"Greg was very easy to work with. I had a complicated scenario that he was able to manage, with complete confidence. I would highly recommend using him."
"I've had a great experience working with Greg Monaco. He is incredibly detail-oriented and thorough, making sure everything is handled correctly and fully compliant. What really stood out to me is how proactive and dedicated he is."
"Monaco CPA is excellent to work with! Greg is detail-oriented, knowledgeable, and prompt. He's been instrumental in helping me get my business off the ground with a strong financial foundation."
"If you need a CPA or accountant in Livingston or Essex County, I highly recommend Greg at Monaco CPA. My wife and I switched because my old accountant often didn't return my calls. Greg is different."
"I've been working with Greg Monaco, CPA for a few years now, and he's honestly saved me real money with both personal tax help and crypto tax stuff."
"I've been working with Gregory Monaco CPA LLC for my taxes, and I couldn't be happier with the experience. Extremely professional, thorough, and organized from start to finish."
Testimonials reflect individual client experiences and do not guarantee similar outcomes. Tax savings and other results depend on each client's facts and are not typical of all engagements. No client was compensated for providing a review.
Last Updated: March 18, 2026 · NJ CPA License #20CC04711400
Thousands of NJ business owners filed IRS Form 2553 but never filed the separate NJ Form CBT-2553 required before December 22, 2022. NJ has been taxing these entities as C-Corps at the state level, at rates up to 9% on all income, even though they believe they are S-Corps.
April 15, 2026: The 2025 NJ business tax return (CBT-100S) is due. The 2025 BAIT election deadline (March 16) has already passed. If you file another year on the wrong form, that is another year of overpayment you may not recover.
Before P.L. 2022, c. 133 was signed on December 22, 2022, New Jersey required a separate S-Corp election filed directly with the state. Filing IRS Form 2553 with the federal government was not enough. NJ and New York were the last two states to maintain this separate requirement.
The law change fixed this going forward: entities formed on or after December 22, 2022 have their federal S-Corp election automatically recognized by NJ. But the fix was not retroactive. If your entity was formed before that date and you never filed Form CBT-2553 with NJ, the state has been taxing you as a C-Corp for every year since formation.
The cost is substantial. NJ C-Corp tax rates are not marginal brackets like income tax. They are flat rate tiers. If your entire net income (ENI) exceeds $100,000, the entire amount is taxed at 9%. Not the amount above $100,000. All of it.
$150,000 net income, single owner, NJ gross receipts under $100K. These numbers are per year.
Annual Savings: ~$12,265 · 3-Year: ~$36,795 · 5-Year: ~$61,325
NJ has no shareholder credit for CBT paid by the C-Corp entity. NJ has no qualified dividend rate. All distributions taxed at full ordinary rates up to 10.75%.
Answer 5 questions to find out if NJ may be taxing your S-Corp as a C-Corp. No personal information required.
This takes about 60 seconds. Your answers are not stored or transmitted. All processing happens in your browser.
This diagnostic is for informational purposes only and does not constitute tax advice. Results are estimates based on general NJ tax rules. Consult a CPA for your specific situation.
The CBT-2553-R retroactive election process is designed for exactly this situation. The law includes a liberal construction mandate (N.J.S.A. 54:10A-5.22a) directing the Division of Taxation to construe regulatory requirements in your favor when evaluating retroactive elections.
Pull your NJ business tax returns for every year since formation. Check whether you filed CBT-100S (S-Corp) or CBT-100 (C-Corp).
Submit the retroactive election at njportal.com/dor/scorp. You will need your IRS acceptance letter (CP261 or 385C).
NJ allows refund claims within 4 years of payment (N.J.S.A. 54:49-14). If your retroactive election is approved.
For privilege periods beginning on or after December 22, 2022, you can file CBT-100S while your retroactive election is pending.
Once NJ recognizes your S-Corp status, you become eligible for the Business Alternative Income Tax (BAIT) election.
The Liberal Construction Mandate
N.J.S.A. 54:10A-5.22a directs that "the Directors of the Divisions of Revenue and Enterprise Services and Taxation, when determining whether to grant retroactive election of S corporation status, shall liberally construe regulatory requirements in favor of the corporation and shall have the discretion to authorize retroactive S corporation status in circumstances in which a taxpayer may not be capable of meeting all regulatory requirements for such retroactive election through no fault of the taxpayer."
This mandate was enacted to address situations like Shree Ram Investments v. Director (2013), where the Division rejected a retroactive election because NJ had no retroactive procedure at the time. The NJ Tax Court in Xylem Dewatering Solutions v. Director (2017) noted that the retroactive election process is intended to assist "honest taxpayers" with a procedure "less draconian" than the alternative.
If your entity is an LLC taxed as an S-Corp, there is a second trap. NJ registers LLCs as "1065 Filer" by default. To file a CBT-100S, your entity must be registered as a "1120 Filer."
The correct order:
The REG-C-L form explicitly excludes changes in legal structure and cannot be used for this purpose.
The NJ Business Alternative Income Tax (BAIT) allows pass-through entities to pay NJ income tax at the entity level. Because BAIT is deductible on the federal return, it effectively bypasses the individual SALT deduction cap ($40,000 for 2025, $40,400 for 2026 under OBBBA, increased from $10,000). Members receive a refundable credit on their NJ-1040.
If NJ does not recognize you as a pass-through entity, you cannot elect BAIT. You are locked out of the largest SALT cap workaround available to NJ business owners. The 2025 BAIT election deadline (March 16, 2026) has already passed. Fixing your S-Corp status now preserves your eligibility for the 2026 election.
| NJ-Sourced Income | BAIT Rate |
|---|---|
| $0 - $250,000 | 5.675% |
| $250,000 - $1,000,000 | 6.52% |
| Over $1,000,000 | 10.9% |
Example: BAIT on $150K at 5.675% = ~$8,513. At the 32% federal bracket, the federal deduction generates ~$2,724 in additional savings. BAIT cannot be elected retroactively (N.J.S.A. 54A:12-3). The election must be made annually by March 15 (calendar year entities).
This is the detail that makes the NJ S-Corp election trap so costly. NJ C-Corp tax rates are flat within each tier, not marginal. Once you cross a threshold, the higher rate applies to all income.
Corporate Transit Fee: additional 2.5% on C-Corps with ENI > $10M. S-Corps are exempt from the Corporate Transit Fee.
| Date | Deadline | Status |
|---|---|---|
| March 16, 2026 | Federal 1120-S, BAIT election | Passed |
| April 15, 2026 | CBT-100S, NJ-1040, Federal 1040, Q1 2026 estimated payments | Upcoming |
| October 15, 2026 | Extended due date for 2025 returns | Upcoming |
| Any time | CBT-2553-R retroactive election (via DORES portal) | Open |
If your entity was formed before December 22, 2022, NJ required a separate S-Corp election via Form CBT-2553, independent of the federal IRS Form 2553. P.L. 2022, c. 133 eliminated this requirement going forward but did not fix prior years retroactively. If you never filed the NJ form, the state has been taxing you as a C-Corp.
Look at your NJ business tax return. If it says CBT-100S, you are filing as an S-Corp. If it says CBT-100, NJ is treating you as a C-Corp. You can also check your tax bill: S-Corps pay a minimum of $375 to $1,500 based on gross receipts, while C-Corps pay 6.5% to 9% on allocated net income (flat rate tiers, not marginal brackets). An additional 2.5% Corporate Transit Fee surtax applies to C-Corps with NJ-allocated net income over $10 million (P.L. 2024, c.20, effective through 2028) - S-Corps are exempt from the surtax.
Form CBT-2553-R allows entities that missed the original NJ S-Corp election to retroactively correct their status. It is filed online at njportal.com/dor/scorp. There is a $100/year fee for privilege periods before December 22, 2022, and no fee for periods beginning on or after that date. You need your IRS CP261 or 385C letter, all shareholder signatures, and a reasonable cause explanation.
N.J.S.A. 54:10A-5.22a, added by P.L. 2022, c. 133, directs the Division of Taxation to 'liberally construe regulatory requirements in favor of the corporation' when evaluating retroactive S-Corp elections. This means the Division must lean in your favor, even if you cannot meet every regulatory requirement, provided the failure was through no fault of your own.
On $150,000 of net income, the difference is approximately $12,265 per year. NJ C-Corp tax uses flat rate tiers: income over $100,000 is taxed at 9% on all income (not marginal). As a C-Corp, the entity pays $13,500 in CBT, and then distributions to the owner are taxed again at NJ personal rates with no qualified dividend distinction and no shareholder credit. As an S-Corp, the entity pays only the $375 minimum and income passes through once.
NJ has a 4-year refund statute of limitations from the date of payment (N.J.S.A. 54:49-14). If you correct your status retroactively, you may be able to file amended returns for prior years. Post-December 22, 2022 returns cannot be amended to change entity type. Shareholders may also need to amend their NJ-1040 returns.
LLCs default to '1065 Filer' status in NJ. To file as an S-Corp (CBT-100S), you must first update your tax Ownership Type to '1120 Filer' via Form REG-C-L (Change of Registration) or the DORES online portal at nj.gov/treasury/revenue. Since the LLC is not changing its legal form (it remains an LLC), there is no fee. Order matters: update Ownership Type via REG-C-L or DORES first, then file the S-Corp election (CBT-2553-R for retroactive years or rely on automatic federal-S-corp conformity for post-12/22/2022 periods), then file CBT-100S. Form CD-100 is reserved for legal-entity conversions and is not used for tax filer-type changes.
No. The NJ Business Alternative Income Tax (BAIT) is available only to entities NJ recognizes as pass-through entities. If NJ treats you as a C-Corp, you are locked out of BAIT, which is the primary workaround for the federal SALT deduction cap ($40,000 for 2025, $40,400 for 2026 under OBBBA, increased from $10,000). The TY2026 BAIT election deadline was March 16, 2026 (the 15th day of the 3rd month of the tax year, rolled from Sunday March 15) via the NJ DOT PTE File and Pay System - already passed. Fixing your S-Corp status now preserves your TY2027 BAIT eligibility (election due March 15, 2027). Read the full NJ BAIT election guide for rates, deadlines, and qualification rules.
The 2025 NJ CBT-100S is due April 15, 2026. The BAIT election deadline (March 16, 2026) has already passed. You can file Form CBT-2553-R at any time through the DORES portal. If you need more time, file a CBT extension before April 15. Extended returns are due October 15, 2026.
Yes. The CBT-2553-R requires the Shareholder Jurisdictional Consent (Schedule SJC) signed by all shareholders who held shares during any retroactive privilege period. If a former shareholder is unavailable or unwilling to sign, it may complicate the retroactive election. The liberal construction mandate under N.J.S.A. 54:10A-5.22a may provide relief in hardship cases.
The 2025 CBT-100S is due April 15, 2026. Every year you file as a C-Corp instead of an S-Corp costs thousands in unnecessary NJ tax. Monaco CPA covers CBT-2553-R retroactive election, BAIT analysis, and prior-year amendments for NJ business owners.
NJ CPA License #20CC04711400 · Firm License #20CB00789800 · Livingston, NJ
Disclaimer: This page is for general informational purposes only and does not constitute tax, legal, or financial advice. It does not create a CPA-client relationship. Tax law is complex and changes frequently. The information presented reflects NJ tax rules as of the date shown and may not apply to your specific situation. Consult a licensed CPA before taking action.
Tax advice disclaimer: This material is for general educational information only and is not legal, tax, or accounting advice for your specific facts. A CPA-client relationship is formed only through a signed engagement letter.