SPEAKER_00]: Okay.

[SPEAKER_00]: So they're like, there's some separation there.

[SPEAKER_00]: Okay.

[SPEAKER_00]: Okay.

[SPEAKER_00]: What they're looking at and how they're calculating things.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Okay.

[SPEAKER_03]: So, I mean, if anything, you know, in a lot of cases, especially if the S corporation is your only source of income, you know, your password entity tax payment kind of covers your individual tax liability.

[SPEAKER_03]: And then you're doing this, the estimated payments for the general corporation tax and then you're covering the taxes for the business.

[SPEAKER_03]: Gotcha.

[SPEAKER_00]: Sounds like this is when you want a professional to be included.

[SPEAKER_00]: Because you've explained it and that it makes sense and then five seconds later, I'm like, okay, wait, like, where is everything at visual, and yeah, he is, you, you can't schedule all of these payments to go through.

[SPEAKER_00]: Oh, that's nice.

[SPEAKER_00]: Okay, so it's not something you have to keep looking.

[SPEAKER_03]: Yeah, okay, right, so that's where having a separate tax account, and really comes into play, because

[SPEAKER_03]: then, you know, on March 15th, when you know what you're required estimated payments are, you could just schedule all of your estimated payments at that time.

[SPEAKER_03]: It goes into your, it comes out of your tax account and you're already like pre-saving everything that you need from that account if not a little bit more because we use the extra for your retirement funding.

[SPEAKER_03]: So that way things can happen really seamlessly and you don't have to think about it.

[SPEAKER_03]: But also, if your income does change pretty drastically, it could still call them and ask them to cancel the payment as long as you do it.

[SPEAKER_03]: Like, I recommend two days before the payment is actually scheduled to be processed.

[SPEAKER_03]: You just call them and they can cancel it and you can redo the payment or completely cancel it.

[SPEAKER_03]: But at the very least, you have something that's going through.

[SPEAKER_03]: And that is, you're not just constantly worrying about all of these deadlines that.

[SPEAKER_00]: because it's a lot and there's a bunch of different things.

[SPEAKER_00]: So I feel like even with working was professional, it would get to be like, oh, this is like, can we, I mean, I'm the person that I go to appointment and I schedule my next appointment because otherwise I'll never see them again.

[SPEAKER_00]: So yeah, just right, you know, it's it, right?

[SPEAKER_00]: But yeah, it's good.

[SPEAKER_00]: You can schedule out.

[SPEAKER_00]: like you can play in all of this ahead and just get that go.

[SPEAKER_00]: So scheduling out, having a tax savings account, are there any other tools that can help with like, maybe the income side of like separating out what is considered income for the general corporation like within the New York City stuff versus this, like are there any other cool tips or tools that tricks for that?

[SPEAKER_03]: Yeah, I mean, I think that that's,

[SPEAKER_03]: Yeah, generally, it's a little bit tricky because even California has an additional tax.

[SPEAKER_03]: It's only one and a half percent, so it's a little bit lower, you know, a little bit lower.

[SPEAKER_03]: Um, you know, but then you also have your 2% for City of LA and so all of these things, so that's why, you know, even if you're marginal or like your effective tax rate is, you know, let's say 15% or even 20% for your effective tax rate, you still want to save a little bit extra because there are a lot of other things, you know,

[SPEAKER_03]: It's like, just when you thought you were done, we got moosey.

[SPEAKER_03]: There are definitely a lot of costs associated with moving to that next level.

[SPEAKER_03]: It's just another thing to consider really sitting down, planning out what is this year.

[SPEAKER_03]: Look like what is even my goal here.

[SPEAKER_03]: Maybe this is a great example of an S corporation not being for everyone.

[SPEAKER_03]: Yeah, yeah, there are certain situations where it might be more beneficial for you to stay as that single member LLC or a sole proprietorship.

[SPEAKER_03]: So really meeting with the tax professional and being able to plan out what does the future look like.

[SPEAKER_03]: and also being able to check in with them to see kind of how you're progressing and why they're things changes because I always say like there's different seasons in your life.

[SPEAKER_03]: So just making sure that you're constantly going back and making sure that this is still the right fit for you.

[SPEAKER_03]: You know, and like I said once you're in New York City we're going to have

[SPEAKER_03]: A couple different questions, you know, when we convert over to that S corporation and things to consider, but that doesn't necessarily mean that it's not good decision.

[SPEAKER_03]: It's just another thing to be aware of and add into your calculations.

[SPEAKER_00]: I also think it's just helpful to like New York listeners to like know what to ask because if you don't even know what to ask and you don't know that these things exist like you'll be like oh you know like but this like maybe that's corpus guy for me but there's like a whole other sector that you have no idea about so just just knowing those questions to ask the tax professional when you do speak with them of like okay if I stay here can I see what that looks like and if I do this can we get an idea of what this looks like with these things because I know at least the name you may not know the

[SPEAKER_00]: Just at least you have the knowledge that it's out there and that, like, you should account for it.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Yeah.

[SPEAKER_03]: Yeah.

[SPEAKER_03]: Yeah.

[SPEAKER_03]: Because I mean, there's a lot of things where, you know, everybody loves an S-Corp. Yeah.

[SPEAKER_03]: So you can just go online and create an S-Corp. Or you shouldn't have a S-Corp. Or there's like nationwide companies that will do it.

[SPEAKER_03]: you know, and support you in what have you, but they may not know some of these different little pieces of individual areas, you know, so it's kind of up to the business owner to know that this is their responsibility and to ensure that it's part of their tax filing.

[SPEAKER_03]: It's not the responsibility of the tax prepared to notify you that you have this requirement.

[SPEAKER_03]: So even if you have a tax prepared

[SPEAKER_03]: you know, it's not, you know, depending on what your engagement letter says, it may only say that they've filed a federal and the state.

[SPEAKER_03]: They may not have anything that says that they'll file this city return for you as well.

[SPEAKER_00]: So just knowing what to look for, what to ask for, like, what do you need kind of thing?

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: You can't go wrong with some more knowledge.

[SPEAKER_00]: Yeah.

[SPEAKER_00]: Okay.

[SPEAKER_00]: So for like, um, like, as we've kind of answered it, but like, what should a New York escort do today to like avoid any big problems?

[SPEAKER_00]: Is ask some questions?

[SPEAKER_03]: Yeah.

[SPEAKER_03]: I mean, I would say definitely, you know, if you're in the five boroughs, make sure that you're paying that quarterly estimated payment because, you know, sometimes that that late fee is going to be pretty large.

[SPEAKER_03]: Okay.

[SPEAKER_03]: Especially if you're not expecting any payment.

[SPEAKER_03]: And then also generally when we file, it's, you know, you pay the amount that's due, then you have any late penalties, any interest, and then also making the first quarterly estimated payment.

[SPEAKER_03]: So just knowing it could be like a $6,000 tax bill, you know, and just being able to ask the questions that you're aware of it, so that you're not surprised when

[SPEAKER_03]: You know, this pass through entity that's not supposed to pay any income tax and we cost you 6,000 dollars when you go to file.

[SPEAKER_03]: Yes.

[SPEAKER_00]: So, okay.

[SPEAKER_03]: I think those are very helpful.

[SPEAKER_03]: Yep.

[SPEAKER_03]: And then it also, you know, have if you're going to switch over to the S corporation, just having somebody show you that it's still worthwhile.

[SPEAKER_03]: Yeah.

[SPEAKER_03]: Yes, there is this extra tax.

[SPEAKER_03]: Yes, there are these extra costs.

[SPEAKER_03]: Yes, there are these extra responsibilities.

[SPEAKER_03]: But what do I get out of it at the end?

[SPEAKER_03]: And how is that helping me go forward to where I want to go?

[SPEAKER_02]: It's really funny because it still reminds me how you say like escorts are like a baby and how they just let you take a baby home.

[SPEAKER_02]: It's super fun.

[SPEAKER_02]: Thank you for explaining it to us.

[SPEAKER_03]: So if you have any questions about this in New York City general corporation tax feel free to put a message below or send us an email and we are more than happy to talk through your particular situation.

[SPEAKER_01]: He's guys, bye!