Brenda Colburn Jemmott, CPA, Stockholder and Oakland Office Head
Brenda Colburn JemmottCPA / Partner / Co-Managing Director of Taxview bio

Kelly Creed, CPA, Tax Stockholder in the Oakland office.
Kelly CreedCPA / Tax Partner / Co-Managing Director of Taxview bio

California Pass-through Entity Elective Tax Payment is Due June 15th!

5/20/2022

RINA Alert - May 20, 2022 | Volume 20, Issue 5


Last October, we sent out an alert informing clients that the passage of Assembly Bill 150 creates an elective tax that allows the California taxes on pass-through income to be paid at the entity level.
 
This means owners can avoid the Federal $10,000 deduction limitation on State and Local Taxes (SALT) which they would have faced if they, and not the entity, paid taxes on the income.

Payment Date is Approaching

For our clients who wish to implement this strategy, they must make an initial payment by June 15, 2022 to be eligible to make the 2022 California Pass-Through Entity Tax (PTET) election. The Pass-Through Entity (PTE) may not make the election if the initial payment is not made by June 15th.
 
An electing California PTE must make two payments for tax years 2022 through 2025:

  1. The first payment (equal to the greater of 50% of the PTET paid for the prior year, or $1,000) must be made by June 15th of the taxable year for both calendar year and fiscal year PTEs.
  2. The second payment must be made by the PTE’s filing deadline without extensions (March 15th for calendar year taxpayers) though you may want to talk to your tax professional about making this payment by the end of the year to secure the federal tax deduction for the current year.

Payment Details

If the June payment is underpaid or not paid, the PTE will not be eligible to make the election for that taxable year – there are currently no exceptions to this rule!
 
If a PTE is currently on extension for tax year 2021, we recommend that clients overestimate the 2021 PTET when projecting the June 15th estimated payment.
 
If a PTE underpays the June 15th estimate and does not qualify for the 2022 PTET, any funds that were paid in but not utilized for the PTET, can be claimed as a refund in the PTE’s 2022 tax filing. This is only possible if the PTET is paid prior to the filing of the PTE tax return.
 
If your company is subject to CA web pay requirements - this payment must be made online Pay | FTB.ca.gov
 
If you have any questions or concerns, please reach out to your RINA professional.

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