What California Form 100S Is For
California Form 100S (2018) is the annual franchise or income tax return that S corporations must file when doing business in California or earning income sourced to the state. While an S corporation typically passes income and losses through to shareholders, California still imposes an entity-level tax. The form calculates this tax liability and reports items that flow through to shareholders on Schedule K-1 (100S).
For the 2018 tax year, the state required S corporations to pay the greater of 1.5% of net income (3.5% for financial S corporations) or the $800 minimum franchise tax. Newly formed corporations received relief from the minimum tax only in their first taxable year. These rules applied even when a business operated at a loss or was inactive.
When You’d Use California Form 100S
You must file Form 100S if your corporation elected federal S corporation status and meets California’s “doing business” standards. These standards are based on sales, property, or payroll thresholds and apply even when no income was generated. Any corporation meeting those tests owes at least the $800 minimum franchise tax beginning in its second year.
This form is also required when filing late or amended returns. Original filings are due by the 15th day of the third month after the close of the taxable year, and calendar-year filers use March 15. If corrections are needed later, an amended return must be filed using Form 100X.
Key Rules or Details for the 2018 Tax Year
Tax Rates and Minimum Tax
The standard S corporation tax rate for 2018 was 1.5% of net income, and financial S corporations were subject to a 3.5% rate. Certain items such as built-in gains or excess net passive income were taxed at 8.84%, consistent with C corporation rates. Regardless of income, most corporations owed the $800 minimum franchise tax.
Doing Business in California
A corporation was considered to be doing business in the state if its California sales exceeded $583,867 or 25% of total sales. The same 25% threshold applied to property and compensation. Meeting any one of these tests required filing Form 100S and paying at least the minimum tax.
Nonconformity with Federal Law
California conformed to the Internal Revenue Code as of January 1, 2015. As a result, the state did not adopt most Tax Cuts and Jobs Act provisions. S corporations had to adjust for areas such as bonus depreciation, expanded Section 179 limits, GILTI, IRC Section 965, and qualified opportunity zones. These differences affected both income computation and apportionment.
Filing and Payment Requirements
California required e-filing for entities using tax software. Large payments—those over $20,000 in a single transaction or where total liability exceeded $80,000—had to be made electronically. Otherwise, a 10% penalty could apply. Corporations were also required to keep adequate records, and failure to provide them on request carried escalating penalties.
Step-by-Step (High Level)
Step 1: Gather Federal and State Information
Collect federal Form 1120S, schedules, shareholder information, California identification numbers, and records of estimated and extension payments. These documents support both income reconciliation and state adjustments.
Step 2: Calculate California Net Income
You may begin with federal ordinary income and adjust for California differences or compute income directly on Schedule F. Adjustments often relate to depreciation, credits, or nonconformity with federal changes.
Step 3: Compute the Tax
Apply the correct rate to net income and compare this to the minimum franchise tax. Enter all estimated payments, withholding, credits, and extension payments to calculate the balance due or refund.
Step 4: Assemble and Attach Required Schedules
Include schedules such as K, K-1, M-1, M-2, Schedule R for apportioning income, and any federal forms referenced. Keep the packet loose—California instructs filers not to staple or permanently bind the return.
Step 5: Sign and File the Return
An authorized officer must sign and date the return. Paid preparers must include their PTIN. File electronically when required, or mail the return to the appropriate Franchise Tax Board address. Extension filings require Form FTB 3539 when tax is owed.
Common Mistakes and How to Avoid Them
- Missing the filing deadline — Mark the March 15 deadline or extension date and submit taxes owed by the original due date.
- Incorrect estimated tax payments — Follow the 30% / 40% / 0% / 30% schedule, and ensure the first payment is at least $800.
- Failing to pay electronically — Use EFT, Web Pay, or credit card when payment thresholds are met.
- Incorrect attachments — Include required federal forms such as 5471, 5472, 8886, and others to avoid penalties.
- Not providing Schedule K-1 to shareholders — Deliver Schedule K-1 (100S) on or before the filing deadline.
- Applying federal TCJA rules — Adjust income for California’s nonconformity, especially depreciation and foreign-income rules.
What Happens After You File
The Franchise Tax Board reviews the return for completeness and verifies schedules, payments, and signatures. If information is missing, the agency contacts the corporation or preparer. Refunds are issued by direct deposit or check, and any balance due accrues penalties or interest until paid.
Some returns may be selected for audit, and the FTB can request supporting records at any point within four years of the original due date. Failure to comply can lead to assessments or even suspension. A suspended corporation cannot legally operate in California and must file all past-due returns and pay outstanding liabilities to regain good standing.
FAQs
Do I owe the $800 minimum franchise tax if the corporation had no income?
Yes. All S corporations doing business in California owe the minimum tax beginning in their second year, even with no income or losses.
What estimated payments are required for 2018?
Payments were due in four installments: 30% in month four, 40% in month six, 0% in month nine, and 30% in month twelve. Electronic payment was required when thresholds were met.
Does California conform to the federal TCJA rules?
No. California uses the IRC as of January 1, 2015, so most TCJA changes are not recognized. Corporations must adjust federal amounts for state purposes.
What penalties apply for late filing or payment?
Late filing may trigger a penalty of 5% per month, up to 25%, plus $18 per shareholder per month. Late payment adds 5% plus monthly interest of 0.5%.
Must each shareholder receive a Schedule K-1?
Yes. Every shareholder must receive Schedule K-1 (100S) by the return’s due date so they can report their share of income on their individual income tax return.
Can the corporation file an extension?
Yes. An automatic six-month extension applies, but any tax liability must be paid by the original due date.
For the official form and instructions, visit the IRS page for California Form 100S.
