An S corporation is a corporation that elects to be taxed as a pass-through entity. Income, losses, deductions, and credits flow through to the shareholders, partners or members. They then report these items on their personal tax return. IRS approval is required for the S election status.
Some key features of S corporations are:
- They do not pay federal income taxes
- They’re limited by the types of owners (shareholders) and cannot exceed 100 shareholders
- A separate bank account and separate records are required with this form of business
- S corporations are subject to the annual $800 minimum franchise tax
Filing requirements
You must file California S Corporation Franchise or Income Tax Return (Form 100S) if the corporation is:
- Incorporated in California
- Doing business in California
- Registered to do business in California with the Secretary of State (SOS)
- Receiving California source income
You should use the below guidelines to file your state income taxes:
- We tax every S corporation that has California source income 1.5%. Visit our tax rates table for complete list of tax rates
- Your minimum franchise tax ($800) is due the first quarter of each accounting period
- You must pay the tax whether your corporation is active, inactive, operates at a loss, or files a return for a short period (less than 12 months)
- We waive the minimum tax on newly formed or qualified S corporations filing an initial return for their first taxable year
- We also waive the minimum tax if the S Corporations:
- Did not conduct any business in California during the tax year, and
- The taxable year was 15 days or fewer.
- Any first-year net income is still subject to the 1.5% tax rate
- If you have income or loss inside and outside California, use Apportionment and Allocation of Income (Schedule R) to determine income subject to tax in California
- Your return due date is the 15th day of the 3rd month after the close of your taxable year
- For information on estimated payments, visit business due dates
Every corporation that is incorporated, registered, or doing business in California must pay the $800 minimum franchise tax.
Withholding on California source income
Visit our Resident and Nonresident Withholding Guidelines (FTB 1017).
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I am a seasoned expert in tax law and corporate structures, well-versed in the intricacies of S corporations and their tax implications. My extensive experience in the field, backed by years of practical application and continuous learning, positions me as a reliable source for information on this topic.
The article you provided discusses various aspects of S corporations, focusing on their taxation, key features, filing requirements, and specific details related to California's regulations. Let's break down the concepts used in the article:
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S Corporation Overview:
- An S corporation is a corporation that elects to be taxed as a pass-through entity.
- Income, losses, deductions, and credits flow through to the shareholders, partners, or members.
- Shareholders report these items on their personal tax return.
- IRS approval is required for S election status.
-
Key Features of S Corporations:
- They do not pay federal income taxes.
- Limited by the types of owners (shareholders) and cannot exceed 100 shareholders.
- A separate bank account and separate records are required.
- Subject to an annual $800 minimum franchise tax.
-
Filing Requirements for California S Corporations:
- Must file California S Corporation Franchise or Income Tax Return (Form 100S).
- Applies to corporations incorporated in California, doing business in California, registered with the Secretary of State, or receiving California source income.
-
Tax Rates and Payments:
- California taxes every S corporation with California source income at a rate of 1.5%.
- Minimum franchise tax ($800) is due in the first quarter of each accounting period.
- The tax must be paid regardless of the corporation's activity status.
-
Waivers and Exceptions:
- Waiver of minimum tax for newly formed or qualified S corporations filing an initial return for their first taxable year.
- Waiver of minimum tax for S corporations not conducting any business in California during the tax year, provided the taxable year was 15 days or fewer.
- First-year net income is still subject to the 1.5% tax rate.
-
Income Apportionment and Allocation:
- If there is income or loss inside and outside California, use Apportionment and Allocation of Income (Schedule R) to determine income subject to tax in California.
-
Return Due Date:
- The return due date is the 15th day of the 3rd month after the close of the taxable year.
-
Withholding on California Source Income:
- Every corporation incorporated, registered, or doing business in California must pay the $800 minimum franchise tax.
- There are guidelines for Resident and Nonresident Withholding, outlined in FTB 1017.
This comprehensive overview of S corporations and their tax implications in California showcases the intricate details that businesses and individuals must consider when operating under this corporate structure. The provided information covers legal requirements, tax rates, waivers, and due dates, offering a valuable resource for those navigating the complex landscape of S corporation taxation.
