What California Form 568 (2018) Is For
California Form 568 (2018), Limited Liability Company Return of Income, is the main state tax return for LLCs that are not taxed as corporations. It reports the LLC’s income, deductions, gains, losses, and other items to the Franchise Tax Board (FTB). The form is used for calendar year 2018 or fiscal years beginning in 2018.
Unlike a corporate return, Form 568 is largely an informational and pass-through return. For LLCs classified as partnerships or disregarded entities, the income or loss usually flows through to members, who report their shares on their own California individual income tax return or business return. At the same time, California imposes an $800 annual tax and an income-based LLC fee directly on the entity, so Form 568 also calculates and reports that tax liability.
When You’d Use California Form 568 (2018)
You use California Form 568 (2018) if the LLC is doing business in California, organized in California, registered with the California Secretary of State, or has California-source income and is not taxed as a corporation. LLCs that elect corporate treatment instead file Form 100 or 100S, not Form 568. A nonregistered foreign LLC that is not doing business in California but has California-source income may need to file Form 565 rather than Form 568.
For 2018, partnership-classified LLCs on a calendar year generally had to file by March 15, 2019 (the 15th day of the third month after year-end). Single-member LLCs (SMLLCs) follow the due date of their owner’s return: SMLLCs owned by pass-through entities use the third-month deadline, while those owned by individuals, trusts, estates, or C corporations file by the 15th day of the fourth month (usually April 15). California grants an automatic seven-month extension to file, but this does not extend time to pay the annual tax, LLC fee, or nonconsenting nonresident members’ tax.
You also use Form 568 when filing an amended or past due return. If you discover an error or the IRS later adjusts your federal return, you must file an amended Form 568, check the “Amended return” box, and issue amended Schedule K-1 (568) forms to affected members. In many cases, amended California returns are due within six months of a final federal determination.
Key Rules or Details for 2018
Filing requirements and classification
Form 568 applies to every LLC that is not taxable as a corporation and meets California’s filing requirements. Entity classification matters:
- LLCs taxed as corporations file Form 100 or 100S
- Certain nonregistered foreign LLCs instead file Form 565
- SMLLCs disregarded for federal purposes still must file Form 568 and pay the annual tax and LLC fee
An LLC with a taxable year of 15 days or less that does no business during that period is not required to file or pay the annual tax or LLC fee.
Annual $800 tax and LLC fee
Most LLCs must pay the $800 annual tax for the privilege of doing business in California, regardless of income, losses, or inactivity. For a calendar-year LLC beginning January 1, 2018, this tax is due April 15, 2018 (the 15th day of the fourth month), and must be paid with Form FTB 3522, not with Form 568 itself.
In addition, LLCs with total California annual income of $250,000 or more must pay an income-based LLC fee. For 2018, the fee was:
- $900 for $250,000–$499,999
- $2,500 for $500,000–$999,999
- $6,000 for $1,000,000–$4,999,999
- $11,790 for $5,000,000 and over
The estimated fee is due by the 15th day of the sixth month (June 15, 2018 for calendar-year LLCs) using Form FTB 3536. Underpaying the estimated fee can trigger a 10% penalty.
California conformity for 2018
California’s conformity to the Internal Revenue Code stops at January 1, 2015. That means many Tax Cuts and Jobs Act provisions in effect for federal 2018 returns do not apply for California income tax. Examples include:
- No IRC Section 199A qualified business income deduction
- No federal Opportunity Zone deferrals or exclusions
- Different like-kind exchange and interest limitation rules
LLCs must adjust their California Form 568 to reflect these differences, which can change the tax liability compared with the federal return.
Step-by-Step (High Level)
Step 1: Confirm classification and filing obligation
Determine whether the LLC is treated as a partnership, disregarded entity, or corporation for tax purposes. Confirm that Form 568 is the correct return, and not Form 100, 100S, or 565. Gather your FEIN, California SOS file number, and member information before you file a tax return.
Step 2: Pay the $800 annual tax
Make sure the $800 annual tax for 2018 has been paid on time using Form FTB 3522. This payment is separate from the return and should not be mailed with Form 568. If it was missed, pay it as soon as possible to reduce penalties and interest.
Step 3: Calculate total California annual income
Complete Schedule IW (LLC Income Worksheet) to determine total California annual income. This amount, which is essentially gross receipts from all sources without deductions, determines whether the LLC fee applies and at what level. Use this figure to estimate the fee and avoid underpayment penalties.
Step 4: Pay the estimated LLC fee (if required)
If total California annual income exceeds $250,000, estimate and pay the LLC fee using Form FTB 3536 by the midyear deadline. Paying at least the prior year’s fee is often the safest way to avoid the 10% underpayment penalty. Any remaining fee is reconciled on Form 568.
Step 5: Complete Form 568 and Schedules K and K-1
Fill out the income, deduction, and tax sections of Form 568, making state adjustments for nonconforming federal items. Complete Schedule K for all members combined, then prepare a separate Schedule K-1 (568) for each member. Member percentages must be shown in decimal format to four decimal places and must reconcile to Schedule K totals.
Step 6: Handle nonresident members and assemble the return
Obtain signed Form FTB 3832 from nonresident members or compute the nonconsenting nonresident members’ tax on Schedule T at the highest marginal rate. Attach any required schedules, such as Schedule D (568) for capital gains or Schedule EO (568) for pass-through ownership. Sign the return, attach all Schedules K-1, and either e-file or mail to the appropriate FTB address.
Common Mistakes and How to Avoid Them
- Using Form 568 instead of Form 565
Nonregistered foreign LLCs not doing business in California but with California-source income may need Form 565. - Paying the annual tax with Form 568
Always use Form FTB 3522 for the $800 tax; do not include it with the return. - Missing or unreconciled Schedules K-1
Make sure every member has a K-1 and that all K-1 totals match Schedule K. - Incorrect ownership percentages
Report percentages as decimals to four places (e.g., 25.0000) rather than fractions or symbols. - Ignoring nonconsenting nonresident member rules
Collect Form FTB 3832 or compute and pay the nonconsenting tax on the member’s share. - Skipping amended returns after federal changes
File amended California Form 568 within six months when IRS changes affect the LLC fee or member tax.
What Happens After You File
Once you file Form 568, the FTB processes the return and applies any payments made through Forms 3522 and 3536 to the LLC’s account. Schedule K-1 (568) data is entered into FTB systems and matched to each member’s California return, whether it is an individual income tax return or another business return.
If a member fails to report K-1 items or reports different amounts, the FTB may send notices or open an examination. The general statute of limitations is four years from the due date or filing date, but it can be extended when federal changes are not reported. If an LLC fails to file or pay, it can be suspended or forfeited, losing the right to do business and facing extra penalties until it files past due returns and pays all outstanding taxes, fees, and interest.
FAQs
Does every LLC owe the $800 annual tax for 2018?
Yes. Almost every LLC organized in California, registered with the California SOS, or doing business in the state owes the $800 annual tax, even if it has no income. The main exception is an LLC with a taxable year of 15 days or less that does no business during that period.
How is the 2018 LLC fee calculated and when is it due?
The LLC fee is based on total California annual income, not net income tax. If the LLC’s income exceeds $250,000, it must pay a fee according to the 2018 brackets and make an estimated payment by the 15th day of the sixth month using Form FTB 3536. Any remaining balance is due when you file a tax return on Form 568.
Do single-member LLCs have to file Form 568?
Yes. SMLLCs disregarded for federal purposes must still file Form 568 (2018), pay the $800 annual tax, and pay the LLC fee if they meet the income threshold. The filing deadline tracks the owner’s filing deadline, whether that is March 15 or April 15 for a calendar-year owner.
What is the difference between California Form 568 and Form 565?
Form 568 is for LLCs that are not taxed as corporations, while Form 565 is for partnerships and certain foreign LLCs not required to file Form 568. A foreign LLC that is not registered and not doing business in California but has California-source income may fall under the Form 565 filing requirements instead.
When should an LLC amend its 2018 Form 568?
You should amend Form 568 if you discover errors, if member allocations change, or if the IRS adjusts the federal return and the change affects the LLC fee or member tax. File the amended return promptly, update Schedules K-1, and notify members so they can amend their own California returns or correct a past due return if needed.
