Urgent LLC Alert – Erroneous Tax Refunds

By: Tamara B. Pow, Esq.

Very recently, the Franchise Tax Board (FTB) has had to notify certain California limited liability companies (LLCs) that their 2017 LLC annual tax/estimated fee payment were misapplied to the 2016 tax year, which resulted in the FTB mistakenly sending out refund checks to some LLCs. This issue arose due to a glitch in the software of some tax software companies.

While it is not known how the software glitch occurred, what has been determined is that the software incorrectly applied the Account Period Begin on the 2017 LLC annual tax/fee payment as 01.01.16 instead of the correct begin date, 01.01.17. The Account Period End date was correctly applied as 12.31.17.

In essence, the erroneous refund checks issued by the FTB due to the glitch are based on last year’s estimated income return rather than this year. As a result, LLC payments for this year must be resubmitted by July 15 th , 2017 in order to avoid accruing additional interest and facing penalties. If a refund check has been received, cash the check and then resubmit the payment by the same July 15 deadline . Affected accounts will be reviewed by the FTB after July 15 th and applicable adjustments will be made at that time.

Tamara B. Pow is a founding partner of Strategy Law, LLP in downtown San Jose, California where she practices business and real estate law including representing real estate LLCs and other business entities. Her personal experience managing and investing in real estate limited liability companies as well as her MBA and real estate brokers license help her in advising owners of limited liability companies and other business entities.

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.