What California Form 100S Is For
California Form 100S (2021) is the annual income tax return for S corporations operating in California. Unlike federal rules where S corporations generally pass income through to shareholders without paying federal corporate income tax, California imposes an entity-level tax. This means the corporation must compute and pay its own income tax or minimum franchise tax each year.
Any S corporation incorporated, organized, registered, or doing business in California must file Form 100S. For 2021, California taxes standard S corporations at 1.5% of net income and financial S corporations at 3.5%. In addition, the $800 minimum franchise tax applies beginning in the corporation’s second taxable year.
When You’d Use California Form 100S
You must file Form 100S if the S corporation is considered “doing business” in California. For 2021, this includes meeting property, payroll, or sales thresholds, or being commercially domiciled in the state. The form is also required even if the business is inactive or operating at a loss.
S corporations also use Form 100S to file late or amended returns. California provides an automatic six-month filing extension, though all tax must be paid by the original due date. Amended California returns are filed using Form 100X after changes to the federal return or following an IRS examination.
Key Rules or Details for 2021
Filing Deadlines
Form 100S is due on the 15th day of the 3rd month after the close of the tax year—March 15, 2022, for calendar-year filers. The automatic six-month extension pushes the filing due date to September 15, 2022, but it does not extend time to pay.
Tax Rates and Minimum Franchise Tax
S corporations owe either the computed tax (1.5% or 3.5%) or the $800 minimum franchise tax, whichever is greater. Each Qualified Subchapter S Subsidiary (QSub) adds another $800 annual tax. Built-in gains and excess net passive income may trigger additional taxes.
Elective Pass-Through Entity (PTE) Tax
Starting in 2021, S corporations may elect to pay a 9.3% entity-level PTE tax. This optional tax can create federal savings because it bypasses the federal SALT deduction cap. The election must be made on a timely filed original return and requires Forms FTB 3804, 3804-CR, and 3893.
California–Federal Differences
California conforms to the Internal Revenue Code as of January 1, 2015, resulting in many differences from federal rules. Nonconformity areas include bonus depreciation, enhanced Section 179 expensing, qualified opportunity zones, and certain credits or exclusions.
COVID-19 Relief Exclusions
California excludes many pandemic relief programs from taxable income in 2021, including PPP loan forgiveness, restaurant and venue grants, and state small business grants.
E-Filing Requirement
Any return prepared with tax software must be e-filed. Electronic payments may also be required.
Step-by-Step (High Level)
Step 1: Gather Financial and Federal Tax Records
Collect income statements, expenses, depreciation schedules, shareholder information, and a completed federal Form 1120-S. These documents form the basis of the California return.
Step 2: Complete Identification Information and Schedule Q
Enter corporate details, entity numbers, accounting method, and other disclosures. Schedule Q covers required business activity details and compliance questions.
Step 3: Report Business Income on Schedule F
List gross receipts, cost of goods sold, and allowable deductions. Schedule F produces the corporation’s ordinary business income or loss, which carries to the main form.
Step 4: Make California Adjustments
Enter additions or subtractions for items California treats differently, such as depreciation, taxes deducted for federal purposes, or portfolio income. Attach explanations for “other additions” or “other deductions.”
Step 5: Apply Apportionment if Operating in Multiple States
Use Schedule R to apportion income using California’s single-sales factor method. Corporations doing business both inside and outside the state must compute the California-source amount.
Step 6: Compute Tax, Credits, Payments, and Balance
Apply the correct tax rate, the minimum franchise tax, QSub annual tax, and any special taxes. Then apply eligible tax credits, estimated payments, withholding, and extension payments to determine the final balance due or refund.
Common Mistakes and How to Avoid Them
- Missing required schedules — Attach Schedule K-1 for each shareholder, Schedule K, Schedule B, Schedule C, Schedule D, and other supporting documents.
- Underpaying the minimum franchise tax — Remember the $800 minimum applies even in loss years (starting year two).
- Skipping Schedule R when operating in multiple states — Any out-of-state activity generally requires apportionment.
- Incorrect state adjustments — California nonconformity creates frequent adjustments; double-check depreciation, capital gains, and state tax addbacks.
- Errors with the PTE elective tax — The election must be timely, original, and properly documented.
- Claiming NOLs during suspension periods — Verify your eligibility and use Form FTB 3805Q.
What Happens After You File
The Franchise Tax Board reviews the return and may send notices requesting clarification or documentation. Providing accurate officer contact information can speed responses. If you report an overpayment, you may request a refund or apply the amount to next year’s estimated tax.
Refunds can be direct-deposited if correct banking information is provided. Any tax unpaid by the original due date accrues interest until paid. Corporations may face penalties for late filing, late payment, or underpayment of estimated taxes.
If the IRS adjusts your federal return, you must file Form 100X within six months to reflect those changes. Failure to file or pay can also lead to suspension or forfeiture of corporate rights in California. Shareholders must receive their Schedule K-1 (100S) to report income on their individual California income tax return.
FAQs
What is the elective PTE tax and who benefits from it?
The PTE tax allows S corporations to pay a 9.3% entity-level tax on qualified net income. Shareholders then claim a matching credit to reduce California personal income tax. It often benefits shareholders in higher federal tax brackets, but the election must be timely and is irrevocable for the year.
When does a new S corporation start owing the $800 minimum tax?
Newly formed or qualified corporations are exempt for their first taxable year. The $800 minimum franchise tax begins in the second year, and QSubs do not receive the first-year exemption.
How does California’s single-sales factor affect income tax?
California sources business income using only sales, not property or payroll. Multi-state S corporations compute the percentage of California sales and multiply it by apportionable income to determine the California-source amount.
Can an S corporation use NOL carryovers in 2021?
California suspended NOL use for many taxpayers for 2020–2022, though the suspension was partially repealed. Eligibility depends on income thresholds and when the NOL was generated. Use Form FTB 3805Q to calculate allowable deductions.
Are COVID-19 relief amounts taxable in California for 2021?
Most federal and state COVID-related grants and forgiven loans are excluded from California income, including PPP forgiveness and small business relief grants. S corporations must list related deductions or exclusions properly when completing the return.
For official forms and instructions, visit the California Franchise Tax Board’s Form 100S page: https://www.ftb.ca.gov/forms/2021/2021-100s-instructions.html
