All about business August 2018 Tax News

Reminder - S Corporations no longer have an additional month after filing their federal return to file their California return

Corporations or limited liability companies treated as corporations that have a valid federal election to be an S corporation and have a California filing requirement are deemed to have made an election to be an S Corporation in California on the same date as the federal election.[1] Terminating its federal S corporation election simultaneously terminates its California S corporation election.

S corporations that are incorporated in California, registered to do business in California with the Secretary of State, doing business in California, or receive California source income must file FTB Form 100S, California Franchise or Income Tax Return, and generally must pay the minimum franchise tax of $800. (Form 100S; S Corporation Tax Booklet.) The original due date of the return is the 15th day of the 3rd month after the close of the taxable year (March 15, 2018 for 2017 calendar year filers), and, for taxable years beginning after December 31, 2015, the extended due date is the 15th day of the 9th month after the close of the taxable year without filing a written request for an extension (September 17, 2018 for 2017 calendar year filers).[2] (See FTB Notice 2016-04.) Extension of time to file the return is not an extension of time to pay. The full amount of tax must be paid by the original due date of Form 100S. When the due date falls on a weekend or holiday, the deadline to file and pay without penalty is extended to the next business day.

If an S Corporation fails to file a return by the extended due date (original due date if the S Corporation is not in good standing) then a Per Shareholder Late Filing Penalty will be imposed under Revenue and Taxation Code (R&TC) Section 19172.5. The penalty is imposed even if the S Corporation does not have a tax liability because it is computed as $18 per shareholder, for each month or a fraction of the month the return is late or incomplete from the original due date, to a maximum of 12 months ($18 x Shareholders x Months).[3] The Per Shareholder Late Filing Penalty is imposed in addition to the delinquent filing penalty imposed under R&TC Section 19131. Both these penalties may only be abated for reasonable cause.[4]

For more information about due dates for business entities, refer to this Business Due Date Chart.

For more information about penalties, refer to this Penalty Reference Chart.

[1] Form 100S Booklet, pg. 7, Section C. R&TC Section 23801(a).

[2] The extended due date only applies to S Corporations in good standing. Visit the Secretary of State to see if the S Corporation is in good standing.

[3] A new month begins on the 16th day of each month.

[4] To establish reasonable cause, a taxpayer must show that the failure to timely file the return occurred despite the exercise of ordinary business care and prudence. Unlike the Internal Revenue Service, we do not have first-time penalty abatement authority.