What Form 568 (2015) Is For
Form 568 (2015) is used by limited liability companies (LLCs) operating or registered in California to report income, claim deductions, and pay the annual California Franchise Tax. This form is required whether the LLC is classified as a disregarded entity, a single-member LLC, or a partnership for tax purposes. Unlike Form 565, which is used for partnerships not organized as LLCs, Form 568 is specifically tailored to meet the filing requirements of California LLCs, including foreign LLCs registered with the California Secretary of State.
When You’d Use Form 568 (2015)
LLCs must use Form 568 (2015) in specific circumstances based on their classification and activity:
- Single-member LLCs taxed as disregarded entities: These entities must file Form 568 to fulfill the filing obligation and pay the $800 California Franchise Tax, even if no business activity occurred during the year.
- Multi-member LLCs treated as partnerships: LLCs with more than one member must file Form 568 instead of Form 565 when organized as a limited liability company under California law.
- LLCs with ownership changes during the year: Any ownership changes within the taxable year still require the LLC to file Form 568 and accurately report its income and member information.
- Foreign LLCs registered in California: Even if the LLC’s primary business is out of state, it must file Form 568 if it is registered with the California Secretary of State or conducts business in California.
- LLCs exceeding gross receipts thresholds: If the LLC’s California income exceeds certain levels, it must calculate and remit the additional gross receipts fee along with the return.
Key Rules or Details for 2015
The 2015 version of Form 568 followed specific guidelines outlined by the California Revenue & Taxation Code:
- Minimum franchise tax requirement: All LLCs, except those exempt for their first year, are subject to a minimum annual franchise tax of $800, regardless of income or business activity.
- Taxable year consistency: The LLC must use the same taxable year and accounting method reported on its federal return, as required by the California Franchise Tax Board.
- Schedule T for technical terminations: If the LLC was terminated or underwent a technical termination under federal law during 2015, it must attach Schedule T to provide details.
- Filing deadline for calendar-year LLCs: For most LLCs, Form 568 was due by April 15, 2016 (the 15th day of the 4th month after the end of the taxable year).
- Electronic filing requirements: If the LLC used tax preparation software, it may have been required to e-file Form 568 unless the Franchise Tax Board granted a specific waiver.
- Federal Employer Identification Number (FEIN) reporting: All LLCs must include a valid FEIN or tax identification number, even if they file as disregarded entities and report business activity through Schedule C.
Step-by-Step (High Level)
Filing Form 568 (2015) requires several key steps to ensure compliance with California filing rules:
- Step 1: Determine LLC classification: Identify whether the LLC is treated as a disregarded entity or partnership for federal and state tax purposes before completing Form 568.
- Step 2: Calculate total tax due: Add the $800 California Franchise Tax, any applicable gross receipts fee, and the tax on nonconsenting nonresident members, if appropriate.
- Step 3: Complete all required schedules. Attach supporting documents, such as Schedule B, Schedule K, Schedule L, Schedule IW, and Schedule EO 568, as required by the California Franchise Tax Board.
- Step 4: Report Guaranteed Payments to Members: If members received guaranteed payments for services or capital, these amounts must be disclosed on Schedule B and included in total income.
- Step 5: Include prior year and estimated payments: Subtract any payments made using Form 3522 or Form CA-14 from the total liability to determine the remaining balance due.
- Step 6: Submit Payment and File Return: Mail the completed Form 568 and any payment to the Franchise Tax Board or file electronically if required, ensuring all identifying details, such as the California Corporation Number and ZIP code, are accurate.
Common Mistakes and How to Avoid Them
Several common mistakes can lead to penalties or delays when filing Form 568 (2015):
- Filing Form 568 instead of Form 565: Only LLCs should use Form 568; general partnerships or entities not registered as LLCs must file Form 565 to avoid misfiling.
- Skipping payment due to inactivity: LLCs must file and pay the $800 California Franchise Tax even if no income was earned, unless they completed a Short Form Cancellation.
- Leaving out required schedules: All applicable schedules, such as Schedule IW and Schedule EO 568, must be attached to ensure the return is considered complete by the Franchise Tax Board.
- Reporting inaccurate ownership details: Any changes in ownership or the addition of foreign members must be accurately listed to comply with California’s disclosure and filing requirements.
- Using mismatched tax years: The taxable year reported on Form 568 must match the LLC’s federal return to avoid inconsistencies and potential audits.
- Failing to e-file when required: LLCs that prepare their return using tax software must e-file unless they have obtained a waiver from the Franchise Tax Board.
What Happens After You File
Once Form 568 (2015) is filed, the Franchise Tax Board will apply the payment toward the LLC’s tax liabilities and verify the completeness of the return. If an overpayment exists, a refund will be issued by mail or direct deposit, depending on the original payment method. If a balance is due, the Franchise Tax Board will send a Notice of Tax Due, which may include penalties under Section 19171. Filing on time also helps the LLC remain in good standing with the California Secretary of State. Records should be kept for at least four years to comply with audit retention requirements.
FAQs
Do all California LLCs need to file Form 568 (2015)?
Yes, all limited liability companies doing business in California or registered with the California Secretary of State are required to file Form 568 for the applicable taxable year.
Is Form 3522 the same as Form 568?
No, Form 3522 is used to submit the $800 California Franchise Tax payment, while Form 568 is the complete Limited Liability Company Return of Income.
What if I previously amended my federal return using Form 1040X?
If your federal return was amended using Form 1040X, you must still update your California income reporting by filing a corrected Form 568 with any relevant changes.
Can I use tax preparation software to file Form 568 (2015)?
Yes, many LLCs use tax preparation software to complete Form 568, and those that do may be subject to mandatory electronic filing rules under the California Franchise Tax Board.
Are there separate filing requirements for security services or other specific industries?
No, there is no industry-specific Form 568 version; however, all LLCs, including those providing security services or IT solutions, must report gross income and tax liabilities using the same form and applicable schedules.
