S Corporations

S Corporations in California

As an S corporation in California, you must file annual returns with both the federal Internal Revenue Service (IRS) and the California Franchise Tax Board (FTB). In addition to these tax filings, you must also maintain your corporation’s good standing with the California Secretary of State.

Federal Tax Filings

For federal taxes, the S corporation reports its income but typically does not pay corporate income tax directly. Instead, the profits and losses “pass through” to the shareholders’ individual tax returns.

• IRS Form 1120-S: The U.S. Income Tax Return for an S Corporation is an informational return reporting the company’s financial activity, including income, gains, losses, deductions, and credits. Due date: March 15 for calendar-year corporations.
• Schedule K-1 (Form 1120-S): A Schedule K-1 must be issued to each shareholder, detailing their share of the company’s income, losses, and deductions.
• Employment tax filings: If the S corporation has employees (including officer-shareholders who receive a reasonable salary), it must file federal employment tax returns with the IRS, including quarterly Form 941 and annual Form 940.

California State Filings

Unlike the federal government, California imposes a corporate-level tax on S corporations. This is in addition to the taxes paid by shareholders on their individual returns.

• FTB Form 100S: The California S Corporation Franchise or Income Tax Return is the annual state tax return. Due date: The 15th day of the third month after the close of the corporation’s taxable year (March 15 for calendar-year filers).
• Annual Franchise Tax: Every S corporation operating in California must pay an annual minimum franchise tax of $800. This applies even if the company is inactive or has a loss. New corporations are exempt for their first year.
• 1.5% Tax: California imposes a 1.5% state franchise tax on the S corporation’s net income.
• Estimated Tax Payments: All California corporations must pay estimated tax throughout the year using Form 100-ES.
• Schedule K-1 (100S): Similar to the federal requirement, a California Schedule K-1 must be prepared for each shareholder.

California Secretary of State Filings

These filings are required to maintain the corporation’s legal status, separate from tax filings.

• Statement of Information (Form SI-200): Must be filed with the Secretary of State within 90 days of incorporating and annually thereafter. Failure to file can result in penalties or corporate suspension.

Disclaimer

This is a general overview of the filings for S corporations in California. Specific tax situations can vary significantly. You should always consult with a qualified tax professional or legal advisor for personalized advice.