Fillable Printable Ftb 5949 - Return Information Notice Explanation
Fillable Printable Ftb 5949 - Return Information Notice Explanation
Ftb 5949 - Return Information Notice Explanation
FTB 5949 (REV 03-2017) PAGE 1
STATE OF CALIFORNIA
FRANCHISE TAX BOARD
PO BOX 942857
SACRAMENTO CA 94257-0540
This insert explains the adjustments we made to your
entity’s tax return.
To help you understand our adjustments:
1. Match the Paragraph Codes from the enclosed
notice with the Paragraph Code Explanations on
this insert.
2. Compare the information on your entity’s tax return
and supporting documents with the information on
the enclosed notice.
We refer to:
• California Revenue and Taxation Code as R&TC.
• The California Secretary of State’s Office as SOS.
• Limited Liability Companies as LLCs.
All Franchise Tax Board (FTB) forms and publications
we reference are available at ftb.ca.gov/forms.
If you disagree with our adjustments or you need
clarification, contact us by telephone, fax, or mail.
Refer to Internet and Telephone Assistance for
contact information.
If you contact us, we will need your:
• Name, address, and telephone number.
• Entity’s identification number.
• Enclosed notice number.
If you call us, have your entity’s tax return, supporting
documents, and the enclosed notice available during
the call.
If you write or fax information to us, include copies of
the enclosed notice and any supporting documents.
Send any written correspondence to:
FRANCHISE TAX BOARD
PO BOX 942857
SACRAMENTO CA 94257-0540
Contact Us
Web: ftb.ca.gov
Phone: 800.852.5711 7 a.m. to 5 p.m. weekdays,
except state holidays
916.845.6500
from outside the United States
TTY/TDD: 800.822.6268 for persons with hearing or
speech impairments
Paragraph Code Explanations
AA We revised the tax your corporation reported on its
tax return for one of the following reasons:
• We found a computation error.
• Your corporation used the incorrect tax rate.
• Your corporation’s tax cannot be less than the
minimum franchise tax, if it incorporated or
qualified before January 1, 2000.
• Your corporation incorporated or qualified
through SOS on or after January 1, 2000. In
these situations, the tax on the first required
corporation tax return may be less than the
minimum franchise tax. If inactive or operating
at a loss, no minimum franchise tax is due. On
subsequent required tax returns, the tax cannot
be less than the minimum franchise tax.
•
Because your corporation’s net income after state
adjustments (pre-apportioned income) exceeds
$300,000, it cannot deduct the Net Operating
Loss (NOL) carryover. This law applies to 2010
and 2011 tax years (R&TC Section 24416.21). As
a result, we revised the tax return.
• Because your corporation’s net business
income exceeds $500,000, it cannot deduct
the Net Operating Loss (NOL) carryover. This
law applies to 2008 and 2009 tax years (R&TC
Section 24416.9). As a result, we revised
the tax return.
If your corporation carries tax credits over to a
subsequent year, then revise that amount on the
subsequent year accordingly.
AB Your corporation must pay the minimum franchise
tax for each tax year even if it is inactive or
operates at a loss.
AC Corporations doing business in California are
subject to the minimum franchise tax.
AD Corporations subject to tax under Chapter 3 of
the Corporation Tax Law are not subject to the
minimum franchise tax.
AE The minimum franchise tax is due until your
corporation files one or more of the following
documents with SOS:
• Certificate of Election to Wind Up and Dissolve
(Form ELEC STK), if a domestic stock
corporation.
• Certificate of Dissolution (Form DISS STK), also
if a domestic stock corporation.
• Certificate of Election to Wind Up and
Dissolve (Form ELEC NP), if a domestic
nonprofit corporation.
• Certificate of Dissolution (Form DISS NP), also if
a domestic nonprofit corporation.
• Certificate of Surrender, if a foreign corporation.
AF Minimum or annual tax is due for each entity that
the parent includes in a combined report. This
applies to entities that formed with SOS or that do
business in California. Entities that formed with
SOS must pay minimum or annual tax, even if they
are inactive.
AG Our records do not indicate that we granted your
corporation tax-exempt status. Therefore, it is
subject to the franchise or income tax.
AH Your corporation used the incorrect financial
tax rate.
AI Corporations that elect S corporation treatment
are subject to tax at the rate of 1.5 percent of net
income. However, the tax must not be less than the
minimum franchise tax.
AJ Limited partnerships (LPs), limited liability
partnerships (LLPs), and real estate mortgage
investment conduits (REMICs) must pay an amount
equal to the minimum franchise tax. However, they
are not subject to franchise or income tax.
AK We do not require credit unions whose gross
receipts come solely from membership income
to pay the minimum franchise tax if the tax year
begins on or after January 1, 1990.
Return Information Notice Explanation
FTB 5949 (REV 03-2017) PAGE 2
AL A corporation is subject to Chapters 2 and 3 of the
Corporation Tax Law until it files a Certificate of
Dissolution with SOS. This law applies even if it is
inactive or operates at a loss.
AM Your corporation, which we classify as an insurance
company, is no longer subject to the franchise tax
provisions of the Corporation Tax Law.
AN All qualified subchapter S subsidiaries (Qsub) that
are incorporated or qualified with SOS, or that do
business in California, are subject to an annual tax
amount which equals the minimum franchise tax.
AO Every Financial Asset Securitization Investment
Trust (FASIT) is subject to the minimum
franchise tax.
AP Your corporation used the incorrect tax rate.
AR We revised the tax your corporation reported. The
minimum tax is $800 unless it indicated that it met
the definition of a qualified new corporation. A
qualified new corporation is one that:
• Incorporated on or after January 1, 1999, and
before January 1, 2000.
• Reasonably estimated its gross receipts, less
returns and allowances reportable to California,
to be $1 million or less.
• Reasonably estimated it would not have a tax
liability that exceeded the minimum franchise tax
of $800.
• Began business operation at or after the time of
its incorporation.
• Did not begin business as a sole proprietorship,
partnership, or other form of business entity
before it incorporated.
The minimum tax for the second tax year of a
qualified new corporation was $500.
BB Tax credits that your corporation claimed cannot
reduce tax below the minimum franchise tax. If your
corporation carries tax credits over to a subsequent
year, then revise that amount on the subsequent
year accordingly.
BC Tax credits that your business entity claimed cannot
exceed the maximum amounts the statute allows.
If your corporation carries tax credits over to a
subsequent year, then revise that amount on the
subsequent year accordingly.
BD We revised the tax credits that your business entity
claimed because we could not locate the schedules
and identify the tax credit it claimed. If your
corporation carries tax credits over to a subsequent
year, then revise that amount on the subsequent
year accordingly.
BF We disallowed your New Jobs Credit
generated amount based on one or both of the
following reasons:
• You did not file your original tax return timely.
• You filed after the New Jobs Credit cutoff date.
BG We disallowed your New Employment Credit
generated amount because you did not file your
original tax return timely.
CA We revised the tax your corporation reported
because we found a computation error in adding
one or more of the following:
• The alternative minimum tax.
• Tax from Schedule D.
• Excessive net income tax.
• Preference tax.
We revised the corresponding lines on your
corporation’s tax return.
DA We revised the prior year overpayment your
corporation claimed because the amount
was incorrect.
DB We applied an estimated tax payment or credit to
another tax year according to your corporation’s
instructions. We cannot refund or transfer those
funds to a different tax year until your corporation
files a tax return for that year.
DC We have no record of a prior year credit.
DD We refunded all or part of the overpayment amount
from the prior year that your business entity
claimed on its tax return.
DE Your business entity may not claim pending credits
due to a claim for refund until we allow the claim.
EA We revised the estimated tax payment amount that
your corporation reported on its tax return to reflect
what we received.
EB The minimum tax your corporation paid to SOS
when it incorporated is for the privilege of doing
business in California. It cannot claim this as an
estimated tax payment.
EE We revised the amount of real estate, backup,
resident, or nonresident withholding to the
greater of:
• The amount we substantiated from Forms 592-B
and 593, which your business entity attached to
its tax return.
• The amount of credit we were able to verify.
If you disagree with our revision, please contact
Withholding Services and Compliance
Telephone: 888.792.4900
Fax: 916.845.9512
EF We credited your entity with payments its
subsidiaries made.
FA Your entity claimed an incorrect extension payment
amount.
GA We revised the dissolving/withdrawing credit that
your corporation claimed on its tax return for one of
the following reasons:
•
Your corporation cannot claim this credit if it
incorporated or qualified after December 31, 1971.
• Your corporation must formally dissolve to
claim this credit. SOS’ records do not indicate
it dissolved.
HA We revised the tax due that your corporation
reported on its tax return either to correct a
computation error or to reflect our adjustments to
the preceding lines.
HB Your corporation made an error when it transferred
figures from Schedule J to Side 1 of its tax return
or in its computation of the look-back amount
tax adjustment.
HS Your entity designated on its tax return that its only
source of income is qualified health care service
plan income that is excludable from gross income
under R&TC Section 24330. We disallowed this
designation because your entity’s qualified health
care service plan is not listed with the Department
of Health Care Services as subject to the Managed
Health Care Provider tax.
IA We revised the overpayment your corporation
reported to correct a computation error.
JA We revised the credit to the next year’s estimated
tax for one or more of the following reasons:
• We found a computation error.
• We revised the total tax your
corporation reported.
• We transferred the minimum amount the
law requires for the first estimate due on the
subsequent year.
FTB 5949 (REV 03-2017) PAGE 3
JB We applied part or all of the overpayment from your
corporation’s tax return to the next year’s estimated
tax. Contact us if you do not want this. If we refund
the credit, your corporation may be subject to
an estimated tax penalty when it files next year’s
tax return.
JC We applied the overpayment from your
corporation’s tax return to the next year’s estimated
tax as requested.
KA We revised the refund amount on your
corporation’s tax return to reflect the amount of
available payments and credits.
KB We may not allow your business entity a refund or
credit beyond the later of:
• Four years after the original tax return due date.
• Four years after the file date of the original tax
return. Your corporation must have filed by the
extended due date.
• One year after the payment date.
KC We applied part or all of the refund that your
business entity claimed on its tax return to a prior
balance due.
MA We revised the prepayment tax amount your
corporation paid to SOS. If your corporation met
the definition of a qualified new corporation (QNC),
then the tax was $600. This amount applied to tax
years that began on or after January 1, 1997, but
before January 1, 1999. For that period, a QNC
was one that:
• Reasonably estimated its gross receipts, less
returns and allowances reportable to California,
to be $1 million or less.
• Reasonably estimated its California tax liability,
which it bases upon its income, would not
exceed $800.
• Another corporation owned 50 percent or less of
its stock.
The prepayment tax to SOS was $300 if your
corporation met the definition of a QNC for tax
years that began on or after January 1, 1999, but
before January 1, 2000. For that period, a QNC
was one that:
• Began operation on or after the date
it incorporated.
• Reasonably estimated its gross receipts, less
returns and allowances reportable to California,
to be $1 million or less.
• Less than 50 percent of its stock was owned by
another corporation.
• Did not begin business as a sole proprietorship,
partnership, or other form of business entity
before it incorporated.
SOS did not require your corporation to pay any
prepayment tax for its first tax year if it:
• Incorporated or qualified with SOS on or after
January 1, 2000.
• Was not a Regulated Investment Company
(RIC), Real Estate Mortgage Investment
Conduit (REMIC), Financial Asset Securitization
Investment Trust (FASIT), or a Qualified
Subchapter S Subsidiary (Qsub).
• Did not reorganize solely to avoid payment of the
minimum tax.
MB Your corporation paid a prepayment tax of $600
when it incorporated with SOS. (See paragraph
MA for this definition.) However, it did not meet the
definition of a qualified new corporation. It should
have paid $800 prepayment tax to SOS. We made
the adjustment.
MC Under California law, corporations that do business
in California must pay the minimum tax on or before
the first estimate due date. This tax is $800.
MD Information on your corporation’s tax return
indicates it is a qualified new corporation. (See
paragraph MA for this definition.) A qualified
new corporation must pay $600 to SOS when it
incorporates. Your corporation paid $800.
ME We cannot grant your corporation’s request for a
$200 refund of the prepayment tax it paid to SOS.
Your corporation does not meet the definition of a
qualified new corporation. (See paragraph MA.)
MF Your corporation paid $300 to SOS when it
incorporated. (See paragraph MA.) SOS charged a
prepayment tax of $800. We made the adjustment.
MG
Information on your corporation’s tax return indicates
it is a qualified new corporation (QNC). (See
paragraph MA.) When QNCs incorporated, SOS
charged them $300. Your corporation paid $800.
MH We cannot grant your corporation’s request for a
$500 refund of the prepayment tax it paid to SOS.
Your corporation does not meet the definition of a
qualified new corporation. (See paragraph MA.)
NB We issued your organization this refund because
we approved its application for tax-exempt status.
NC Organizations exempt under R&TC Section 23701d
are not subject to a filing fee. These
organizations are:
• Exclusively religious.
• Controlled by a religious organization.
• Schools.
• Public charities.
ND The filing fee is not required; the return gross
receipts are below the filing fee threshold.
NE Political action organizations are tax-exempt from
the payment of the minimum franchise tax.
NF Your organization does not have to file an FTB
Form 199, California Exempt Organization Annual
Information Return, or pay the associated filing fee.
PA We revised the payments balance shown on your
tax return due to a computation error. If you reported
use tax, payments and/or credits must be applied
to use tax first. For use tax assistance, please
contact the Information Center at the State Board of
Equalization at 800.400.7115 or go to boe.ca.gov.
PB We assessed a penalty for the period your
corporation did not pay the estimated tax.
PC No estimated tax penalty is due for the tax year that
we show on the enclosed notice.
PD We assessed penalties and interest where
applicable. Refer to Interest Information and
Penalties and Fees Information within this insert.
RA Total income is defined as gross income plus
the cost of goods sold; it does not include losses
(R&TC Sections 17942 and 24271). We revised
the amount on line 1 of Form 568, Limited Liability
Company Return of Income, for one or more of the
following reasons:
• It is a negative amount.
• It is less than the gross profit calculated on
Form 568, Limited Liability Company Return of
Income, Schedule B, Income and Deductions.
• The LLC Income Worksheet was incorrect or
not attached. We calculated your income using
the information you provided on Forms 568,
Schedule B, Income and Deductions, and
Schedule K, Member’s Shares of Income,
Deductions, Credits, etc.
For more information, get FTB 3556 LLC MEO,
Limited Liability Company Filing Information.
FTB 5949 (REV 03-2017) PAGE 4
RB LLCs that do business in California are subject
to an annual fee based on the total income they
attribute to California (R&TC Section 17942). We
revised the fee your LLC reported on its tax return
either because we found a computation error, or it
used the incorrect fee amount.
RC An LLC is subject to the annual tax of $800 if one
of the following is true:
• It does business in California.
• SOS issued it a Certificate of Registration.
• SOS endorsed its Articles of Organization.
RD We revised the nonconsenting nonresident
members’ (NCNR) tax your LLC reported on its tax
return because we found a computation error or it
used an incorrect tax rate.
RE We revised the annual tax your LLC reported on
its tax return. For your LLC to qualify for zero tax,
it must file a Limited Liability Company Short Form
Certificate of Cancellation (LLC-4/8) with SOS
within 12 months of filing its Articles of Organization
(LLC-1). For this to apply, your LLC must not have
conducted business. Annual tax payments that
a registered LLC made for its first tax year are
not refundable.
RF We revised the extension and annual tax payments
your LLC reported on its tax return because the
amounts are incorrect.
RG We revised the tax and fee due that your
LLC reported on its tax return to correct a
computation error.
RH We revised the credit to next year’s tax or fee
your LLC reported on its tax return for one of the
following reasons:
• We found a computation error.
• We made a change to the total tax and fee due.
• We corrected the payment amount and
credits available.
RI We applied part or all of the overpayment from
your LLC’s tax return to the next year’s tax liability.
Contact us if you do not want this. If we refund the
credit, your LLC may be subject to a late payment
penalty for the next year.
RJ We offset all or part of the total overpayment to
other liabilities that exist on your LLC’s account.
If you disagree with our offset, you can file a
claim for refund. File the claim for refund for the
year to which we applied the overpayment. If the
overpayment did not completely satisfy the liability
for that tax year, your LLC must pay the tax and
penalties before you submit the claim. The claim
should be in the form of a letter with a title, “Claim
for Refund” and must provide the following:
• The LLC’s name and ID number.
• All tax years involved.
• Total amount of the claim.
• The reason for the claim and any substantiation.
Send the claim for refund letter to:
FRANCHISE TAX BOARD
PO BOX 942857
SACRAMENTO CA 94257-0540
SA We disallowed your corporation’s request for
direct deposit of its refund. We did this because
the required information was missing, invalid, or
illegible. We converted the request to a paper check
to ensure a timely refund.
UT We revised the use tax balance shown on your
return due to a computation error. If you reported
use tax, payments and/or credits must be applied to
use tax first. For use tax assistance, please contact
the Information Center at the State Board of
Equalization at 800.400.7115 or go to boe.ca.gov.
VA We offset all or part of your entity’s total
overpayment to other liabilities on its account. If
you disagree with our offset, you can file a claim
for refund. File the claim for the tax year to which
we applied the overpayment. If the offset did not
completely satisfy the liability for that tax year,
your entity must pay the tax and penalties before
you submit the claim. (See paragraph RJ for
instructions on how to file a claim for refund.)
WA We offset all or part of your corporation’s total
overpayment to other liabilities on a related
corporation’s account. If you disagree with our
offset, you can file a claim for refund. File the
claim for the tax year to which we applied the
overpayment. If the offset did not completely satisfy
the liability for that tax year, then your corporation
must pay the tax and penalties before you submit
the claim. (See paragraph code RJ for instructions
on how to file a claim for refund.)
XA The State Board of Equalization (BOE) notified
us that your entity has an outstanding liability with
them. We offset its refund against that liability. Refer
to the enclosed notice for the amount we credited
to them. You may call BOE from within the United
States at 800.400.7115 or from outside the United
States, at 916.445.6362.
XB The State Controller’s Office (SCO) notified us that
your entity has an outstanding liability with them.
We offset its refund against that liability. Refer to
the enclosed notice for the amount we credited to
SCO. You may call them at 916.445.2636.
XD The Attorney General’s Office notified us that
your entity has an outstanding liability with them.
We offset its refund against that liability. Refer to
the enclosed notice for the amount we credited to
them. You may call the Attorney General’s Office
at 800.952.5225 or from outside the United States,
at 916.445.9555.
XE The Medical Board of California notified us that
your entity has an outstanding liability with them.
We offset its refund against that liability. Refer to
the enclosed notice for the amount we credited to
them. You may call the Medical Board of California
at 800.633.2322 or from outside the United States,
at 916.263.2382.
XF The Pharmacy Board notified us that your entity
has an outstanding liability with them. We offset its
refund against that liability. Refer to the enclosed
notice for the amount we credited to them. You may
call the Pharmacy Board at 916.574.7900.
XG A California city, county, or agency notified us that
your entity has an outstanding liability with them.
We offset all or part of this overpayment to that
liability. We mailed a notice with details about this
transaction to your entity. If you have any questions,
you may call us at 916.845.5344.
YA The Employment Development Department (EDD)
notified us that your entity has an outstanding
liability with them. We offset its refund against that
liability. Refer to the enclosed notice for the amount
we credited to them. You may call EDD from within
the United States at 888.745.3886 or from outside
the United States, at 916.464.3502.
FTB 5949 (REV 03-2017) PAGE 5
LLC Estimated Fee Penalty We assess a penalty if
your LLC fails to estimate and pay its annual fee by the
15th day of the 6th month of the tax year. The penalty
amounts to 10 percent of the unpaid fee. We will not
assess this penalty if your LLC pays a fee that equals
or exceeds the amount it paid for the previous year.
This provision affects tax years that begin on or after
January 1, 2009 (R&TC Section 17942).
Delinquent Return Penalty – Corporation and
Partnership If you do not file your entity’s income
tax return by the due date, we impose a penalty of
5 percent of the tax due, after applying any payments
and credits made on or before the original return due
date, for each month or part of a month the return is
late. The maximum penalty is 25 percent. We impose
the penalty from the original tax return due date of the
return (R&TC Section 19131).
Delinquent Return Penalty – LLC If you do not file
your limited liability company’s income tax return by
the due date, we impose a penalty. After we deduct
your timely payments and credits, we charge 5 percent
monthly on the fee and/or nonconsenting nonresident
members’ tax indicated on your tax return, not to exceed
25 percent. We impose the penalty from the original
return due date (R&TC Section 19131).
Delinquent Penalty – Form 199 If your organization
does not file its Form 199 by the extended due date,
we impose a penalty of $5 per month for each month
or part of a month the Form 199 is late. The maximum
penalty is $40. We impose the penalty from the original
due date of the return (R&TC Section 23772).
Demand to File Penalty If we send you a demand
to file your entity’s income tax return or to provide us
with information, and you do not comply, we impose
a penalty of 25 percent of the tax on our assessment
before applying any payments or credits. Therefore,
your entity may owe penalties and interest even
if its tax return shows that a refund is due. (R&TC
Section 19133) The demand to file penalty is in addition
to the 25 percent late filing penalty discussed above
(imposed pursuant to R&TC Section 19131).
Nonqualified/Nonregistered, Suspended, Forfeited
Penalty We impose a $2,000 penalty on entities who
fail to file a tax return within 60 days after we send a
demand to file. This penalty applies to the following
entities doing business in California:
• Nonqualified, suspended, or forfeited corporations.
• Nonregistered, suspended, or forfeited limited
liability companies (R&TC Section 19135).
Late Filing Penalty – LLC and Partnership We
impose a penalty if you do not file limited liability
company returns by the extended due date or if
the returns fail to contain the required information
(incomplete). For returns filed before January 1, 2011,
the penalty is $10 per member for each month or part of
the month the return is late or incomplete, not to exceed
five months. For returns with original due dates on or
after January 1, 2011, for taxable years beginning on or
after January 1, 2010, the penalty is $18 per member
for each month or part of the month that the failure
continues, but not to exceed 12 months. The maximum
penalty is $216 per member. We impose the late filing
penalty in addition to the delinquent penalty (R&TC
Sections 18633.5 and 19172).
ZC The overpayment is due to duplicate or
additional payments.
ZD If your corporation wants us to refund this credit,
return a copy of this notice with a request for
refund. If we refund the credit, your corporation may
be subject to an estimated tax penalty for the next
tax year.
ZE We applied all or part of your corporation’s
overpayment to a balance due on a
subsidiary account.
ZF We base the tax for the year in which a corporation
either dissolves or withdraws on the income
for that year plus the income for the preceding
year. However, the tax cannot be less than the
minimum tax.
ZG We disallowed your entity’s request for a waiver
of penalties and interest due to a disaster
or act of terrorism. We did this for one of the
following reasons:
• The tax year does not fall within the designated
period to claim the disaster or terrorism loss.
• The loss did not occur within the designated
disaster or terrorism area.
ZH
We partially disallowed your entity’s request for
waiver of penalties and interest due to a disaster or
act of terrorism. We only waive penalties and interest
for the duration of the administrative relief period.
Extension of Time to File
We automatically allow an extension to file for all
corporations and LLCs that are not suspended
or forfeited by FTB or SOS. We will not assess a
delinquent penalty if you file your tax return by the
extended due date. However, to avoid late payment
penalties and interest, you must pay the tax due by the
original tax return due date.
Interest Information
Generally, interest accrues on unpaid taxes from the
original due date of the tax return until the date we
receive full payment. Interest accrues on penalties from
the effective date of the penalty until the date we receive
full payment (R&TC Section 19101).
We adjust interest rates semiannually (R&TC
Section 19521).
We charge C corporations an interest rate that is
2 percent greater than the current rate if:
• Their total unpaid tax for any taxable year
exceeds $100,000.
• They do not pay the full balance due within 30 days
of the original notice date.
To locate both past and current interest rates, go to
ftb. ca.gov and search for interest rates.
Penalties and Fees Information
Penalties
Estimated Tax Penalty We impose a penalty if
your entity does not pay, pays late, or underpays an
estimated tax installment. We calculate the penalty on
the unpaid amount from the due date of the estimated tax
installment to the following dates (whichever is earlier):
• The date we receive your payment.
• The 15th day of the 3rd month after the close of the
taxable year if filing forms 100, 100W, or 100S.
• The due date of the return if filing form 109.
To locate both past and current interest rates, go to
ftb.ca.gov and search for interest rates.
(R&TC Sections 19142 and 19161)
FTB 5949 (REV 03-2017) PAGE 6
Late Filing Penalty – S Corporation We impose a late
filing penalty if an S corporation fails to file a tax return
by the original or extended due date for tax returns
with original due dates on or after January 1, 2011, for
tax years beginning on or after January 1, 2010. (This
penalty is also known as the per shareholder penalty).
We also impose the late filing penalty for incomplete tax
returns. The late filing penalty is $18 per shareholder,
for each month or fraction of the month the return
is late (or incomplete), to a maximum of 12 months.
We impose the Late Filing Penalty in addition to the
Delinquent Penalty (R&TC Section 19172.5).
Underpayment and Monthly Penalty – Corporation
and Partnership We impose a penalty if you do not pay
the total amount due shown on your entity’s tax return
by the original due date. The penalty is 5 percent of the
unpaid tax, plus 0.5 percent of the unpaid tax for each
month or part of a month it remains unpaid—not to
exceed 40 months. The maximum penalty is 25 percent
of the unpaid tax (R&TC Section 19132).
Underpayment and Monthly Penalty – LLC We
impose a penalty if you do not pay your limited
liability company’s:
• Annual tax by the 15th day of the fourth month of its
tax year.
• Fee or nonconsenting nonresident members’ tax
by the 15th day of the 4th month after the end of its
taxable year.
The penalty is 5 percent of the total unpaid tax or fee
(underpayment), plus 0.5 percent of the unpaid tax or
fee for each month or part of a month it remains unpaid
(monthly). The maximum penalty is 25 percent of the
unpaid tax or fee (R&TC Section 19132).
Large Corporate Understatement Penalty For tax
years beginning on or after January 1, 2010, we impose
a penalty if your understatement of tax exceeds the
greater of $1,000,000 or 20 percent of the tax shown on
your original tax return (R&TC Section 19138).
For tax years prior to 2010, we impose a penalty if you
understated your tax by more than $1,000,000 for any
tax year that begins on or after January 1, 2003. The
penalty equals 20 percent of the total understatement of
tax (R&TC Section 19138).
Dishonored Payment Penalty We impose a penalty
if your entity’s financial institution does not honor a
payment you make to us by check, money order, or
electronic funds transfer. For a payment of $1,250 or
more, the penalty is 2 percent of the payment amount.
For a payment less than $1,250, the penalty is $25
or the payment amount, whichever is less (R&TC
Section 19134).
50 Percent Interest-Based Amnesty Penalty We
impose a penalty because your entity had a past-due
tax liability that qualified for tax amnesty, but it did not
resolve its tax obligations. Go to ftb.ca.gov for more
information. The penalty is equal to 50 percent of the
interest that accrued on the balance from the original
due date of the tax to March 31, 2005. You can file a
claim for refund only on the grounds that the amount of
the penalty was not properly computed by us (R&TC
Section 19777.5(a)(1)).
Post-Amnesty Penalty We impose a penalty when
your entity owes new or additional tax on a tax year that
qualified for amnesty. The penalty is equal to 50 percent
of the interest that accrued on the tax assessment from
the original due date of the tax to March 31, 2005. You
can file a claim for refund of this penalty only on the
grounds that the amount of the penalty was not properly
computed by us (R&TC Section 19777.5(a)(2)).
40 Percent Accuracy Related Penalty For tax years
that were eligible for tax amnesty (beginning before
January 1, 2003), we may impose an accuracy-related
penalty if you understated your entity’s tax liability.
The penalty is equal to 40 percent of the related
underpayment (R&TC Section 19164).
Fees
Filing Fee
If we require your organization to file Form 199, it
must pay a fee. The amount depends upon when
it files Form 199 and it makes the payment (R&TC
Section 23772).
The fee is $10 if:
• Your organization files and pays by the original
due date.
• Your organization files and pays after the original
due date, but on or before the extended due date.
The fee is $25 if:
• Your organization files by the original due date, but
pays after that date.
• Your organization files and pays after the extended
due date.
We do not apply the filing fee to the following
tax-exempt organizations (R&TC Section 23701d):
• An exclusively religious organization.
• An organization controlled by a religious
organization.
• A school.
• A public charity.
Cost Recovery Fees
If we must take action to resolve your entity’s filing and
payment delinquencies, we charge cost recovery fees.
These may include filing enforcement, collection, lien,
or Federal Treasury Offset Program (FTOP) fees. They
may also include fees to recover the cost of seizure
and sale of property. (California R&TC Sections 19209,
19233, 19234, 19235, 19254, and 19376; Internal
Revenue Code Section 6402(e); and California
Government Code Sections 7174, 16583.1, 27361,
27361.3, and 27361.4).
Other Penalties/Fees
Electronic Funds Transfer (EFT)
Once an entity remits an estimated tax or extension
payment in excess of $20,000 or has a total tax liability
in excess of $80,000 in any taxable year beginning
on or after January 1,1995, it must make all future
payments, regardless of the taxable year or amount,
through an electronic funds transfer. Payments made
by other means will result in a penalty of 10 percent of
the amount paid. For more information regarding this
requirement, go to ftb.ca.gov and search for eft or call
800.852.2753. (R&TC Section 19011)
For additional information about penalties and fees,
refer to R&TC Part 10.2, Division 2, Chapter 4, Article 7
(R&TC Section 19131 et seq.). For more information, go
to ftb.ca.gov/forms and search for FTB 1024, Penalty
Reference Chart.
