California's Paperless Extension is for Filing not Paying
Generally, California grants all income and franchise taxpayers an automatic extension of time to file a tax return. There is no request a taxpayer needs to make in order to take advantage of this automatic extension to file a tax return. As long as taxpayers file their tax returns within the extension period, taxpayers are allowed either a six-month or seven-month extension.  There is no request a taxpayer needs to make in order to take advantage of this automatic extension to file a return. The extended due date for a 2012 California calendar-year taxpayer (individual, partnership, limited liability company, or corporation) is October 15, 2013.  If the tax return is filed late (after October 15) no valid extension exists and the taxpayer is subject to a late filing penalty. (Cal. Code of Regulations section 18567(a)) The late filing penalty is computed at a rate of five percent of the tax due for every month that the tax return is late, up to a maximum of 25 percent. (Revenue and Taxation Code Section 19131(a)) In some cases individual taxpayers may be subject to a minimum late filing penalty amount.
In addition to the late filing penalty based on tax, pass-through business entities (such as partnerships, limited liability companies, or S corporations) are also subject to a late filing penalty based on the total number of partners, members, or shareholders. For more information on this late penalty, see our August 2012 Tax News article.
The extension is for time to file, not for time to pay, so when the full amount of tax is not paid by the original due date of the tax return, a late payment penalty at the rate of five percent plus 0.5 percent per month or a fraction of a month and interest will be imposed until the tax is fully paid even if the return is filed on time. The late payment penalty will continue to accrue from the original due date until the taxpayer pays in full or we assess the maximum 25 percent penalty.
Like the late filing penalty, taxpayers can avoid this penalty if they can show their failure to pay was due to reasonable cause. The fact that it may have been difficult to estimate the proper amount of tax due is not sufficient, to prove reasonable cause. Taxpayers must be able to prove that despite the exercise of ordinary business care and prudence, they were unable to pay the correct amount of tax. However, the penalty is not imposed if taxpayers pay at least 90 percent of the tax by the original due date and pay any remaining amount due with their timely-filed (by the extended due date) tax return.
For more information on penalties we may assess businesses and individuals, see our recently updated FTB 1024, Penalty Reference Chart.
Even if your client can show reasonable cause for either the late filing or late payment of tax, interest is charged. Interest is not a penalty. Since 1982, California law requires interest to be compounded daily. Interest begins to be charged from original due date for underpayments because the liability for tax arises on the original due date and ends on the effective date of payment.
If your client is planning to file the return under the automatic extension period, but has not paid the full amount of tax owed, unpaid tax should be paid as soon as possible after the original due date to avoid the accrual of penalties and interest.
Your client can use Web Pay for Individuals or Businesses to make payments online. Businesses and individuals can either pay the same day or schedule payments up to one year in advance 24 hours a day, 7 days a week. Go to ftb.ca.gov and search for web pay.Note: Taxpayers that cannot pay in full and needs to make monthly payments can request an Installment Agreement.
 Tax returns for corporations filing on a calendar year basis are due on the 15th day of the third month following the close of the tax year. To allow for uniformity of the extended due date, corporations have a seven month extension to file.
 In some cases additional time may be allowed. For example, taxpayers residing or traveling abroad and members of the armed forces or Merchant Marines serve beyond the boundaries of the U.S.
 To avoid the late filing penalty the taxpayer would need to show the failure to file was due to reasonable cause.
 The minimum amount for individuals is the lesser of $100 or 100 percent of the tax required to be shown on the return. The tax amount upon which the penalty is based is the amount of tax required to be shown on the return, reduced by any amount of tax paid on or before the prescribed due date for the payment of the tax and any credit against the tax which may be claimed upon the tax return.
 Also called the underpayment of tax penalty or the failure to pay penalty