I own a relatively new C-corp (with some income, but much more losses than income). In my State Taxes (California) section, it says the following. What does this mean and how do I know whether the answer is Yes or No? TurboTax didn't have an "Explain this" hyperlink like normal.
"Filing an Income Tax Return?
Interest on federal and California obligations is generally subject to franchise tax, but not income tax.
Are you filing an income tax return rather than a franchise tax return?"
I understand the difference between franchise tax and income tax in general. But I don't understand why a "franchise tax return" and an "income tax return" would be two separate things and which I'm doing. Am I doing "income tax return" because I had some income? Is a "franchise tax return" only if you had no income?
California corporations without taxable income are subject to California's franchise tax. California corporations with taxable income are subject to the state's corporate income tax and, potentially, the state's alternative minimum tax.
If you have no taxable income, you would file a Franchise Tax return. Otherwise, you would file an Income Tax return.