Most states follow the federal IRS rules and don’t require S Corps to pay income tax, but California is an exception. All California LLCs that elect to be taxed as S Corps must pay the greater of $800 or 1.5% state franchise tax on their net income. In the first year, you'll just pay 1.5% of your business income, as you're exempt from the $800 minimum.
This is a business tax, and is paid from the business' bank account. The good news - this tax payment counts as a deduction from your business income for federal IRS tax purposes! Here's a video explaining a bit more about how your taxes work in CA:
The easiest way to pay this annual S Corp franchise tax is online, so we'll start with those instructions. If it's your first year operating as an S Corp in CA, you may not be able to login to the Franchise Tax Board's website yet - and that's okay - we've got Pay By Mail instructions in here for you too!
Instructions for Making Payment to the FTB using Credit/Debit Card:
Visit https://www.ftb.ca.gov/pay/ and select the type of payment method being used. The process differs depending on the methods. We are covering Credit Card in these instructions.
Under “Business”, select “Pay now with ACI Payments” and click Continue to leave the site when prompted.
Select “Corporation Taxes”. Do NOT select “Limited Liability (LLC) Taxes”. Click “Make a Payment”.
Enter the amount of the payment you are making. Select from one of the Payment Options as appropriate. Click “Continue”.
Agree to the terms of the payment by selecting “Accept”.
Choose if you wish to make an account, create an account, or continue as a guest.
Select “Form 100, 100S, 100W, or 100X - Payments”
Complete the first half of the page that loads. Note that the “Entity ID (7 Digits)” is your California Corporation Number. The FEIN is your Federal Employer Identification Number.
Complete the remainder of the page. Under “Payment Types”, select one of the following:
Original Return Payment - This is for your Balance Due (Form 3586) for 2023 or your Pass-Through Entity Tax Election Payments (Form 3893) due when filing.
Estimated Tax Payment - This is where you make all Estimated Tax Payments (Form 100-ES) and Pass-Through Entity Election Tax Payments due June 15th, 2024.
Be sure to enter the proper Account Period Beginning Date and Ending Date. Use 2023 for Original Return Payments and 2024 for Estimate Tax Payments, with January 1st and December 31st respectively.
Click continue, confirm your information, and make the payment official!
Log into your Collective dashboard and upload your payment confirmation from the webpage - this screenshare should include: (a) the date of payment, (b) amount paid, and (c) year payment is applied.
Instructions for Making Payment to the FTB using Bank Account
Visit https://www.ftb.ca.gov/pay/ and select the type of payment method being used. The process differs depending on the methods. We are covering the Bank Account in these instructions.
Under “Business”, select “Use Web Pay business”
Select “Corporation” and NOT LLC. Enter your Entity ID (Your 7-digit California Corporation Number or 12-digit Secretary of State ID Number). Click “Login”.
Enter your First Name, Middle Initial, and Last Name. You will see your Entity ID that you entered and Entity Name filled in on this screen.
Select “Form 100, 100S, 100W, or 100X”
On this screen, this selection depends on the type of tax you are paying:
Select “Estimated Tax Payment (Form 100ES)” if you are making an estimated payment for the current year (to be credited on next year’s return)
Select “Original Return Payment (Form 100, 100S, 100W, or 3586)” if you are paying the balance due from the return being filed this year
Select “Pass-Through Entity Elective Tax (Form 3893)” if the payment is related to the optional tax you have elected to pay
Based on the type of tax you are paying, do the following:
For Estimated Tax Payments: Be sure to put the proper dates (ex: January 1, 2024 and December 31, 2024). Click “Add an estimated tax payment”, and put the date and amount of the payment you wish to make. You can make up to 4 estimated tax payments on this screen.
For 2023 Balance Due Payments: Be sure to put the proper dates (ex: January 1, 2023 and December 31, 2023). Enter the payment amount and date.
For Optional Pass-Through Entity Elective Tax: Be sure to put the proper dates (ex: January 1, 2024 and December 31, 2024).
Enter your payment details on this screen:
Review your details, enter your email address, confirm your email, enter your telephone number, and submit the form.
Log into your Collective dashboard and upload your payment confirmation from the webpage - this screenshare should include: (a) the date of payment, (b) amount paid, and (c) year payment is applied.
Instructions on making a California Franchise Tax payment by Mail:
Fill in Form 100-ES like so (using your own information of course):
Make your check, money order, or cashier’s check payable to Franchise Tax Board
Write your business name, business CA tax ID, and tax year on your payment
Example:
Log into your Collective dashboard and upload a photo of your check, voucher, and envelope - we basically need to know: (a) the date of payment, (b) amount paid, and (c) year payment is applied.
Mail, using certified mail, to:
Franchise Tax Board
PO Box 942857
Sacramento CA 94257-0501