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at the highest marginal rate. Any amount paid by

extended due date, the automatic extension will

Accounting Periods

the LLC will be considered a payment made by

not apply and the late filing penalty will be

LLC returns normally must be filed for an

the nonresident member.

assessed from the original due date of the return,

accounting period that includes 12 full months. A

see R&TC Section 19131.

For taxable years beginning on or after

short period return must be filed if the LLC is

Failure to Pay by the Due Date

January 1, 2005, the tax may be reduced by the

created or terminated within the taxable year. In

The failure-to-pay penalty is imposed from the

amount of tax previously withheld and paid by

that case, write “Short Period” in red ink at the

due date of the return or the due date of the

the limited liability company with respect to

top of Form 568, Side 1.

payment. Since the LLC fee and the

each nonconsenting, nonresident member.

For information on the required taxable year of a

nonconsenting nonresident members’ tax are due

Reminder: All nonresident members must file a

partnership that also applies to LLCs, see the

with the return, the penalty is calculated from the

California tax return. The completion of form

instructions for federal Form 1065.

15th day of the 4th month after the close of the

FTB 3832 does not satisfy the nonresident

taxable year. The annual tax payment date is the

J Amended Return

member’s California filing requirement.

15th day of the 4th month during the taxable year,

Corporate members are also considered doing

so the penalty is calculated from this date. The

If, after the LLC files its return, it becomes aware

business in California and may have additional

penalty for each item is calculated separately.

of changes it must make, the LLC should file an

filing requirements. For more information, get

amended Form 568 and an amended

The failure-to-pay penalty begins at 5%. Every

FTB Pub. 1060, Guide for Corporations Starting

Schedule K-1 (568) for each member, if

month or fraction thereof the amount is not paid

Business in California. Nonresident individuals

applicable. Check the amended return box in

the penalty increases .5%. The penalty continues

may qualify to file a group Form 540NR and

Item I(3) Form 568, Side 1. Give a corrected

to increase for 40 months, thereby maximizing at

should get FTB Pub. 1067, Guidelines for Filing

Schedule K-1 (568) with box G(2) checked and

25%, see R&TC Section 19132.

a Group Form 540NR.

label “Amended” to each affected member. If the

Note: If an LLC is subject to both the penalty for

If the LLC’s return is being filed on or before the

LLC originally filed a Form 540NR group

failure to file a timely return and the penalty for

15th day of the 4th month (fiscal year) or

nonresident member return, the LLC should file

failure to pay the total tax by the due date, a

April 17, 2006 (calendar year), the LLC

an amended Form 540NR.

combination of the two penalties may be

completes the Schedule T. See Specific Line

Note: If the LLC wishes to file amended

assessed, but the total penalty may not exceed

Instructions for Schedule T in this booklet for

Schedules K-1 (568) via CD or Diskette, see

25% of the unpaid tax. However, the penalty for

further information.

General Information T, Substitute Schedules.

failure to comply with the filing requirements will

If the LLC owes a tax and/or fee and is unable

be assessed in addition to the penalty for failure

If the LLC’s federal return is changed for any

to complete Form 568 on or before the original

to file a timely return and the penalty for failure to

reason, the federal change may affect the LLC’s

due date, it must complete form FTB 3537.

pay the total tax by the due date.

California return. This would include changes

However, the nonconsenting nonresident

made because of an examination. The LLC must

Interest

members’ tax along with the voucher must be

file an amended return within six months of the

Interest is due and payable on any tax due if not

received on or before the 15th day of the 4th

final federal determination if the fee the LLC or tax

paid by the original due date. Interest is also due

month (fiscal year) or April 17, 2006 (calendar

a member owes has been affected. The LLC

on some penalties. The automatic extension of

year), after the close of the taxable year. Failure

should attach a copy of the federal Revenue

time to file does not stop interest from accruing.

to do so causes penalties and interest to be

Agent’s Report or other notice of the adjustments

California follows federal rules for the calculation

assessed. See the instructions for form

to the return. The LLC should inform the

of interest. Get FTB Pub. 1138, Business Entity

FTB 3537 included in this booklet.

members that they may also be required to file

Refund/Billing Information, for more information.

G Penalties and Interest

amended returns within six months from the date

Other Penalties/Fees

of the final federal determination.

Failure to Comply with Filing Requirements

A penalty may also be charged if a check is

A penalty is assessed if the LLC is required to

returned for insufficient funds. In addition, fees

K Required Information

file a Form 568 and it:

may be charged for the cost of collection.

Returns

• Fails to file the return on time, including

H Accounting Methods

extensions; or

Every LLC must file information returns if, in the

• Files a return, including Schedules K-1

Compute ordinary income or loss by the

course of its trade or business, it:

(568), that fails to show all the information

accounting method regularly used to maintain the

• Makes payments to one person of rents,

required.

LLC’s books and records. This method must

salaries, wages, annuities, or other fixed or

clearly reflect the LLC’s income or loss.

determinable income during one calendar year

The amount of the penalty for each month, or

totaling $600 or more;

part of a month (for a maximum of five

LLCs given permission to change their account-

• Pays an individual or one payee interest and

months), that the failure continues, is $10

ing method for federal purposes should see IRC

dividends totaling $10 or more during one

multiplied by the total number of members in

Section 481 for information relating to the

calendar year; and

the LLC during any part of the taxable year for

adjustments required by changes in accounting

• Receives cash payments over $10,000.

which the return is due. Interest will be charged

method.

on the penalty from the date the notice of tax

Payments of any amount by a broker, dealer, or

Generally, an LLC may not use the cash method

due is mailed until the date the return is filed.

barter exchange agent must also be reported. Get

of accounting if the LLC has a corporate member,

FTB Pub. 4227A, Guide to Information Returns

For “small partnerships,” as defined in IRC

averages annual gross receipts of more than

Filed With California, for more information.

Section 6231, the federal exception to the

$5 million, or is a tax shelter. For exceptions, see

imposition of penalties for failure to file

IRC Section 448.

LLCs must report payments made to California

partnership returns does not apply for

residents by providing copies of federal

The mark-to-market accounting method is required

California purposes. For more information see

Form 1099 (series). For nonresidents, see the

for securities dealers. The IRC Section 481

R&TC Section 19172.

reporting and withholding requirements on

adjustment is taken into account ratably over five

Form 592, Nonresident Withholding Annual

Failure to File a Timely Return

years beginning with the first income year.

Any LLC that fails to file Form 568 on or before

Return; Form 592-A, Nonresident Withholding

Rounding to Whole-Dollar Amounts

Remittance Statement; and Form 592-B,

the extended due date is assessed a penalty.

Whole dollar amounts should be shown on the

Nonresident Withholding Tax Statement.

The penalty is 5% of the unpaid tax (which

return and accompanying schedules. To round,

includes the LLC fee and nonconsenting

LLCs must submit a copy of federal Form 8300,

drop any amount less than 50 cents and increase

nonresident members’ tax) for each month, or

Report of Cash Payments Over $10,000 Received

any amount from 50 cents through 99 cents to

part of the month, the return remains unfiled

in a Trade or Business, within 15 days after the

the next whole dollar.

from the due date of the return until filed. The

date of the transaction.

penalty may not exceed 25% of the unpaid tax.

If an LLC does not file its return by the

Form 568 Booklet 2005 Page 5

Instructions For Form 568 - Limited Liability Company Return Of Income - State Of California Franchise Tax Board - 2005 Page 5

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