How can NYS ask someone to pay tax on the loss from a Federal S corporation?
A federal S corporation pays no income tax to the Internal Revenue Service (IRS). The same is true for New York State (NYS) S corporation since tax year 2004. However, in situations where the federal S corporation was not an NYS S corporation, the state requires that the Federal loss is not reported on the NYS tax return. The shareholder’s income increases as result. This may be called payment of tax on the federal loss.
