All about business June 2018 Tax News

June 15 payments

Limited liability company (LLC) fee estimated payment due June 15

An LLC not classified as a corporation must pay the annual LLC fee if it is organized, doing business, or registered in California and has total income from all sources derived from or attributable to California of at least $250,000. For calendar year LLCs, June 15 is the date that their 2018 estimated LLC fee is due. For fiscal year LLCs, the estimated fee is due on the 15th day of the sixth month of the current taxable year.

The fees are as follows:

If Total Income* Is: 2018 Fee:
$250,000 to $499,999 $900
$500,000 to $999,999 $2,500
$1,000,000 to $4,999,999 $6,000
$5,000,000 or more $11,790

* Total income for LLC fee purposes is gross income plus the cost of goods sold, that are paid or incurred in connection with the trade or business of the taxpayer.

LLCs should use Form 3536, Estimated Fee for LLCs, to make their estimated fee payments. LLCs can also use our Web Pay feature to make their estimated fee payment, go to ftb.ca.gov, and search for Web Pay.

The LLC current estimated fee requirement is 100 percent of the previous taxable year estimated fee. If the payment is late or less than the amount owed, we will assess a 10 percent (10%) penalty on the underpaid fee. The underpaid fee is the difference between the current taxable year LLC fee, and the estimated fee paid on or before the estimated fee due date.

LLCs can avoid the penalty if their estimated fee payment is equal to or greater than their prior year’s LLC fee. For purposes of whether the LLC estimate fee penalty applies, there is no requirement that the prior tax year be a full 12 months. Also, there is no penalty for the LLC’s first year filing in California.

Member second estimated tax payments also due June 15

Generally, you must make estimated tax payments if you expect to owe at least $500 ($250 if married/Registered Domestic Partner (RDP) filing separately) in tax for 2018 (after subtracting withholding and credits) and you expect your withholding and credits to be less than the smaller of:

  • 90 percent of the tax shown on your 2018 tax return.
  • 100 percent of the tax shown on your 2017 tax return (including alternative minimum tax (AMT)).

Limit on the use of prior year’s tax

Individuals who are required to make estimated tax payments, and whose 2017 California adjusted gross income is more than $150,000 (or $75,000 if married/RDP filing separately), must figure estimated tax based on the lesser of 90 percent of their tax for 2018 or 110 percent of their tax for 2017 including AMT. This rule does not apply to farmers or fishermen.

Taxpayers with 2018 California adjusted gross income equal to or greater than $1,000,000 (or $500,000 if married/RDP filing separately), must figure estimated tax based on their tax for 2018.

Important: California differs from federal. To avoid an estimate penalty, you must pay at least:

  • 30 percent first quarter (April 18, 2018)
  • 40 percent second quarter (June 15, 2018)
  • 0 percent third quarter (September 17, 2018)
  • 30 percent fourth quarter (January 15, 2019)

Use the California Estimated Tax Worksheet in the Instructions for Form 540-ES, Estimated Tax for Individuals to figure your estimated tax payments.

Use Form 540-ES, Estimated Tax for Individuals, to pay your estimated tax installments.

E-pay requirements

Under California law, taxpayers are required to remit payments electronically once they make an estimate or extension payment exceeding $20,000 or file an original tax return with a total tax liability over $80,000. Once the taxpayer meets this threshold, all subsequent payments regardless of amount, tax type, or taxable year must be sent to us electronically.

Failure to comply with California’s e-pay requirement will result in penalties. The e-pay penalty will depend on the taxpayer. Corporations are subject to a ten percent (10%) penalty, while the mandatory e-pay for individuals will be one percent (1%) of the amount paid.

For example: You make your first quarter estimated tax payment of $25,000 on April 15, 2016, by paper check. Any payment made after that (e.g., a bill payment from a previous year or your second quarter estimated tax payment) must be made electronically.

Making a payment using your bank's online bill payment system is not an electronic payment. Your bank mails a paper check to us which does not meet the requirement to pay electronically.

Make your tax payment using one of the following methods:

*Not available for Group Nonresident/Composite Return Filers.

We provide detailed instructions so group nonresident/composite filers can pay electronically using Web Pay.

Advantages of electronic payment methods

Even if your clients are not required to make electronic payments, they can still take advantage of paying their income tax (estimated tax, bill, return, or extension) payments online.

  • e-file and schedule a tax payment.
  • Ensure we receive payments on time.
  • Subscribe to receive an email reminder to remit quarterly estimate payments.
  • Schedule estimate payments for the entire year at one time.
  • Save the cost of mailing payments.