California’s individual income tax rates vary between 1% to 12.3%, depending on your filing status. The state has an 8.84% corporate income tax rate, but despite its higher tax liability, the state has a booming economy, conducive to any business.
Understanding the cost of apportionment in the state can help you accurately report earnings to the IRS and local government.
Corporations
- Filing Requirements. You must file a California S Corporation Franchise or Income Tax Return (Form 100S).
- Allocation and Apportionment. All trade or businesses, except those that derive more than 50% of their gross receipts from qualified business activities (QBA), must apportion their business income using a single sales factor, or a three-factor.
Partnerships
Filing Requirements. Partnership file Form 568, Limited Liability Company Return of Income.
Employees & individual filers
- Filing requirements. Generally, you must file a California income tax return if you’re a resident, part-year resident, or nonresident and are required to file a federal return, or receive income from a source in California.
- California residents, and their spouses if married filing a joint return, must report all income, regardless of the source, similar to federal tax filing. This is done using Form 540. Part-year residents must report all income earned while a resident of the state, along with any state-sourced income earned before or after their residency period. For non-residents, only income from California sources is taxed, with prorated thresholds based on the proportion of California gross income to federal adjusted gross income.
Ensuring Accurate Tax Filings
Consulting an expert CPA can help you keep a handle on different laws and tax implications.
At Fusion CPA we have a team of experts with multi state tax experience. We can help you with business structuring and accounting to stay compliant with tax laws across multiple states. We can help you take the stress out of tax season, so you can focus on what really matters.
To see how we can help you with a proactive tax strategy to save you time and money, schedule A Discovery Call with one of our CPAs.
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