topic How do I waive the California franchise tax first year? in State tax filing

How do I waive the California franchise tax first year?

mjohnson — Fri, 31 May 2019 23:56:58 GMT

I'm hoping to submit my taxes for 2013 (late) and it was my first year of doing business by a few weeks. Where does Turboxtax show the option to mark and waive the first year franchise tax? I've seen several of these questions on the board and none have been answered.

As far as I know it's not a "waiver" in the sense that yo...

TomYoung — Fri, 31 May 2019 23:56:58 GMT

As far as I know it's not a "waiver" in the sense that you have to ask or apply for it.

Pub 1060 states:
---------------------------------------------------------------
Newly Incorporated or Qualified Corporation Exception

Newly incorporated or qualified corporations are not required to pay the minimum franchise tax in their first
taxable year.
---------------------------------------------------------------

I would think that the TTBusiness California program should "know" this and handle it correctly.

I'm not sure what you mean by " it was my first year of doing business by a few weeks." It seems like it is, or it isn't.

TTBusiness California didn't handle it which is why I'm h...

mjohnson — Fri, 31 May 2019 23:57:00 GMT

TTBusiness California didn't handle it which is why I'm here. Got to the end and says I owe the minimum franchise tax fee that I'm trying t waive. Still at a loss.

I incorporated 12/4/13. The 15 day rule didn't apply so I'm forced to submit a return for that year.

Please see this thread, including the screenshots in it:...

SweetieJean — Fri, 31 May 2019 23:57:02 GMT

Please see this thread, including the screenshots in it:

https://ttlc.intuit.com/questions/2335321-why-would-i-owe-ca-franchise-tax-800-in-first-year-and-a-n...

Be sure your 2013 CA software is updated.

Beautiful. Thank you.

mjohnson — Fri, 31 May 2019 23:57:04 GMT

Beautiful. Thank you.

this link doesnt work, i am in the same situation of how...

pshah — Fri, 31 May 2019 23:57:05 GMT

this link doesnt work, i am in the same situation of how to configure turbotax for first years of operation in ca

Re: How do I waive the California franchise tax first year?

taiweile — Wed, 02 Mar 2022 20:53:44 GMT

I would like to follow with this question because I got the same problem for 2021 with TurboTax. I only set up and run my s Corp starting Oct. 2021, but in the final printed paperwork it show the brochure for $800 franchise fee. I think the first year of a new established company will be exempted from franchise fee.

Re: How do I waive the California franchise tax first year?

GeorgeM777 — Wed, 02 Mar 2022 23:21:17 GMT

This matter is being investigated. However, while this matter is under review, what is the underlying character of your business. For example, are you a single member limited liability company, a limited partnership, or a limited liability partnership?

@taiweile

Re: How do I waive the California franchise tax first year?

taiweile — Thu, 03 Mar 2022 02:03:42 GMT

Thank you for quick reply, my company is a Inc. (S corporation) not a LLC or any other type. It is a small business, and only 2 shareholders. Thanks

@GeorgeM777

Re: How do I waive the California franchise tax first year?

GeorgeM777 — Thu, 03 Mar 2022 16:30:19 GMT

Information about your S Corp election is entered in the Business Info category of TurboTax Business, under the subheading About Your Business. In the subheading About Your Business are various entry categories, one of which is Date you incorporated. Select Date you incorporated and work your way through that section making sure the date you selected is correct.

You will likely see page(s) requesting information about your S Corp election and whether such election is effective (see below sample pages that relate to the S Corp election and whether such election was timely made). Review your answers to ensure they are correct. An S Corp election has to be timely made and is generally done in the beginning of the calendar year. However, there are exceptions where a late filing can be made.

Follow-up with additional information as appropriate. As a reminder, in any follow-up post do not include personally identifiable information.

@taiweile

Re: How do I waive the California franchise tax first year?

taiweile — Sat, 05 Mar 2022 01:25:00 GMT

Hi @GeorgeM777

Thank you for quick reply, yes I checked the election date, I did correctly according to my form 2553.

Re: How do I waive the California franchise tax first year?

firebytes — Mon, 21 Mar 2022 15:52:28 GMT

I am having the same issue for 2021 taxes. How do I make Line 3 of CA Form 568 $0?? First year payment is waived!

Re: How do I waive the California franchise tax first year?

DaveF1006 — Wed, 23 Mar 2022 13:48:29 GMT

The $800 fee is correct. In reading this Turbo Tax post written by GeorgeM777, you would have been required to pay a LLC franchise fee in 2021 within 2-3 months after you formed your LLC. You would need to pay again on April 15, 2022. This resulted in back-to-back payments, which provided a hardship for LLC business owners that formed their LLC in the last quarter of the tax year. This was the result of Assembly Bill 85.

So to avoid this double payment, California waived the first year fee that was to be paid in 2021 but you are expected to pay this $800 because this will apply to the 2022 tax year and not for 2021. After this, the $800 franchise fee will be due every year by the tax filing deadline.

Check your return to make sure that only the $800 fee that is due April 15 is the only fee being reported instead of $1600, $800 for 2021 and $800 for 2022.

@firebytes

Re: How do I waive the California franchise tax first year?

firebytes — Wed, 23 Mar 2022 16:00:40 GMT

This is not correct as it clearly states 2021 Fee, not 2022. 2022 is an estimated payment submitted on form 2022 3522 which Turbotax also prints.

Re: How do I waive the California franchise tax first year?

ZoltanB45 — Wed, 23 Mar 2022 17:13:21 GMT

As was stated earlier. the relief of the first Franchise tax payment is regarding the payment which is due the 15th day of the 4th month following the entity organization. This would be the 2nd franchise tax payment.

If it is believed that this is actually the first payment which should be abated, you do not have to make the payment. You can always not send the check and explain to California that is was the first year and that the fee was abated.