What Form 100S Is For
Form 100S serves as California’s franchise or income tax return for S corporations. It reports taxable income, adjustments, credits, and required payments. Most S corporations pay tax at a rate of 1.5% of their taxable income, while financial S corporations pay a rate of 3.5%. Every corporation must also pay at least $800 unless it qualifies for the first-year exemption.
Form 100S includes Schedule K-1, which reports each shareholder’s share of ordinary income, deductions, charitable contributions, and distributions. California’s instructions refer to several resources, including FTB publications, which offer guidance on rules that differ from federal treatment.
When You’d Use Form 100S
You must file Form 100S when your corporation is:
- incorporated in California
- qualified with the Secretary of State
- doing business in the state
- receiving California-source income
The form is required for original filings, late filings, and amended returns. For 2022, calendar-year corporations must file by the 15th day of the third month following the end of the year. Fiscal-year filers follow the same rule based on their fiscal year-end month.
California provides an automatic six-month extension to file, but the extension does not postpone payment of tax owed. Corporations expecting a balance may need to send a payment using Form FTB 3539. Form 100S is also used when reporting shareholder income, deductions, and distributions, as well as when completing schedules such as Schedule R and Schedule K-1.
The state also clarifies which businesses are considered ineligible entities for S corporation purposes. Corporations should verify their status before filing for incorporation. Visit the IRS form help center for guidance on corporate tax documents, supporting schedules, and compliance steps relevant to Form 100S preparation.
Key Rules or Details for 2022
Several rules affected the 2022 tax year. Understanding these details helps ensure the form is completed correctly:
- Tax rates: Most S corporations pay 1.5% of taxable income; financial S corporations pay 3.5%.
- Minimum tax: Corporations owe at least $800 unless eligible for the first-year exemption.
- Additional taxes: Built-in gains and certain passive activities may create additional reporting requirements.
- Doing-business thresholds: Filing is triggered when California sales, property, or payroll exceed the 2022 amounts.
- NOL rules: The suspension of net operating loss deductions was removed for 2022.
- Credit flexibility: The repeal of the credit limitation allowed corporations to apply more credits.
- Adjustments: California requires adjustments when federal amounts differ from state rules, including changes related to depreciation, interest rules, and variations in federal provisions.
- Apportionment: Corporations that operate across multiple states may need to use Schedule R to determine the California portion of their income.
California also notes that certain federal income items, such as funds from a relief grant or relief grant program, may need review to determine whether they are taxable in California. Corporations should review their income to confirm the correct treatment for grant allocations.
Acquire guidance on resolving unfiled federal returns, which is critical for S corporations, as Form 100S relies on accurate federal return data and schedules.
Step-by-Step Filing Process (High Level)
Filing Form 100S is easier when you follow a step-by-step approach:
- Complete the federal S corporation return first: You will need several amounts that carry over to the California return, including items reconciled on Schedule M-1 when federal and state income differ.
- Gather necessary information: Collect identification numbers, prior-year overpayments, estimated tax payments, and apportionment data.
- Enter identification details: Provide your corporation’s legal name, address, and all required identification numbers.
- Report income and adjustments: Complete the income sections and make California-specific adjustments to ensure amounts align with state rules.
- Calculate the tax and compare it to the minimum: Compute the tax on income, then compare that amount to the $800 minimum franchise tax.
- Apply credits and list payments: Enter credits, estimated tax payments, and other payments to determine the balance due or refund.
- Prepare shareholder schedules: Complete Schedule K and Schedule K-1 for each shareholder. If your corporation has losses or credits subject to limitation, you may also need FTB 3805Q.
- Assemble and submit the return: Place forms in the required order and file by mail or through an approved electronic system.
Review IRS payment plan options that may assist S corporations when federal or state tax balances remain after computing tax on Form 100S.
Common Mistakes and How to Avoid Them
Below are frequent Form 100S mistakes and how to prevent them:
- Incorrect corporation information: Some returns list incorrect names or corporation numbers. Ensure that the details align with the records held by the Secretary of State.
- Minimum tax errors: Filers often overlook the $800 minimum tax. Reviewing the rule before calculating the final amount prevents underpayment.
- Improper form assembly: Incorrectly stapling or arranging forms can cause delays in processing. Using paper clips and following the state instructions can help avoid this issue.
- Missing short-year labels: Short-year returns must display the beginning and ending dates. Adding these labels prevents processing confusion.
- Missing Schedule K-1 Forms: Some returns fail to include shareholder schedules. Preparing each K-1 while completing Schedule K helps ensure nothing is overlooked.
- Missing adjustments: Corporations sometimes fail to apply California adjustments. Reviewing each adjustment section ensures accuracy.
- Reporting errors for specific items: Corporations sometimes misreport items like charitable contributions, property transactions, or dispositions. Ensuring each item appears in the correct line and section helps prevent these issues.
What Happens After You File
After filing Form 100S, the Franchise Tax Board reviews the return and processes any balance due or refund. Direct deposit generally arrives faster than a paper check. When tax is still owed, the FTB issues a notice listing the amount due. Paying promptly helps limit interest.
The FTB may request additional details when reported amounts differ from the federal return or when income requires clarification under California rules. Keeping organized records of schedules and supporting documentation helps prevent delays. Maintaining clear documentation helps prevent delays and unnecessary follow-up correspondence.
FAQs
What tax rate applies to S corporations in California?
Most S corporations pay 1.5% of taxable income. Financial S corporations pay 3.5%. The $800 minimum franchise tax also applies unless the corporation qualifies for the first-year exemption.
When is Form 100S due for the 2022 tax year?
Form 100S is due on the 15th day of the third month after the taxable year ends. Calendar-year corporations must file by March 15.
Do S corporations owe the minimum tax even if they have no income?
Yes, the $800 minimum tax applies even if the corporation has no income or is inactive, unless it is in its first taxable year.
What happens if a corporation files late or pays late?
Late filing or late payment can result in penalties, interest, and a notice from the FTB. Paying on time helps avoid these issues.
Are shareholders required to report income even if there are no distributions?
Yes, shareholders report the amounts shown on Schedule K-1, which may affect base and passive activities.
