All about business January 2020 Tax News

California’s paperless extension, FTB Notice-2019-07

FTB Notice 2019-07, Automatic Seven-Month Extension – Forms 100 and 100W, will make it easier for certain corporations to timely file.

FTB Notice-2019-07

On December 2, 2019, we issued the Notice granting taxpayers, in good standing, filing the Forms 100 (including REITs, REMICs, and RICs) and 100W an automatic 7-month extension, for taxable years beginning on or after January 1, 2019.

As stated in the Notice, the automatic 7-month extension does not apply to S Corporations. The extended filing due date for S Corporations will remain the 15th day of the 9th month after the close of the taxable year.

California’s paperless extension is an extension of time to file, not to pay.

Generally, California grants all income and franchise taxpayers an automatic extension of time to file a return.[1] As long as a taxpayer files their return within the extension period,[2] taxpayers are allowed either a 6-month or 7-month extension depending on their original due date, thus, the extended due date for a (an):

• 2019 California calendar year taxpayer (individual, partnership, or limited liability company treated as a partnership) is October 15, 2020,[3]
• S Corporation’s extended due date is September 15, 2020
• Corporations that file the forms 100 or 100W the extended due date will be November 16, 2020[4]

If the return is filed late the extension is denied and the taxpayer is subject to a late filing penalty.[5] The late-filing penalty is computed at a rate of 5% of the tax due for every month that the return is late, up to a maximum of 25%.[6]

In addition to the late-filing penalty that is based on tax, pass-through business entities (such as a partnership, limited liability company or S-corporation) are also subject to a late-filing penalty based on the total number of partners, members, or shareholders.

Refer to our Penalty Reference Chart (FTB 1024) for more information on the penalties we may assess businesses and individuals.

Interest

Even if your client can show reasonable cause for either the late filing or late payment of tax, interest is charged. Interest is not a penalty. Since 1982, California law requires interest to be compounded daily.[7]Interest begins to accrue from the original due date for underpayments because the liability for tax arises on the original due date[8] and ends on the effective date of payment. Interest is mandatory, and we are not allowed to abate interest except where authorized by law.

Go to our adjusted interest rates webpage to find current and previous rates. If your client is planning to file their return under the automatic extension period, but has not paid the full amount of tax owed they can and should pay any unpaid tax as soon as possible after the original due date to avoid the accrual of penalties and interest.
Note: If your client cannot pay in full and needs to make monthly payments, they can request an installment agreement.