Are You Contemplating the 2024 June 15 Passthrough Entity Tax Prepayment?

For S-Corporations and Partnerships, the election to participate in the Passthrough Entity Tax program in California requires a prepayment to “elect in” for the calendar year. For first time elections, the prepayment of $1000 is required to be paid on June 15. For ongoing elections, California requires a prepayment equal to or greater than 50% of the previous year Passthrough Entity Tax.

The FTB has made it clear that there is no “reasonable cause” or “de minimis” exception to the 50% requirement because the 50% prepayment is a statutory requirement. Taxpayers may want to add a cushion to the 50% prepayment amount to ensure that they will still qualify to make the election for the 2024 taxable year should they discover an error in their prior-year’s return.