California PTE tax for a 100S in Lacerte

California A.B. 150, also known as the Pass-Through Entity Elective tax or PTET, allows state tax on passthrough income to be paid at the entity level at a flat rate of 9.3%. The law is effective for tax years beginning on or after January 1, 2021, and before January 1, 2026.

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Follow these steps to make the election:

For all qualifying shareholders -

1. Go to Screen 42.011, California Miscellaneous.
2. Scroll down to the California Miscellaneous section.
3. Check the box labeled Every qualified shareholder wants to elect to file PTE tax calculation (3804).

Note: If this is a large S-Corporation and most qualifying shareholders want to elect in, you can check this box then elect out at the shareholder level for those who don’t want to participate.

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To elect in or out for certain shareholders:

1. Go to Screen 46.011, California Schedule K-1.
2. Scroll down to the California Miscellaneous section.
3. Enter a 1 or 2 in Qualified taxpayer is electing to have tax paid by S Corporation.

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When you make the election:

The program will generate form 3804, Pass-Through Entity Elective Tax Calculation. Part II of the form lists each qualifying shareholder who elected in, along with their pro-rata share of income, and calculated PTE tax. 

• If you select Qualifed Exempt Organization as your shareholder type on Screen 5, you will be excluded from the form.
• You can override a shareholder’s pro-rata share of income on Screen 46.011.
• The amount of credit calculated for each shareholder will flow to their CA K-1, line 13d.

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To make or record PTE payments

Filing Instructions or client letter paragraphs will generate for any separately filed payment vouchers. Always double check the e-file Instructions and e-file Payment Records Lacerte generates to be sure how much you’re paying with a direct debit return.

To make a PTE payment:

By default, Lacerte assumes your client is going to pay PTE tax by mail, and will print an FTB 3893 voucher for any amount you haven't already recorded as paid in the program.

If your client is going to use Web Pay to make their payments:

1. Go to Screen 48.011, California Taxes.
2. Find the Tax Computation section.
3. Check the Payment amount will be paid with Web Pay for business (code 98) box.

Checking this box will produce Web Pay verbiage for the pass-through entity elective tax on the client letter or filing instructions.

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To enter PTE tax already paid:

1. Go to Screen 48.011, California Taxes.
2. Enter the amount of Pre-payment actually made for PTE (-1 equals none).

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What if my client made a partial payment?

• the full amount of PTE tax will print on line 35
• the 3893 (PMT) will print, showing only the amount of PTE tax not previously paid.

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State tax accrual

If you’re using the Accrue State Option 1 (in screen 3.1), then the program will take all of the taxes owed on the state return, line 30, and add this as a deduction on the federal return. The same amount will be added back to the state return on page 1, line 2.

If you want to allocate the deduction for PTE taxes paid to only the participating shareholders:

1. Go to Screen 33, Schedule K-1 Overrides.
2. Override the Ordinary business income (loss) for each shareholder to report the adjusted federal and state amounts.

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How do extensions affect PTE tax?

If you’re requesting a California extension in Screen 12, Automatic Extension with direct debit, the program will no longer include the PTE amount in the total tax due. These changes went into effect on the 43.0328 update.

Before you e-file an extension, check:

• The e-file Payment Record (ext.) and
• The e-file Instructions (Ext.)

to verify the amount of payment you’re authorizing. 

If you need to make a PTE payment with your extension:

• the separate 3893 (PMT) voucher will report the amount of PTE tax due, and
• your client should mail the voucher with payment or use Web Pay by 3/15, or the due date for their return.

After you file an extension:

1. Go to Screen 48.011, California Taxes.
2. Enter the amount of Pre-payment actually made for PTE (-1 equals none).

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How do I make the election for 2024?

When you make the election in a 2023 return, Lacerte assumes you’ll want to do the same next year, and produces the 3893 (ES) voucher. This payment can’t be made electronically through Lacerte.

If you use Filing Instructions, a separate filing instruction will generate for the 3893 that tells your client when and where to file, as well as the option to make payments or schedule them in advance through Web Pay. Otherwise, a paragraph in the client letter will tell your client when and where to send the payment. 

To suppress or override the 3893:

On Screen 48.011, California Taxes, you can indicate that the Payment amount will be paid with Web Pay, or that the 2024 Estimate amount will be paid with Web Pay.

These checkboxes suppress the 3893 (PMT) and 3893 (ES) from printing, and remove the Filing Instructions or client letter paragraph specific to the form. 

The voucher amounts can also be overridden here.

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