California Tax Update – Guidance on Upcoming Tax Payments
By Christian J. Burgos, CMI, J.D., LL.M., National Co-Leader - State & Local Tax
On September 15, 2023, the California Franchise Tax Board (FTB) issued a Tax News Flash advising Taxpayers to make separate tax payments to avoid receiving notices, penalties, and erroneous tax refunds.
Due to the severe Winter Storms that were experienced in California in late 2022 and early 2023, President Biden and California Governor Newsom declared a state of emergency, which resulted in the IRS and the FTB providing affected Taxpayers with an extension to file tax returns and remit tax payments to October 16, 2023. The disaster declaration extended the due dates for two tax years for multiple different personal and business entity taxes. The state recommends submitting separate payments for each year and payment type to avoid any confusion.
The relief provided by the IRS and the FTB to individuals and businesses located in California (except for those located in Modoc, Shasta, and Lassen Counties) applied to tax deadlines falling on or after December 27, 2022, and before October 16, 2023, which include:
- Individuals whose tax returns and payments were due on April 18, 2023,
- Quarterly estimated tax payments due January 17, 2023, March 15, 2023, April 18, 2023, June 15, 2023, and September 15, 2023,
- Business entities whose tax returns are normally due on March 15, 2023, and April 18, 2023, and
- California Pass-Through Entity (PTE) elective tax payments due on March 15, 2023, and June 15, 2023.
For individuals and businesses in Modoc and Shasta Counties, the extended due date for tax returns and payments was August 15, 2023.
The postponement of time to file and pay did not apply to residents and businesses located in Lassen County, who were subject to the regular established deadlines.
Special Note on California Pass-Through Entity (PTE) Elective Tax Payments
As an important reminder, there are two payment due dates for the California PTE elective tax.
The first payment is due on or before June 15th, during the taxable year of the election (e.g., June 15, 2023, applicable towards the 2023 tax year). The amount due is $1,000 or 50% of the elective tax paid for the prior taxable year, whichever is greater. The remaining amount is due on or before the due date of the original return without regard to extensions.
However, as noted above, due to the 2022-2023 winter storms, individuals and businesses located in California (except for those located in Modoc, Shasta, and Lassen Counties) generally qualify for an extension until October 16, 2023, to file and pay taxes. This extension applies to applicable payments of the PTE elective tax.
The first PTE installment payments that are untimely or underpaid will result in an inability to make the PTE election.
If you have any questions regarding the above guidance, please reach out to your Marcum relationship partner for further assistance.
