ProConnect HelpIntuit HelpIntuit

California PTE tax in a 100S in ProConnect

SOLVEDby Intuit4Updated July 14, 2022

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.

Follow these steps to make the election:

For all qualifying shareholders -

  1. From State & Local, under Miscellaneous, go to 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.

To elect in or out for certain shareholders -

  1. From State & Local, under Schedule K-1, go to 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.

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. 

  • The program uses the Shareholder Type selected on the Shareholder Information screen to exclude shareholders who don’t qualify (SMLLCs and exempt organizations).
  • You can override a shareholder’s pro-rata share of income on the CA Schedule K-1 screen.
  • The amount of credit calculated for each shareholder will flow to their CA K-1, line 13d.

To make or record PTE payments:

Amounts you already paid or indicate you’re going to pay outside of the return (with the 3893 (PMT) voucher or via WebPay) will be included on line 35 so they don’t affect the bottom line of the tax return. 

However, if you have the return set for direct debit of balance due, any unpaid PTE tax will flow to the total on line 40, to allow you to pay it with the tax return.

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 enter PTE tax already paid:

  1. From State & Local, under Taxes, go to CA Taxes.
  2. Scroll down to the Tax Computation section and enter the amount of Pre-payment already made for PTE.

The amount already paid will be included on form 100S, line 35. 

If a partial payment was made, and your client is going to pay the amount due for this return with direct debit:

  • only the partial payment will flow to line 35;
  • the remainder of PTE tax owed will be included in line 40 and paid when the return is e-filed; and
  • no 3893 (PMT) will print.

If a partial payment was made, and the return is not set for direct debit:

  • 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.

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

If you’re requesting a California extension on the Automatic Extension (7004) screen with direct debit, the program will transmit electronic payment information for the amount of tax due. If the client has shareholders elected in for the PTE tax, and no prepayment has been entered, the tax due will include the PTE amount. 

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’re paper filing an extension:

  • the regular tax amount will be shown on the 3539 payment voucher,
  • the separate 3893 (PMT) voucher will report the amount of PTE tax due, and
  • your client should mail both vouchers with payments by 3/15, or use WebPay.

After you file an extension:

  1. Under Payments, Penalties, & Extensions, go to Estimated Tax.
  2. Enter the Amount paid under Paid with Extension, in the State column. Include any amount you want to flow to 100S, line 34 here.

If you don’t have the tax return set up to direct debit the balance due, the program will assume all PTE tax is going to be paid with the 3893 (PMT), and print the full amount on line 35. An override is available on CA Taxes, if needed.

How do I make the election for 2022?

In order to make the election in 2022, calendar year clients must pay the greater of $1,000 or one-half of the 2021 PTE tax by June 15, 2022. 

When you make the election in a 2021 return, Lacerte assumes you’ll want to do the same in 2022, 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. 

On the CA Taxes screen, you can indicate that the 2021 Payment amount will be paid with Web Pay, or that the 2022 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.

Was this helpful?

You must sign in to vote, reply, or post
ProConnect Tax

Sign in for the best experience

Ask questions, get answers, and join our large community of Intuit Accountants users.