CalSavers and PEET Registration Deadlines
CalSavers registration and Employee Retention Tax Credit (ERTC) applies to all businesses with employees and PEET only applies to pass through entities. If one or more of these items apply to your business, please read the following for more information on what to do.
CalSavers
Deadline for CalSavers required registration: June 30, 2022
Required registration for CalSavers for businesses with 5 - 20 employees
CalSavers will be fully implemented on 6/30/22. Employers with a larger employee count were required to register with CalSavers in 2020 or 2021. If you have 5 or more employees, you must register even if you already offer a retirement plan.
CalSavers is a retirement plan that business owners must offer employees if you do not offer a retirement plan through the business.
CalSavers does not cost the business anything. It offers a retirement plan option through CA to employees. It is the business owner's responsibility to give your employees the CalSavers information and it is the employee's responsibility to register with CalSavers if they choose.
Go to calsavers.com and register or indicate you are exempt because you already offer a retirement plan.
Optional Passthrough Entity Elective Tax Payment - PEET
Deadline for PEET optional participation: June 15, 2022
Option for passthrough business owners: S Corporations, Partnerships, LLCs
If you are interested in making PEET payments to reduce your federal income taxes, please contact us and one of our tax professionals can help you with estimating what to pay and answer any questions that you may have.
PEET is California’s solution to deduct your CA income taxes that are now subject to the State and Local Income Tax deduction limitation, called the SALT limitation. The limitation of the SALT deduction is a maximum of $10,000 per year. Any payments made for PEET are federally tax-deductible on your entity tax return in which the net income flows to your personal tax return, thereby reducing your personal income. The PEET will reduce your taxable K-1 income for federal tax purposes. Two payments are required, the first payment is due on 6/15. You have until 3/15 of the following year for the second payment and it would be a deductible expense in that year. If you make the second payment by 12/31 of the current year, then you will deduct the expense in the current year.
To take a deduction in 2022, you must make an election to pay the PEET by 6/15/22.
All the passthrough entity owners must make the election to participate or not to participate. If all the owners do not participate there are other arrangements and considerations that must be made.
You should make the PEET payment at least 1 day prior online at ftb.ca.gov to be sure it posts on time.
To make your first-year election, you must pay a minimum of $1,000 by 6/15/22. We suggest making a larger payment based on your estimated tax liability otherwise you may have a large 2nd payment due.
After your initial election all future year payments on 6/15 must be at least 50% of the prior year PEET, and that payment must be at least $1,000. To elect, you must pay these amounts regardless of your estimated tax liability.
If you make the election you can pay through myFTB or webpay through the FTB website at ftb.ca.gov. The payment is on behalf of the shareholder or partner but is paid through the entity and with your entity as the taxpayer. The payment is designated as a PEET payment and that it is being paid on behalf of the shareholder/partner by name. You can also mail a check with Form 3893 to pay the tax.
To receive a full deduction to reduce your 2022 income and taxes, you will need to pay the second estimated tax payment by 12/31/22. To deduct the federal expense in 2022, we will need to estimate your net profit prior to the end of the year to make the second payment before the end of the year so that you will get that payment as a 2022 federal tax deduction.
The total tax will be exactly 9.3% of the taxable income. Any adjustment will be made with the filing of the return. Any underpayment will be paid by the original due date of the return and payments made after the end of 2022, the federal tax deduction will be a 2023 deduction. You still get credit on your CA return as a payment towards taxes for 2022, just like your 1/15 estimated tax payment is a payment for the prior year.
The PEET shows as a tax credit on your K-1 form and is credited towards your CA taxes.
You may not have any personal CA estimated tax payments to make, or your estimated CA tax payments will be reduced by the PEET payments that you make.
You are still allowed to file an extension to file your taxes, but you must pay the estimated taxes due by the original filing deadline.
If you are interested in making PEET payments to reduce your federal income taxes, please contact us and one of our tax professionals can help you with estimating what to pay and answer any questions that you may have.
Employee Retention Tax Credit - ERTC
May be available for 2020 and 2021 if you qualify
The Employee Retention Tax Credit impacts businesses with payroll and who experienced a reduction in gross income in any one quarter in 2020 or 2021 as compared to the same quarter in 2019:
Contact TBC for an evaluation of eligibility for 2020 and 2021.
Details:
It is a Payroll Tax Credit taken on an amended Form 941, or 941X.
In 2020 you could not have had both the ERTC and PPP funds.
The 2020 credit is up to 50% of qualified wages on maximum wages of $10,000 per employee per quarter or a $5,000 per employee per quarter maximum.
In 2021 you cannot use the same payroll that was used for any PPP forgiveness, but you can have both ERTC & PPP.
In 2021 the credit is up to 70% of qualified wages on maximum wages of $10,000 per employee per quarter, or a maximum of $7,000 per employee per quarter maximum and is available 1st, 2nd& 3rd quarter of 2021.
To qualify your business must have experienced the following:
The full or partial suspension of operation of your business during any calendar quarter because of governmental orders limiting commerce, travel, or group meeting due to COVID-19.
A significant decline in gross receipts.
For 2020 a significant decline in gross receipts begins on the first day of the first calendar quarter of 2020 in which gross receipts are less than 50% of the gross receipts for the same calendar quarter in 2019.
For 2020 the significant decline in gross receipts ends on the first day or the first calendar quarter following the calendar quarter in which gross receipts were more than 80% of its gross receipts for the same calendar quarter in 2019.
Wages do not include any wages used for a tax credit for sick or family leave under the Families First Coronavirus Response Act.
For 2021 a significant decline in gross receipts is when gross receipts are less than 80% of the same quarter in 2019.
Any ERTC funds received reduce wages in the year for the amended 941. Any ERTC refunds received in 2020 will also result in an amended 2020 income tax return. In 2021 if an income tax return has already been filed, it will also require an amended 2021 return. TBC can prepare any amended tax returns and will provide a quote to do so.
Thank you for taking the time to read this important information
We appreciate your time, support, trust and business and look forward to helping you with these programs.