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Business Entity e-file Requirement - Frequently Asked Questions

  1. Where can I read more about the law?
  2. Why is Business e-file required?
  3. Who must e-file a business tax return under this law?
  4. What types of returns must be e-filed under this law?
  5. Are Fiduciary (Estate and Trust) returns (Form 541) included in this requirement?
  6. Are Combined (Parent/Subsidiary) returns included in the requirement?
  7. When did this law take effect?
  8. How will FTB enforce the law?
  9. How much is the penalty?
  10. Who does the penalty apply to in a combined reporting situation?
  11. When will the penalty take effect?
  12. Per the mandate, the penalty for failing to e-file a required business return goes into effect for taxable years beginning on or after January 1, 2017. Is FTB going to start issuing penalties starting with the January 2017 tax year for those entities not in compliance with the Business e-file requirement?
  13. Is there a waiver provision in the law to allow exceptions to e-filing a required return?
  14. How do I request a waiver?
  15. When is the e-file waiver due?
  16. Are combined report return filers required to file a separate waiver for each entity in the combined report?
  17. Is there a paper version of the e-file waiver?
  18. If I file multiple business entity returns in a year, do I need to file a waiver for each entity and return?
  19. Do I need to attach the waiver confirmation page to my paper return?
  20. What is the difference between the effective date (January 1, 2015) and the beginning taxable year date (2014)?
  21. Can business entities without a California identification (ID) number e-file their return?
  22. Can I continue to submit my Schedule K-1s using your Paperless Schedule K-1 program?
  23. If I choose to e-file my Schedule K-1s with my return, is there a limit on how many that can be submitted with an e-file return?
  1. Where can I read more about the law?

    Assembly Bill 2754 added California Revenue and Taxation Code, Sections 18621.10 and 19171. See Sections 5 and 6 of Assembly Bill 2754

  2. Why is Business e-file required?
    • e-filing significantly reduces income tax return processing costs.
    • e-filed returns are more accurate and contain less errors than paper returns. The e-file program checks for common error conditions before you submit the returns. This gives the business entity a chance to correct the return to avoid a notice.
    • The paper return error rate is approximately 30 percent. The e-file return error rate is less than 10 percent.
  3. Who must e-file a business tax return under this law?

    Business entities who file an original or amended return prepared with tax preparation software. The law applies to business entities and preparers who file the return on a business entity’s behalf.

  4. What types of returns must be e-filed under this law?

    Any return that is considered acceptable. Acceptable returns include any original and amended returns including:

    • Corporations: Forms 100, 100S, 100W, 100X
    • Partnerships: Form 565
    • LLCs: Form 568
    • Exempt organizations: Form 199

    You can find a complete acceptable forms and schedules list in our Business e-file Overview.

    This law does not apply to Form 109, Exempt Organization Business Income Tax Return, filing.

  5. Are Fiduciary (Estate and Trust) returns (Form 541) included in this requirement?

    No. Although we accept Form 541 in e-file, Trust and Estate returns are not included in this requirement.

  6. Are Combined (Parent/Subsidiary) returns included in the requirement?

    Yes. Combined returns are included in the requirement. Combined returns are acceptable in our e-file program.

  7. When did this law take effect?

    January 1, 2015.

  8. How will FTB enforce the law?

    A business entity required to e-file pursuant to Section 18621.10, that files a return in a manner that fails to comply with Section 18621.10 shall be subject to a penalty if the failure to e-file is due to willful neglect and not reasonable cause.

  9. How much is the penalty?
    • $100 for the initial e-file failure
    • $500 for each subsequent failure.

    The penalty is applied at the entity level.

  10. Who does the penalty apply to in a combined reporting situation?

    If a return is filed on behalf of a combined reporting group, the penalty applies to the combined reporting group and not the group’s electing members or subsidiaries.

  11. When will the penalty take effect?

    The penalty will apply to returns filed for taxable years beginning on or after January 1, 2017.

  12. Per the mandate, the penalty for failing to e-file a required business return goes into effect for taxable years beginning on or after January 1, 2017. Is FTB going to start issuing penalties starting with the January 2017 tax year for those entities not in compliance with the Business e-file requirement?

    Business entity returns are required to be e-filed and non-compliant entities may be subject to penalties for not following the mandate. If you are unable to e-file a return subject to the requirement, please submit the online waiver request prior to, or up to 15 days after filing the tax return.

  13.  Is there a waiver provision in the law to allow exceptions to e-filing a required return?

    Yes. The law allows a business entity to annually request an e-filing waiver if it can show the inability to e-file is due to, but not limited to:

    • Technology constraints.
    • Undue financial burden.
    • Other circumstances that constitute reasonable cause and not willful neglect. 
  14. How do I request a waiver?

    Use the Business Entity e-file Waiver Request Form when you cannot e-file a return subject to the requirement. Click here to start waiver

  15. When is the e-file waiver due?

    Your waiver may be submitted prior to, or up to 15 days after filing the tax return.

  16. Are combined report return filers required to file a separate waiver for each entity in the combined report?

    No, only one waiver is required for the parent and all subsidiaries for the return in question.

  17. Is there a paper version of the e-file waiver?

    No. Submit waivers using our online form. If you are unable to use our online form due to technology constraints, contact us at 916.845.0353.

  18. If I file multiple business entity returns in a year, do I need to file a waiver for each entity and return?

    Yes.

  19. Do I need to attach the waiver confirmation page to my paper return?

    No. The waiver confirmation page is for your records only. If you received the confirmation page, we have received your waiver request.

  20. What is the difference between the effective date (January 1, 2015) and the beginning taxable year date (2014)?

    The requirement applies to taxable years beginning with 2014. However, the law’s effective date is January 1, 2015. This means, for example, if a business entity files a short period 2014 tax year return before January 1, 2015, they are not subject to the requirement. Conversely, if in 2015 a business entity is required to file a taxable year 2013 amended return, it would not be subject to the requirement as the requirement applies to 2014 taxable years and later.

  21. Can business entities without a California identification (ID) number e-file their return?

    Yes. There are two options to e-file for entities that are not registered with the California Secretary of State (SOS).

    Business Entities without a California ID
    We accept returns without a California ID for tax years 2014 and forward. The entity should provide an explanation in lieu of a number, such as “Applied for” or “Foreign Non-US”. Check with your software provider to make sure they support this feature.

    Business Entities Assigned a California ID
    If a business entity previously filed a return without a California ID number and they have not registered with the SOS, we will assign an ID number to use on future returns, payments, and documents. We will send a letter to the business entity advising of the assigned id number. To determine if we assigned a California ID number, contact us:

    Phone:
    800.852.5711, Monday through Friday, 8 a.m. to 5 p.m., except state holidays.
    916.845.6500 (outside U.S.)

    California Relay Service
    711 or 800.735.2929

    TTY (Device to Device)
    800.822.6268

  22. Can I continue to submit my Schedule K-1s using your Paperless Schedule K-1 program?

    Yes, although we accept Schedule K-1s attached to an e-filed return, you can continue to use our Paperless Schedule K-1 program to submit Schedule K-1’s (565 or 568) on a CD Rom or Portable USB/Flash Drive. Click here for more information on submitting paperless Schedules K-1 (565 or 568) for partnerships and limited liability companies.

  23. If I choose to e-file my Schedule K-1s with my return, is there a limit on how many that can be submitted with an e-file return?

    No, there is no limit on the number of Schedule K-1’s that can be submitted with an e-file return.

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