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California Business E-file: Are You Required To?

This article is reproduced with permission from Spidell Publishing, Inc.

California law requires business entities that use tax preparation software to file electronically beginning January 1, 2015, for taxable years beginning on or after January 1, 2014. This requirement applies to original and amended returns. The law includes a penalty for failing to e-file for corporations, partnerships, LLCs, and exempt organizations. However, the penalty may not be applied until returns are filed for taxable years beginning on or after January 1, 2017. Beginning with the 2017 taxable year, a business that fails to electronically file its return will be subject to penalties equal to $100 for the initial failure and $500 for each subsequent failure.

Waivers
The California Franchise Tax Board (FTB) has stated that, although no penalty will be applied this year, the law requires taxpayers to electronically file or request a waiver.

A taxpayer may request a waiver of the requirement online in cases where:

  • The taxpayer has technology constraints;
  • E-filing would result In undue financial burden; or
  • In other circumstances that constitute reasonable cause and not willful neglect.

You can request a waiver online at:

www.ftb.ca.gov/professionals/busefile/Business_efile_Waiver_Request.asp

The e-file requirement
The requirement only applies if the return is prepared using tax preparation software with the ability to e-file returns. The returns that must be e-filed include:

  • Corporations – Forms 100, 100S, 100W, and 100X;
  • Partnerships – Form 565;
  • LLCs – Form 568; and
  • Exempt organizations – Form 199 (Form 109, Exempt Organization Business Income Tax Return, is not filed electronically).

According to the FTB, because the FTB’s e-file program checks for common error conditions before the return is submitted, e-filing results in an error reduction rate of 20%.

For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).

 

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