What California Form 565 (2020) Is For
California Form 565 is the Partnership Return of Income that partnerships file with the California Franchise Tax Board as part of their state tax return. This form reports income, deductions, credits, and other items sourced from California sources for both domestic and foreign entities. Partnerships use information from their federal return, including Form 1065, to complete required state tax forms and schedules.
The form provides details needed to prepare each partner’s Schedule K-1 and California Schedule K-1 for reporting state income taxes. It also requires identification of the California SOS file number, principal business activity, and any federal income tax adjustments. Partnerships use support schedule entries to reconcile federal law differences reflected under California law.
When You’d Use California Form 565 (2020)
Form 565 is used when a partnership operates in California, receives income from California sources, or maintains registration with the California SOS. Limited liability partnerships and foreign entities are also required to file this tax return under California law. Some limited liability company groups instead file Form 568, the Limited Liability Company Return of Income, depending on the Form 8832 classification rules.
The filing deadline occurs on the 15th day of the third month following the close of the tax year. Partnerships may submit extension payments using Form FTB 3537 or Form FTB 3536 when the annual tax applies. Filing requirements remain in effect during periods of inactivity, and partnerships must maintain accurate income tax reporting and submit Form Schedule K-1.
Key Rules or Details for Tax Year 2020
California Form 565 follows California Revenue and Taxation Code provisions that differ from federal law, including limits connected to IRC Section 179. Partnerships must adjust federal return items on column B when California does not conform to federal changes introduced after January 2015. These adjustments may include depreciation differences, California use tax obligations, or items reported on Schedule B or Schedule M-1.
Limited liability partnerships and similar entities may be subject to an annual tax based on California franchise tax rules. Partnerships with California Schedule L entries must complete the Balance Sheet using the Schedule L and M worksheet. They must also review Partner’s Instructions for situations involving Form 592, Form 592-B, or Form FTB 3804.
Step-by-Step (High Level)
- Step 1: The partnership determines filing requirements based on California sources, California SOS registration, or entity classification rules.
- Step 2: The partnership gathers Form 1065, each Schedule K-1, and any supporting schedules required under California law.
- Step 3: The partnership enters required details, including the California SOS file number, principal business activity, and tax return information.
- Step 4: The partnership reports income, deductions, and adjustments using Schedule M-1, Schedule M-2, or California Schedule S.
- Step 5: The partnership prepares each Schedule K-1 and completes Schedule L using the Schedule L and M worksheet.
- Step 6: The partnership calculates the required payments, including the annual tax and withholding, as reported on Form FTB 3832.
- Step 7: The partnership signs and files the return, then retains records for review by the Franchise Tax Board.
For step-by-step assistance, common filing questions, and official form explanations, see our IRS Form Help Center.
Common Mistakes and How to Avoid Them
Processing delays arise when IRS submissions contain preventable procedural errors in required tax forms. Identifying these recurring issues strengthens filing accuracy and supports reliable compliance with applicable federal law. Addressing these issues ensures that the submitted tax return information is complete and adequately documented.
- Missing Signatures: Mandatory signature fields on Form 1065 and related schedules remain unsigned, and taxpayers must confirm all required signatures before filing.
- Mismatched EINs: The identification numbers reported on each Schedule K-1 do not match the EIN on the Partnership Return of Income. Taxpayers must verify identical entries before filing.
- Incomplete Attachments: Required forms such as Form 4797 or Schedule M-2 are omitted, and taxpayers must attach every schedule required under California law. Taxpayers must include all supporting schedules before submission.
- Late Transmittals: Filings submitted after the 15th-day deadline require taxpayers to transmit all documentation within the prescribed timeframe established by agency rules.
What Happens After You File
The California FTB reviews the tax return and verifies schedules, including adjustments required under California law and federal return entries. Processing times increase for paper filings, or submissions containing column B modifications or Schedule M-2 items derived from Form 1065. Partnerships maintain documentation, including California Schedule K, Schedule B, and Balance Sheet worksheets, to support future compliance reviews by the Franchise Tax Board.
The Franchise Tax Board may request additional forms such as Form FTB 3885P, Form FTB 3893, or Form FTB 3526. Partnerships provide the necessary materials, including Form 592-B, Form 4797, or Schedule R, to support the requirements of the California Revenue and Taxation Code. Prompt responses reduce the likelihood of assessments involving annual tax calculations, California use tax matters, or payroll tax reviews conducted by the Franchise Tax Board.
Frequently Asked Questions
Do partnerships need to file Form 565 when operating in multiple states?
Partnerships file Form 565 when they have California sources or registration with the California Secretary of State. They must still prepare a federal return using Form 1065 and reconcile differences required under California law. Some filings also require the completion of a California Schedule K or Schedule B to meet specific reporting requirements.
Is the annual tax required for all partnership types?
Limited liability partnerships may be subject to annual tax under the California Revenue and Taxation Code. Liability depends on the entity classification and whether a limited liability company files Form 568 instead. Certain circumstances may also involve payments submitted through Form FTB 3536.
Do partners receive a Schedule K-1 with this filing?
Partnerships prepare Schedule K-1 forms for federal reporting and California filing requirements. These schedules support income taxes reported on Form 1040 or Form 540NR. Partners may also use the Partner’s Instructions when determining required adjustments.
Can Form 565 be filed electronically?
Electronic filing is available through corporate tax software such as CCH ProSystem fx Tax or CCH Axcess Tax. These systems support the required tax forms, including California Schedule M-1. Electronic filing also reduces the likelihood of processing delays.
What if partnership information changes after filing?
Partnerships may need Form LLC-4/7 or an amended filing when corrections are required. Specific changes require notifying the Franchise Tax Board using Form FTB 4197. Additional submissions may include Form 592-B or Form FTB 3526.
