California Form 5806 - Underpayment Of Estimated Tax By Corporations

2014 Instructions for Form FTB 5806

Underpayment of Estimated Tax by Corporations

General Information

If an S corporation acquires a QSub during the

Line 1 – Enter the total tax from Form 100, line 31;

taxable year, but after the due date of the first

Form 100W, line 31; Form 100S, line 30; or Form 109,

A corporation subject to the franchise tax must

estimate installment, then the QSub annual tax is

line 14. Also include any add-on taxes (except

always pay at least the minimum franchise tax and

due with the next required estimate installment

interest computed under the look-back method for

any QSub annual tax, if applicable, by the 15th day

after the acquisition of the QSub.

completed long-term contracts and the increase in

of the 4th month of the taxable year.

tax for the deferral of installment sale income) or

Tax, for purposes of estimates, includes alternative

credits recaptured from Form 100, Form 100W, or

Newly formed or qualified corporations are not

minimum tax, taxes from Schedule D (100S),

Form 100S, Schedule J; or Form 109, Schedule K.

subject to the minimum franchise tax for the

S Corporation Capital Gains and Losses and Built-In

first taxable year. In the first taxable year, the

Gains, excess net passive income tax, QSub annual

Line 2 – Enter in column (a) through column (d) the

corporation computes its tax liability by multiplying

tax, and the minimum franchise tax. This definition

estimated tax installment due dates that correspond

its state net income by the appropriate tax rate and

differs from federal law.

to the 15th day of the 4th, 6th, 9th, and 12th months

is required to make estimated tax payments based

of the taxable year.

For taxable years beginning on or after January 1, 2005,

on the corporation’s expected tax liability after

the underpayment of estimated tax penalty shall not

Line 3 – Short period filers. Use the table below to

credits. The newly formed or qualified corporation

apply to the extent the underpayment of an installment

determine the required percentage.

becomes subject to the minimum franchise tax

was created or increased by any provision of law that is

beginning in its second taxable year.

Newly formed or qualified corporations are not

chaptered during and operative for the taxable year of

subject to the minimum franchise tax for the first

Estimated tax is a corporation’s expected tax

the underpayment.

taxable year.

liability after credits.

To request a waiver of underpayment of estimated

Line 4, column (a) – Enter 30% of the amount

Estimated tax is payable in four installments. The

tax penalty:

on line 1. Do not enter an amount less than the

installments are due and payable by the 15th day

•

Complete form FTB 5806 to compute the full

minimum franchise tax for the taxable year and any

of the 4th, 6th, 9th, and 12th month of the taxable

penalty, which would normally be due.

QSub annual tax, if applicable.

year.

•

Write the word ‘’Waiver,’’ in red, across the top of

Or, if the prior year’s tax was the minimum franchise

The amount of each installment is the applicable

form FTB 5806.

tax and the corporation is a regular corporation,

percentage of the total estimated tax due

•

Attach an explanation to form FTB 5806 that

enter the minimum franchise tax.

(estimated income multiplied by the appropriate

provides the specific law changes that caused the

tax rate). Corporations are required to pay the

Exception:

underpayment, the computation and the amount

following percentages of the estimated tax liability

of penalty to be waived.

The corporation can enter an amount less than

during the taxable year:

•

Attach form FTB 5806 to the back of the return.

the minimum franchise tax if it is a newly formed

•

30% for the first required installment

or qualified corporation, has been granted a tax

A second form FTB 5806, clearly marked “Second

•

40% for the second required installment

exemption by the Franchise Tax Board (FTB), or is

form FTB 5806”, may be used to show the

•

No estimated tax payment is required for the

subject to income tax only under Chapter 3 of the

computation of the penalty not related to the law

third installment

California Corporation Tax Law (i.e., corporations

change.

•

30% for the fourth required installment

that are not doing business within California but

California does not conform to the change in timing

derive income from sources within California.)

For more information, get Form 100-ES,

of certain corporate estimated tax installment

Corporation Estimated Tax. Also see California

Line 4, column (b) – Enter 70% of the amount on

payments under the Federal Tax Increase

Revenue and Taxation Code (R&TC) Section 19011,

line 1 minus the amount entered in column (a).

Prevention and Reconciliation Act of 2005.

Section 19021 through Section 19027, and Section

Line 4, column (c) – Enter 70% of the amount on

For taxable years beginning on or after

19142 through Section 19161 to determine the

line 1 minus the total of the amounts entered on

January 1, 2006, California conformed to federal

estimated tax requirement for California.

line 4, column (a) and column (b).

tax law in excluding the annual payments of

If a required installment is underpaid or late,

the LIFO recapture tax from the computation

Line 4, column (d) – Enter 100% of the amount

a penalty is imposed from the due date of the

of “estimated tax.” Therefore, LIFO recapture

on line 1 minus the total of the amounts entered on

payment to the earlier of:

amounts are not included in the computation of an

line 4, column (a), column (b), and column (c).

estimated tax underpayment penalty.

•

the date of the payment

Line 5a – The overpayment from a prior year return,

•

the original due date of the return.

Purpose

backup withholding, resident and nonresident

The term corporation, as used in form FTB 5806,

withholding, and real estate withholding are credited

Use form FTB 5806 to determine if the corporation:

Underpayment of Estimated Tax by Corporations,

as of the first estimate installment due date or the

and in these instructions, includes banks, financial

•

Paid the correct estimated tax.

date of payment, whichever is later.

corporations, regulated investment companies,

•

Is subject to the penalty for underpayment of

For more information, get federal Rev. Rul. 99-40,

real estate investment trusts, exempt organizations

estimated tax, and to figure the amount of the

Internal Revenue Code Section 6513 (b)(1)

with unrelated business taxable income in excess

penalty.

and (2), IRS Internal Revenue Manual 20.2.4.3

of $1,000, exempt homeowners’ associations with

(03-01-2002) and FTB Notice 2003-1.

Specific Line Instructions

non-exempt function taxable income in excess of

Line 5b – Enter the overpayment from the previous

$100, limited liability companies and partnerships

Part I Figure the Underpayment

installment. However, if an underpayment existed on

classified as corporations, and S corporations.

any prior installment, pay that underpayment first.

An S corporation that is a parent of a Qualified

Generally, an underpayment is the difference

Line 7 – If line 7 shows an underpayment for

Subchapter S Subsidiary (QSub) is required

between the amount due for each installment

any installment, complete Part IV, Exceptions

to pay an $800 annual tax for each QSub. The

of estimated tax and the amount actually paid

Worksheets, and Part II, Exceptions to the Penalty,

QSub annual tax is due and payable on the

or credited on or before the due date of that

for that installment.

S corporation’s first estimate installment due date.

installment.

The QSub annual tax is subject to the estimated tax

rules and penalties.

Accounting Period Less Than 12 Months (Short Period) Fiscal year corporations, adjust dates accordingly.

Number of

Percentage of Estimated Tax Due On or Before the 15th Day of

If taxable year (calendar year) begins:

Installments Due

April

June

September

December

January 1 through January 16

30%

70%

100%

January 17 through March 16

60%

100%

March 17 through June 15

70%

100%

June 16 through September 15

100%

September 16 through December 31

None

FTB 5806 Instructions 2014 Page 1

California Form 5806 - Underpayment Of Estimated Tax By Corporations - 2014 Page 4

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