What California Form 568 (2020) Is For
California Form 568 is the annual state return that LLCs use to report income, deductions, credits, and required taxes to the Franchise Tax Board (FTB). Unlike corporations, most LLCs are treated as pass-through entities, meaning members—not the LLC—pay income tax on profits. Form 568 ensures the state receives information about the LLC’s operations and collects the annual LLC tax and any applicable fee.
LLCs required to file include multi-member LLCs classified as partnerships and single-member LLCs (SMLLCs) treated as disregarded entities for federal tax purposes. California still requires SMLLCs to file Form 568 even though their income is reported on the owner’s return. Any LLC organized, registered, doing business in California, or earning California-source income must file, even with no activity during 2020.
When You’d Use California Form 568 (2020)
LLCs file Form 568 for any year in which they operate, register, or hold California-source income. For 2020, the due dates depended on federal classification. Multi-member LLCs filed by March 15, 2021, while SMLLCs owned by individuals, estates, or trusts filed by April 15, 2021. California offers automatic extensions—seven months for multi-member LLCs and six months for SMLLCs—but the $800 annual tax and any LLC fee must still be paid by the original due date.
You must file an amended Form 568 if you find errors or if member allocations change. Amended Schedule K-1 (568) forms must be furnished to all affected members. If the IRS adjusts your federal return, you must notify the FTB within six months when additional California tax is owed.
Key Rules or Details for the 2020 Tax Year
Annual LLC tax and LLC fee
Most LLCs owe a nondeductible $800 annual LLC tax, due by the 15th day of the fourth month of the taxable year. For 2020, new LLCs did not qualify for the first-year exemption that began later in 2021. LLCs with at least $250,000 of total California income must also pay the LLC fee, based on gross receipts and other income before deductions:
- $250,000–$499,999: $900
- $500,000–$999,999: $2,500
- $1,000,000–$4,999,999: $6,000
- $5,000,000 or more: $11,790
Single-member LLCs paid the annual tax but did not owe the fee.
Schedule K-1 reporting
Multi-member LLCs must prepare a California Schedule K-1 (568) for each member showing their distributive share of income, deductions, and credits. These totals must match Schedule K on Form 568. SMLLCs do not issue K-1s because all activity flows directly to the owner.
Entity classification and reporting
SMLLCs treated as disregarded entities by the IRS must still file Form 568 and complete the SMLLC information section. Multi-member LLCs classified as partnerships follow partnership reporting rules. LLCs that elected corporate status file Form 100 or 100S instead of Form 568.
Step-by-Step (High Level)
Step 1: Gather your 2020 financial records
Collect bank statements, income and expense reports, depreciation schedules, and federal forms. Multi-member LLCs will use federal Form 1065 and federal K-1s; SMLLCs will use Schedule C or other applicable schedules from the owner’s return.
Step 2: Complete your federal return
Form 568 relies heavily on federal income classifications, so finishing the federal return first ensures accurate state reporting.
Step 3: Fill out Form 568 basics
Provide the LLC’s legal name, California Secretary of State file number, FEIN, business address, and tax year. Mark whether the return is original, amended, or final.
Step 4: Compute total California income and the LLC fee
Use Schedule B to report income and deductions, then determine “total income” for LLC fee purposes. Enter the fee on Schedule A if your total California income reached the threshold.
Step 5: Report the $800 annual LLC tax
Enter the tax on the designated line, even if the LLC had no income. If 2020 was the LLC’s first year, the annual tax still applied because the first-year exemption had not yet taken effect.
Step 6: Complete Schedule K for multi-member LLCs
List all distributive income, losses, credits, and other items that will be allocated to members. Ensure totals reconcile with the K-1s you prepare.
Step 7: Prepare Schedule K-1 (568) for each member
Allocate each item from Schedule K to members based on ownership or operating agreement terms. Confirm names, SSNs or TINs, and percentages are accurate.
Step 8: Enter payments and calculate the balance due or refund
Include estimated payments, extension payments, and any withholding. Determine whether additional tax or fee is owed.
Step 9: Sign and file the return
A member or manager must sign. Paid preparers must sign and include their PTIN. Submit the return electronically or by mail and furnish K-1s to members.
Common Mistakes and How to Avoid Them
- Using net income instead of total income for the LLC fee
- Compute the fee using gross receipts plus other income, not after expenses.
- Missing payment of the $800 annual tax by the original due date
- Pay using Form FTB 3522 to avoid penalties and interest.
- Failing to reconcile Schedule K and all K-1s
- Confirm totals match exactly, line by line.
- Incorrect ownership percentages on Schedule K-1
- Compare allocations with the operating agreement and capital accounts.
- Overlooking nonconsenting nonresident member tax
- File Schedule T when a nonresident does not sign Form FTB 3832.
- Filing Form 568 for corporate-classified LLCs
- Verify whether the LLC filed Form 8832 or 2553 with the IRS.
- Submitting incomplete schedules
- Review whether your LLC needs Schedule L, Schedule M-1, or apportionment forms.
What Happens After You File
The FTB reviews the return and issues either a refund or a bill. E-filed returns usually process faster than paper filings. The FTB may send notices requesting additional details, including receipts or clarifications about member allocations. Complete Schedule K-1 forms are often the first items reviewed.
The FTB may examine your return for up to four years from the later of the filing date or due date. Keep financial records, supporting documents, and member capital account details for at least that long. LLCs that fail to file or pay required taxes may be suspended, which prevents them from legally conducting business until they file missing returns and pay all outstanding liabilities.
FAQs
What is the difference between the $800 annual tax and the LLC fee?
The annual tax applies to nearly all LLCs and is paid every year. The LLC fee applies only when total California income reaches $250,000 or more, resulting in an additional graduated charge.
Do I need to file Form 568 if my LLC had no activity in 2020?
Yes. LLCs that were registered, organized, or doing business in California must file Form 568 and pay the annual tax unless they dissolved before the due date for payment.
Can Form 568 be e-filed for 2020?
Yes. The FTB accepts e-filing of Form 568 for 2020 through approved software providers.
How do I calculate total income for the LLC fee?
Add all gross receipts and income items before subtracting any expenses or deductions. Use Schedule B and Schedule A to determine the correct fee tier.
Do SMLLCs issue Schedule K-1 forms?
No. Single-member LLCs do not issue California Schedule K-1s. The owner reports the income directly on their individual return.
What if the IRS later changes my federal return?
You must notify the FTB within six months if the changes increase California tax. File an amended Form 568 and attach documentation from the IRS.
