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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 2880
Experience:  Over 20 Years experience
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Were a CA S-Corp living/doing business in TX and filing TX

Resolved Question:

We're a CA S-Corp living/doing business in TX and filing TX franchise returns in addition to Federal. Just discovered CA suspended us in 2011 for not filing. Last CA return I have is from 2005 (done by a pro) which is the year we moved to TX. I believed that as an S corp we're not subject to neither the income nor franchise taxes in CA. We work from home and have had no CA clients and by paying TX unemployment and filing here we are being compliant. I can't get through to someone at the CA tax board (endless wait on hold). Just want to know do we really have to file these CA tax returns? Isn't there a form for S-Corps who aren't doing business there and have no CA income? Thanks in advance for any help.
Submitted: 10 months ago.
Category: Tax
Expert:  R. Klein, EA replied 10 months ago.

R. Klein, EA :

Thank you for contacting me about your Tax issue. I will work hard to help you understand the issue clearly.

R. Klein, EA :

Welcome to Texas!

R. Klein, EA :

Depending on which city you are in, the CA FTB does have branches in Texas. There is one in downtown Houston, for example. (lucky us)

Customer:

I am in a Houston suburb near Sugar Land

R. Klein, EA :

You are nearby. I am in Katy

R. Klein, EA :

As for your responsibilitiies, as a CA-chartered entity, your entity was created and is based in CA, whether or not you do business there any longer.

R. Klein, EA :

By virtue of you moving out of CA, it does NOT change anything or your responsibilities to the state.

R. Klein, EA :

In other words, you are liable to the state of CA for tax returns until your corporation dissolves.

R. Klein, EA :

Unfortunately, CA is NOT like Texas. CA wants an $800 minimum tax for EACH year your corporation is in existence. It cannot be dissolved by ignoring it or closing the company or moving out of state. The ONLY way to stop CA from wanting their money and tax returns is to formally dissolve the entity.

R. Klein, EA :

The state CAN and WILL come after you for past-due tax returns and taxes.

R. Klein, EA :

(UGH!)

Customer:

I did read somewhere about the $800 minimum tax.

R. Klein, EA :

When a CA-chartered entity starts doing business in Texas, in order to gain protection in the TX courts, you are supposed to reigster with the TX Secretary of State (SOS) as a FOREIGN entity.

R. Klein, EA :

Then you must file a Texas Franchise tax return each year you are in existence.

Customer:

I have filed a tax return with TX every year

Customer:

and quarterly returns for unemployment.

R. Klein, EA :

Fortunately, not only do we not have an $800 minimum here, but there is no tax unless your gross receipts ar more than a million bucks.

Customer:

I wish!

R. Klein, EA :

So it sounds like you are OK with the local sheriff.

R. Klein, EA :

But CA wants its money!

Customer:

But Im still in trouble in CA?

R. Klein, EA :

And legally, they can get it!

R. Klein, EA :

Yup.

R. Klein, EA :

But you can file those past due CA returns and pay the money, and THEN you can file to dissolve the corporation in CA.

R. Klein, EA :

If this is the same corp as in Texas, you may want to refile your Texas charter as a Texas entity.

Customer:

We discussed doing that a little while ago, guess that's what we're going to do.

Customer:

And it would be a regular CA return....the one for S-Corps that I file?

R. Klein, EA :

Yeah, CA is poor. They need the money.

R. Klein, EA :

Yes,

Customer:

haha! yes they do.

R. Klein, EA :

There is no "no tax due" CA form like in Texas.

Customer:

I thought it was odd we've been in "good standing" until 2011.

R. Klein, EA :

They are slow, but they are the elephant. They don't forget/

Customer:

I see that now.

R. Klein, EA :

CA has definitely become more aggressive in the last few years.

Customer:

I assume because they are more "broke"

Customer:

I have relied on Turbo TAx and quickbooks for everything.

R. Klein, EA :

Like I said earlier, CA FTB has an office downtown Houston. If you need assistance, they can help to some degree.

R. Klein, EA :

I can help with all those things, but you'd have to look me up...I cannot give out personal info online.

R. Klein, EA :

I hope I have helped you today. I do have to go down to the Rodeo for a meeting, so I cannot stay online long today. If you need further assistance on this topic, I will return in a few hours....

Customer:

I see. Okay I will get your info AND contact the Houston office for help.

Customer:

very helpful, yes.

Customer:

Have fun!

R. Klein, EA :

Have a great day out in the Land of Sugar!

R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 2880
Experience: Over 20 Years experience
R. Klein, EA and 4 other Tax Specialists are ready to help you

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