Many of you earning a living in New York on a freelance basis have become aware of the new tax when you received a simple blue card notifying you of "tax due". The metropolitan commuter transportation mobility tax (MCTMT) is a new tax imposed on certain employers and self-employed individuals engaging in business within the metropolitan commuter transportation district (MCTD). This department administers the tax for the Metropolitan Transportation Authority. (The MCTD includes the counties of New York (Manhattan), Bronx, Kings (Brooklyn), Queens, Richmond (Staten Island), Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester).
It is understood that the state of NY, just like many of the other states is experiencing a deficit and needs the additional tax revenue. We get that. We are not disputing the origin of the tax, the need for a new tax, etc.. What we don't understand at all is how the methodology of calculation and payment has been designed. The first piece of the puzzle which is based on net self-employment income is due by November 2nd. The second piece of the puzzle is due on February 1st and accounts for net self-employment income for fourth quarter of 2009, and an additional annual return for MCTD is due by April 1st. Now this just seems to be bizarre. We don't know many self-employed individuals clients that can easily extract their "annual self-employment income" by the end of January.
Why burden the taxpayer with interim calculations? Why not just apply a straight %age for this MCTD tax and make it due together with the NYS tax return? The interesting thing is that while the tax information is readily available on the NYS website (http://www.tax.state.ny.us/mctmt/default.htm), the applicable forms and penalties are not yet finalized.
So for all of you scratching your heads on how to properly estimate the tax, more is better and base your formula on the maximum net compensation. The amount of tax is not that significant (.0034 of net earnings ). We are concerned about the penalties for underpayment and late filing. So, until further clarification is available, and until NY figures out how to do this more efficiently, pay the tax due by the deadline based on the maximum net self-employment income anticipated and carry the overpayment (if any) forward.
As always, we're here to help! Stay tuned!