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Tax Alert: CA FTB Passthrough Elective Tax Refund Issued in Error - Must be Returned

Updated: Jul 29

CA Franchise Tax Board systemwide errors have led to June 2022 passthrough entity elective tax prepayments to be incorrectly applied to the 2021 tax year - resulting in funds being issued in error to taxpayers. This is a bid deal, because taxpayers planning on making the passthrough entity elective tax election for 2022, must remit a payment of the lesser of $1,000 or 50% of the 2021 passthrough entity elective tax due by June 15, 2022. If the payment is not posted, taxpayers will not be able to make the election for 2022. The erroneous refunds will show the payment not posted - unless the taxpayer returns the funds. Although the FTB has not indicated a specific deadline to return these refunds, we recommend that taxpayers do this as soon as possible to avoid problems with 2022 passthrough entity tax elections. The method for returning a payment depends on how the payment was refunded to the taxpayer, and what the taxpayer did with it.

What to Do Now

If you have not yet cashed your check, return the check to the FTB, along with a copy Form FTB 3893 Voucher, noting “PTE Elective Tax Erroneous Refund”. Franchise Tax Board P.O. Box 2288 Rancho Cordova, CA 95741-2288 If you have cashed your check or received a refund by direct deposit, resubmit your 2022 passthrough entity elective tax prepayment on Web Pay, or sending another check with a Form FTB 3893 Voucher, noting “PTE Elective Tax Erroneous Refund”.

If you qualify to paying by check, write the entity ID and tax year 2022 on the memo line.

Taxpayers subject to the mandatory e-pay requirements must use Web Pay to make this payment.

Cobalt PacWest | CPAs & Advisors

4225 Executive Square # 600

La Jolla, CA 92037


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