Filed Federally "as LLC" by splitting 50:50 but confused how to file CA Form 568

[snowchi3]

As per suggestion, I filed federally for my LLC with schedule C and split the profit/expense 50:50 and used different business description for wife and me. I am in a community property state.

Now that I have to file the CA state tax, I need to file form 568. 

1) do I need to file two form 568 (one for me and one for my wife) with the 50:50 profit/expense as I had done with the federal return or do I just file one form 568 (for myself) and then use the total profit/expense value

2) if I file two form 568, wouldn't the state think that there are two companies and charge me accordingly?

[PatriciaV · Accepted solution]

In the California state interview, designate only one of the two as an LLC. You will also need to adjust the state income for the "LLC" Schedule C so you report 100% of the taxable income. The franchise fee is $800 regardless of income, but the state does need the accurate income amount.

Follow these steps:

1. Open your return and click on State Taxes.
2. On the California Taxes page, click Edit beside Income and adjustments.
3. Under Business, click Start/Revisit beside Business Profit or Loss Adjustment.
4. Click Edit beside the business you need to report on Form 568.
5. Click "yes" that this business is owned by a Single Member LLC.
6. Continue after reading the Form 568 information.
7. A sub-form will appear. You need to complete any boxes highlighted in red.
8. Note the checkbox at the bottom of the form if you are not eligible to e-file Form 568.
9. In most cases, you will not need to complete sides 4-5 or 7. 
10. When you reach Side 7, you can print Form 568 if you need to mail it.
11. Follow the instructions for the Payment Voucher.
12. Continue on to the Business Summary page.

If you are using TurboTax for Desktop, you can view and edit California Form 568 in Forms Mode.

[snowchi3]

Thank you for the detailed answer!

Some points that were not resolved:

Form 568 Schedule K, the gross income could not be modified (the value is snagged from fed return). Since I had loss this year I think I am okay with that being reported as smaller loss than actual. In other places where turbotax allows modification, I made the proper adjustments.

Also, the LLC fee to the state which should be waived due to first year exemption for CA, was not automatically updated in the generated voucher for print.

Very thankful for the answer. Would not know how to complete it without your help. In the future, I might opt to have a tax preparer handle the taxes because of the LLC filing for CA and the manual modifications that I would need to do.

Thanks

[PatriciaV]

The income adjustments require access to Forms Mode using TurboTax for Desktop (any version).

1. Click  Forms in the TurboTax header.
2. Look for Sch C Wks under California in the forms list on the left.
3. Click the form name to open it in the large window.
4. Override the amounts (right-click + Override) on Lines K, M, 1 and 12 to reflect the totals of both Schedules C in your federal return. 
5. Repeat on Line 1A on LLC Income Wks (Schedule JW Side 7). 
6. Review the results on all related California forms.
7. Click Step-by-Step to return to the main screens.

If you are working in TurboTax Online, see this post for instructions to switch to desktop: How do I switch from TurboTax Online to the TurboTax software? Contact TurboTax Support and request a free download due to program limitations on your State return.