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 FTB is working on creating a dedicated PO box, and specific instructions for these taxpayers to respond to this issue. This information will be included in their upcoming issue of Tax News which is expected to be released next week.
If you prepared any 3893 vouchers with your tax software, we recommend that you reach out to clients to see if their payments have been refunded to them via check or direct deposit.
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.