California LLC Tax Extension and Estimated Tax

You know, you don't have to file a 1065 for this business; you can treat it as a single-member LLC and file it on one or two Schedule Cs with your joint 1040/540 (one or two depending on whether your spouse works in the business and wants her share of the SE tax allocated to her SSN). Rev. Proc. 2002-69, 2002-2 CB 831. However, you can put it on a 1065 if you want to.

You do have to file California form 568 for the LLC to report the minimum tax and fee. There is no need to file an extension request; there is an automatic extension to October 15, 2008. This is not an extension of time to pay; if you had not already paid the $800 minimum tax, you would be required to make the payment by April 15 with Form FTB 3537. See the instructions to Form FTB 3537, p. 54 in the Form

Katie in San Diego

What is your income? I'm sure it was less than 2k because of cost of goods and expenses, maybe even negative. The LLC tax is based on your income.

Limited Liability Company Fee In addition to the annual tax, every LLC must pay a fee based on total California annual income. For additional information see the LLC Income Worksheet instructions on page 11 of this booklet. The LLC fee is due on or before the 15th day of the 4th month after the close of the LLC's taxable year. For taxable years beginning on or after January 1, 2006, use the following chart to compute the fee: If total California annual income The from Form 568, Side 1, line 1 is: fee is: equal to or over - but not over - $ 250,000 $ 499,999 $ 900

The fee for 2008 is due by April 15 2008, so estimated taxes don't apply to it. I guess you could pay $200 in each of Jan, Feb, Mar, Apr but that wouldn't make sense.

You can elect how your LLC is taxed: as a S corp, C corp, sole proprietorship, etc. Assuming it is taxed as a sole proprietorship, and your federal tax bracket is 33% and state is 9.3% based on all your other income, and profit is 1k for first quarter, esimated tax is $330 for federal and $93 for state. But you only have to pay 90% of the tax due, so the estimated payments are 90% of 330 and 93. Also, the $800 tax would be deductible on your federal return, so the federal tax is only 90% of (1k - $800) = 180.

If you're expecting your income to change each quarter, then you have to pay tax on the amount you made in that quarter. But this means you have to track your income by quarter and fill out page 4 of form 2210 (as well as the California equivalent), which is tedious. Equal estimated payments every quarter are easier. However, if you go the equal estimated payments route, then pretend that $200 of the CA franchise tax was paid each quarter.

Looks at the large of of the estimated tax forms to you see what you're getting into if you track your income by quarter: