TurboTax forces incorrect $0 value for CA Form 568 Schedule IW Line 3 for businesses submitting 'final ever return' - it should be $800 - what am I doing wrong?

[pekkis44]

TurboTax forces incorrect $0 value for CA Form 568 Schedule IW Line 3 for businesses submitting 'final ever return' - it should be $800. I am not able to manually override this. This leads to the calculation to suggest a $800 refund is due, which is incorrect. Will likely get flagged in FTB review? Business in question closed in November 2025, although this is not that relevant. Any advice appreciated.

[MonikaK1]

Which version of TurboTax Desktop are you using? I have not encountered this issue.

In general, California LLCs are required to pay the $800 annual tax and file a California return until the appropriate papers are filed. In order to cancel an LLC, the following steps must be taken:

1. File a timely final California return (Form 568) with the FTB and pay the $800 annual tax for the taxable year of the final return.
2. File Form LLC-4/7, Certificate of Cancellation, with the California SOS. The California SOS also requires a domestic LLC to file Form LLC-3, Certificate of Dissolution. Contact the California SOS for more details.

The Form LLC-4/7’s effective date will stop the assessment of the $800 annual tax for future taxable years. If Form LLC-4/7 is filed after the taxable year ending date, a subsequent year return and an additional $800 tax may be required.

The annual tax will not be assessed if the LLC meets all of the following requirements:

• The LLC files a timely Final Limited Liability Company Return of Income, for the preceding taxable year, including extension.
• The LLC did not do business in California after the final taxable year.
• The LLC files the appropriate documents for cancellation with the California SOS within 12 months of the timely filed Final Limited Liability Company Return of Income.

In order for us to troubleshoot this issue, you can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Desktop users:

1. From the black bar at the top of your screen, select Online
2. Click Send Tax File to Agent
3. Click Send on the message that pops up
4. TurboTax will create a "sanitized" copy of your return information with no personal info
5. Post the full token number here in this thread

We will then be able to review your file to see what you are seeing, and we can determine what is going on in your return and provide you with a suggested resolution.

[pekkis44]

Note - I accidentally created a duplicate thread (feel free to merge if you can): https://ttlc.intuit.com/community/state-taxes/discussion/re-bug-in-ca-form-568-schedule-iw-line-3-fo...

I should have clarified that I am using the TurboTax Online version. 

Few clarifications:
- LLC-4/7 Form was filed 11/24/2025. I received approval letter December 3.
- I paid $800 when filing taxes last year with TurboTax Online (i.e. for tax year 2024). This payment was the LLC annual tax for 2025.
- Now, filing taxes for tax year 2025, my balance should be $0: I should not owe anything, nor should FTB owe me anything. Is this correct?

TurboTax Online does correctly mark this as the Final Ever Return for this LLC, but for some reason it ends up calculating that I am owed $800. See the screenshot - I believe the error is happening on Line 3: 2025 Annual LLC Tax (should have value $800). As mentioned earlier, I do not seem to have the ability to change these values: no matter what I put in these fields, TurboTax Online overrides them.

What should I do? Did I misunderstand something? Thank you for the help!

[PatriciaV]

If you are using TurboTax Online, you will need to remove the designation for "final" return. This will add the California franchise tax fee due for your final year of business to offset the payment you made last year. Next year you can file a "final" return with zero tax due.

[pekkis44]

The only way I can achieve that is to go to the income section in TT, and answer "Did this business end in 2025 = NO". This unselected the "Final return" in Form 568, and the calculations look correct. However:

1. The instructions for Form 568 state that the final return should be marked as such to prevent future tax obligation (or confusion)?

2. Wouldn't TT also ask me to pay $800 for year 2026, which I do not need to do?

What other consequences will selecting "Did this business end in 2025 = NO" in the income section have that I should be aware of?

Thank you.

[RobertB4444]

1. If you are filing a zero dollar return next year then you it will be the final return, not this one.  The final return should not owe an $800 fee because the LLC is shuttered.  If you mark this as a final return it removes the $800 fee because the final return should not owe that fee.  You can pay the fee separate of the return and the amount will be correct.  Although, as I read it, because your LLC has been approved to shut down it doesn't owe the fee any more.  

If you feel like you owe the fee then you need to not mark this as the final return and pay the fee, after which you can file next year owing nothing. 

Next year's filing will be a blank return marked final.  

[pekkis44]

That does not make sense to me. The form incorrectly calculates my 2025 LLC tax as $0 if I check final. That is incorrect and it is a bug in TT. The tax liability for 2025 when the business was still running is $800. This is also the amount that I have already paid for year 2025. So it should balance it out and show $0 balance. Nothing to pay, nothing to get as a refund.

Per FTB documentation, I have to check Final Return or otherwise they may expect another $800 for year 2026 and so on, because I did not follow the correct process to shut down an LLC.

Can this bug be addressed in TT please?

Right now the only option I see is to print out the CA return, manually fix it, and send it by mail. Not great.

[PatriciaV]

If you cannot use the work-around previously provided, your only option is to print and file by mail. You'll need an exemption from the state to send a paper return. See California business entity e-file waiver request.

[jbinsantamonica]

The suggested solution, to uncheck final return, is not acceptable.  If the business closed in 2025, then 2025 is the final return. The program should know that the $800 is still owed for 2025. In my situation, I'm using the desktop home and business. The LLC in question was dissolved in December of 2025. Filing a tax return for 2026 when a business didn't even exist on January 1st of that year, makes no sense. Will the experts here agree that it's a bug in the program that it doesn't know the $800 for the final year return is still owed?  

UPDATE: The desktop version allows me to override and type in 800. Since I have two LLC's I have to mail it in anyway, so I guess that's my solution.

[densefogg]

@pekkis44 @jbinsantamonica @PatriciaV @RobertB4444 @MonikaK1 
Hi @pekkis44 I am having the exact same issue. Using TT online. Closed my LLC in Dec 25. Paid $800 in Q1 2025. Trying to file "Final" 568 now. It's not putting the $800 where it should on line 3 (it shows 0), and shows a Refund of $800, which is wrong. I also find the suggested "uncheck Final" for this year and file an empty 568 form marked Final in 2027 unacceptable, as CA requires you to file a final return within 12 months. I'm guessing CA would consider us still in operation and expect us to pay a pointless $800 in 2026 for an LLC we closed. This seems to be bug.

@PatriciaV indicated in your other thread this won't be fixed in time to file.

Curious @pekkis44 what you ended up doing? Seems paper mailing the 568 in with the waiver request is the only solution?

[densefogg]

@pekkis44 paper filing seems like it will delay getting my CA refund by the months it takes FTB to process manually. So the other thing I was considering is just sending it in electronically with my tax return knowing that it's wrong. I get my CA refund for taxes. Then for refunding the $800 LLC tax, I'm thinking maybe the FTB will flag it and upon review send me a letter saying "we're not going to refund you $800". In which case I will say "fine, don't refund me". And call it a day.

[pekkis44]

Very frustrating indeed. I did not accept the workaround suggested and decided to mail the 568 in with the waiver. 

In addition, TT online was not letting me e-file CA return without the (incorrect) 568, so I decided to mail in my CA return as well. Will look into TT alternatives next year.

Hope you figure it out!