2022-35: Erroneous passthrough entity elective tax refunds must be returned

As we previously reported, the FTB has acknowledged that due to issues with the 2022 Form 3893, Passthrough Entity Elective Tax Payment Voucher, June 2022 passthrough entity elective tax prepayments were incorrectly applied to the 2021 tax year resulting in erroneous refunds of these payments.

This is a big issue because in order to preserve the right to make the passthrough entity elective tax election for 2022 taxpayers must remit a payment of the greater of $1,000 or 50% of the 2021 passthrough entity elective tax due by June 15, 2022. If the payment is not posted, taxpayers will not be able to make the election for 2022.

The FTB is allowing taxpayers to return these erroneous refunds to preserve their right to make the election. Although the FTB has not indicated a specific deadline to return these refunds, we recommend that taxpayers do this as soon as possible to avoid problems with 2022 passthrough entity tax elections. The method for returning a payment depends on how the payment was refunded to the taxpayer, and what the taxpayer did with it.

Taxpayer still has check

If your client received a check, and still has that check, they must return it. Mail a copy of the Form FTB 3893 Voucher, along with the explanation “PTE Elective Tax Erroneous Refund” to:

Franchise Tax Board
P.O. Box 2288
Rancho Cordova, CA 95741-2288

Taxpayer cashed check/received direct deposit

If your client cashed the check or received a refund by direct deposit, they must resubmit the 2022 passthrough entity elective tax prepayment by submitting the payment on Web Pay or sending another check with a Form FTB 3893 Voucher, along with the explanation “PTE Elective Tax Erroneous Refund” to the same address. For taxpayers paying by check, write the entity ID and tax year 2022 on the memo line.

Remember that taxpayers subject to the mandatory e-pay requirements must use Web Pay to make this payment.

We have created a client letter addressing this issue for registrants of our 2022/23 Federal and California Tax Update, click here to register for a live seminar and click here to register for a live or on-demand webinar.

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