California Pass-Through Entity (PTE) Elective Tax Payment: A Comprehensive Guide by CAPATA
Qualified pass-through entities, including S corporations, partnerships, and LLCs, and their owners have the option to make an annual election to pay California’s pass-through entity elective tax (PTE) and receive associated tax benefits. To preserve the right to make this election for the 2024 taxable year, a prepayment must be made by June 17, 2024. Failure to make this required prepayment will prohibit the entity from making the PTE election for the 2024 taxable year.
Key Steps to Take:
- Check Your 2023 Business Tax Return: If you’ve already filed your 2023 business tax return with our firm, please refer to the client filing instructions associated with your tax return to determine if a CA PTET payment is required.
- Contact Us If You Haven’t Filed: If you haven’t filed your 2023 tax return, contact our office immediately. We will assist you in ensuring the necessary prepayment is made on time. Call us at 949-364-0334 or email us at ADMINTEAM@CAPATACPA.COM today to schedule a consultation or get your questions answered.
Important Details:
- Due Date: June 17, 2024 (since June 15th falls on a Saturday this year)
- Payment Amount: The greater of 50% of the prior year’s PTET or $1,000
Benefits of Making the PTET Payment:
- Tax Credit: Claim a 100% California credit equal to the entity tax paid on your share of the entity’s income.
- Federal Tax Deduction: Reduce your federal taxable income by the amount of tax paid in 2024 at the entity level.
Compliance and Eligibility:
- To remain eligible for the PTE election for the 2024 taxable year, it is crucial to make the required prepayment by June 17, 2024. Failure to do so will prohibit your entity from making the election.
- For returns still on extension, we advise adding a “cushion” to your estimated 2023 tax liability to ensure the 50% threshold is met.
- If you have committed to the first installment, the second 50% installment payment is required to be paid no later than March 15, 2025, to avoid penalties.
Payment Options for PTE:
- Check: Using a 2024 Form 3893, which we can prepare for you.
- FTB’s Web Pay: Use FTB’s Web Pay system for convenient payment.
Potential Legislative Relief:
Please note that while there is potential legislative relief on the horizon, which may allow PTEs to qualify for the PTE election even if they miss the prepayment, it is not yet law. Therefore, we encourage making the estimate this year to ensure compliance.
If you have any questions or need further assistance, please do not hesitate to reach out to us. We are here to help you navigate through this process and ensure that you maximize your tax benefits.
Remember:
The deadline is approaching quickly. Act now to secure your California PTE tax benefit by June 17th!
Trust Capata to Maximize Your Tax Benefits with Expert PTE Guidance!
