pte - Linkenheimer LLP CPAs & Advisors

Q2 Estimates and PTE Payments Due June 17th

As we navigate through the second quarter of the year, it’s crucial to stay on top of your tax obligations to ensure smooth financial operations and compliance. In particular, we’d like to draw your attention to four important matters: Q2 estimate payments, the California Pass-Through Entity (PTE) elective tax payment, S-Corp estimated payments, and Form 3536 for LLC fees.

Q2 Estimate Payments: For those of you who are required to make quarterly estimated tax payments, the deadline for the second quarter is swiftly approaching. If you are self-employed, a freelancer, a sole proprietor, or have other sources of income not subject to withholding, you likely need to make estimated tax payments to cover your tax liabilities.

The due date for Q2 estimate payments is June 17, 2024, since June 15 falls on a weekend this year. Missing this deadline can result in penalties and interest charges, so it’s essential to ensure your payment is submitted on time. If you need assistance calculating your estimated tax liability or determining the appropriate payment amount, please don’t hesitate to reach out to us. We’re here to help you navigate the complexities of tax compliance and ensure […]

By Linkenheimer LLP|2024-06-13T13:15:46+00:00June 7th, 2024|payments, pte, tax deadlines|0 Comments

Tax Tips When Buying the Assets of a Business

After experiencing a downturn in 2023, merger and acquisition activity in several sectors is rebounding in 2024. If you’re buying a business, you want the best results possible after taxes. You can potentially structure the purchase in two ways:

Buy the assets of the business, or
Buy the seller’s entity ownership interest if the target business is operated as a corporation, partnership or LLC.

In this article, we’re going to focus on buying assets.

Asset purchase tax basics

You must allocate the total purchase price to the specific assets acquired. The amount allocated to each asset becomes the initial tax basis of that asset.

For depreciable and amortizable assets (such as furniture, fixtures, equipment, buildings, software and intangibles such as customer lists and goodwill), the initial tax basis determines the post-acquisition depreciation and amortization deductions.

When you eventually sell a purchased asset, you’ll have a taxable gain if the sale price exceeds the asset’s tax basis (initial purchase price allocation, plus any post-acquisition improvements, minus any post-acquisition depreciation or amortization).

Asset purchase results with a pass-through entity

Let’s say you operate the newly acquired business as a sole proprietorship, a single-member LLC treated as a sole proprietorship for tax […]

By Linkenheimer LLP|2024-05-20T16:50:11+00:00May 20th, 2024|business, pte|0 Comments

Important Reminder on Mandatory e-Pay and S-Corporation Pass-Through Entity Tax

We hope this message finds you well. As we navigate through the financial year, we would like to draw your attention to some significant updates from the California Franchise Tax Board (FTB) that might impact your business operations.

Firstly, based on the guidelines detailed on ftb.ca.gov, it is crucial to note that businesses are required to enroll in the Mandatory e-Pay program once they make an estimate or extension payment exceeding $20,000 or when they file an original tax return with a total tax liability exceeding $80,000. Once you meet this threshold, all future payments, regardless of the amount, duration, or taxable year, must be made electronically. Failure to comply can result in a 1% noncompliance penalty on the amount paid.

Moreover, as highlighted in the FTB Tax News from May 2022, the FTB reminds taxpayers that, beginning from the tax year 2021, payments made for the S-Corporation Pass-through Entity Elective Tax will count toward the Mandatory e-Pay requirement. Hence, if your payment for the S-Corporation Pass-through Entity Elective Tax causes you to meet the threshold, you must enroll in the Mandatory e-Pay program and make all future S-corporation payments electronically.

We understand […]

By Linkenheimer LLP|2023-10-09T16:47:51+00:00October 9th, 2023|pte|0 Comments

Important: More Passthrough Entity Tax Problems

Due to an issue with some software providers, many passthrough entity tax payments made with 2022 vouchers have been improperly applied to the 2021 tax year. This is resulting in refunds of June passthrough entity elective tax prepayments made to preserve the right to make the 2022 passthrough entity tax election. The FTB is aware of this issue, and they are working quickly to address the problem.

This is only an issue for payments made with Form 3893 (PTE), Pass-Through Entity Elective Tax Payment Vouchers, that were generated through tax software programs. Payments made using WebPay or with manually prepared vouchers have been properly applied.

The FTB has confirmed that the incorrect application of these payments will not jeopardize taxpayers’ ability to elect to pay the tax for 2022. However, because these payments have been refunded taxpayers must take action to correct this issue by returning the erroneous refund.

The article above is reproduced with permission from Spidell Publishing, Inc.

If you receive any unexpected refunds from the FTB please contact our office immediately so that we may help you remedy this issue, and feel free to contact your Linkenheimer CPA if you would like to discuss […]

By Linkenheimer LLP|2022-08-03T22:05:26+00:00August 3rd, 2022|entity, ftb|0 Comments

2022 Pass-through Entity Elective Tax (PTE) Payment Due June 15

Beginning with the 2022 taxable year, taxpayers wanting to make election for 2022 tax year must make a pre-payment by June 15, 2022.

The amount due by June 15 is at least the greater of:

50% of the elective tax paid for the prior year;
$1,000.

Entities that did not elect to pay PTE in 2021 will pay $1,000 on June 15 to preserve the right to make the election for 2022. Entities that have elected PTE for 2021 tax year, or plan to elect if on extension, must pay in at least 50% of the final 2021 PTE tax liability. If the 2021 return is on extension, taxpayers should consider making a larger than needed estimate to provide a cushion and ensure that their estimate is equal to 50% of 2021 final PTE tax liability. There are no exceptions to the 50% of prior-year tax requirement for the June 15 payment, even if income is expected to decrease. If the June prepayment is underpaid, then the taxpayer is ineligible to make the election for that taxable year. (R&TC §19904) The June 15 payment deadline applies to both calendar- and fiscal-year taxpayers.

The remaining 2022 […]

By Linkenheimer LLP|2022-05-25T16:05:28+00:00May 25th, 2022|entity, tax, tax deadlines|0 Comments