Introduction
Tax forms are one of the most headache-inducing things about running. A business – especially under California state tax law, in which there are often several relevant tax forms. Depending on the type of structure of your company and tax obligations. As a corporation or LLC, you might ask. “Do I have to file Form 3522 if I already file Form 100ES?” This page outlines the distinctions between the forms and their purposes, assisting you in deciding if filing both is required to comply with California tax law to be California tax law compliant.
What is Form 3522?
Form 3522 is a form in California for the minimum franchise tax, strictly for business concerns filed under California’s minimum franchise tax. This form will document and pay the annual $800 minimum franchise tax each corporation, LLC, limited partnership, and LLP must remit based on the operation of businesses in California.
Who is required to file:
Any business in the state of California that’s classified as a corporation or LLC must file Form 3522. Even if your business did not generate any income during the year or was inactive, you must still pay the minimum franchise tax of $800 for such reason.
Annual Tax:
This is a tax imposed on businesses just for the privilege to operate in the state of California. It has to be paid irrespective of whether or not the business is profitable. This means that it’s just another “cost of doing business” for the state.
Filing Deadline:
Paying for Form 3522 is due by the 15th of the fourth month after commencing the taxable year of the business. For most businesses, it means April 15.
What is Form 100ES?
Form 100ES is also used by a California corporation to make estimated income tax payments. A corporation must estimate its annual income and make periodic payments based on the estimate in the course of the year to ensure that the corporation pays its tax liability as and when the revenues are generated.
The following must make estimated tax payments with Form 100ES and pay quarterly when income from sources other than wages is expected to exceed $500 for the year after applying credits:
A corporation
Estimated Payment:
Payments for Form 100ES are due quarterly and are calculated based on the estimated income that the corporation expects to earn during the year.
Purpose:
This form addresses the minimum income tax liability of a corporation, whereas Form 3522 is concerned only with the minimum franchise tax. The estimated tax payments on this form rely on the corporation’s revenue and profit projections, which are independent of the flat $800 minimum due using Form 3522.
The Difference Between Form 3522 and Form 100ES
Both of these forms refer to taxes of a corporation, but they are used for completely different purposes:
Form 3522 has to be paid specifically as the annual minimum franchise tax for businesses of $800, regardless of income due.
The form, Form 100ES, pays estimated income tax for the year based on the corporation’s project taxpayer income during the entire year.
Filing Form 100ES does not exclude or supercede the requirement to make Form 3522. They are two separate tax requirements, and you might have to file both depending on your business finances.
Do I Have to File Both Form 3522 and Form 100ES?
Generally, yes. Most businesses will need to file both for different reasons: the different forms cover different aspects of a business’s tax liability.
If Your Business Is Profitable:
You will have to file Form 100ES to make estimated tax payments. This is because you are making quarterly estimated tax payments based on the income of your corporation.
You will also be required to submit Form 3522, in order to pay the minimum franchise tax of $800, regardless of how much more you have already paid in estimated tax.
Not earning a profit:
It may be exempted from Form 100ES if your corporation will owe less than $500 during the year. You will still, though, have to file Form 3522 in order to pay the minimum franchise tax of $800. That is applied irrespective of whether your company is generating income or not.
LLCs and Nonprofit Corporations:
Some LLCs and non-profits may be exempt from filing Form 100ES, but they must file Form 3522 in order to pay the franchise tax. Verify qualifications with a tax professional.
What happens if you fail to file Form 3522 or Form 100ES?
Failure to file Form 3522 and Form 100ES will attract penalties and fines from the California Franchise Tax Board (FTB). If your business does not pay the minimum amount of $800 franchise tax by the due date through Form 3522, you may be charged penalties that will bring massive numbers within a very short period. Underpayment of estimated tax and interest would also be added when you fail to file Form 100ES timely.
How to File Form 3522 and Form 100ES
Form 3522:
Obtain a copy of the form from the California Franchise Tax Board website or file it online.
Fill up the necessary information such as the name, identification number, and remittance details of your business entity.
Submit and pay for the form and payment before the required filing deadline, which is usually by April 15th.
Form 100ES:
Additionally, the FTB enables one to file Form 100ES electronically. The quarterly due dates are usually on April 15th, June 15th, September 15th, and December 15th.
Guess your tax given by the amount you expect to earn, and pay that amount.
Final Remarks
In a nutshell, most California corporations must file Form 3522 and Form 100ES. The reasons are because they serve two different purposes. Form 3522 has the minimum franchise tax of $800, while Form 100ES serves. As proof that your corporation was remitting income taxes collected for the given year. Failure to submit both forms might incur penalties. And may cause your company to fall behind on your California tax law requirements.
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