Farmers, fishermen, and the March 1 filing deadline

The FTB has stated that they will not be providing any relief to farmers and fishermen who are having problems filing their returns by March 1 due to the lack of updated forms and tax software. The problem is that updates have not been made to reflect the significant changes made by SB 113 (Ch. 22-3; enacted on February 9, 2022) to the passthrough entity elective tax and Passthrough Entity Elective Tax Credit. Software companies have told us that they will update their programs after the FTB provides updated form instructions.

We brought this matter to the FTB and their response was:

“Farmers and Fishermen can file their returns and pay the total tax due on March 1. The existing forms may be used because only the instructions are being updated to reflect SB 113. Therefore, the Farmers and Fishermen may populate their tax return following the SB 113 statute. The instructions provided with California tax forms are a summary of California tax law and are only intended to aid taxpayers in preparing their state income tax return.”

They did recommend that:

“Taxpayers and practitioners should ensure they have their tax software updates completed before filing.”

In other words, no relief is being provided for farmers and fishermen with a March 1 filing deadline. At this point, tax professionals will have to manually override their software to reflect the significant changes made by SB 113, which include:

  • Repealing the tentative minimum tax limitation on the Passthrough Entity Elective Tax Credit;
  • Including guaranteed payments in the entity’s qualified net income;
  • Allowing partnerships with partnership owners to make the election; and
  • Allowing a partnership/S corporation/LLC to pay the tax on behalf of SMLLC owners if the SMLLC is owned by an individual, estate, or trust.

If your software will not allow these overrides, you will have to manually complete the forms to comply with the March 1 filing deadline.

Attend Spidell’s 2022 Post-Tax Season Update and Review webinar and get the latest update on this and other issues that came up during tax season. Click here and register today.