Ask Leyla

Is there a penalty under Covered California healthcare mandate?

Beginning in 2020, all California residents are required to have healthcare coverage through Covered California, or get an exemption to have coverage. If not, they will have to face a penalty of the greater of

2.5% of Adjusted Gross Income
or $695 per adult
($347.5 for a dependent child)

This means a family of four (2 adults and 2 kids) may have to face a penalty of about $2000 minimum for not having healthcare coverage in California.

What are the types of exemptions that could be claimed under Covered California?

While filing a California State Tax Return, the following exemptions could be claimed, among others

  • Income below the state filing threshold
  • Coverage gap of 3 months or less
  • Unaffordable healthcare (exceeding 8.24%) of income
  • Certain non-citizens
  • Citizens living abroad or in another state

Certain other exemptions could be filed with Covered California, such as

  • General hardship exemption like
    • Homelessness
    • Natural disaster
    • Bankruptcy
    • Eviction
    • Affordability hardship exemption
    • Religious conscience exemption

Has the filing deadline for C corporations been extended?

The FTB has given an extension of up to 7 months for C corporations to file their California Tax returns for Form 100. Hence for 2019 calendar year returns the filing date would be April 15 2020 for C corporations. With extensions, they will get time up to October 15 2020 to file their Federal returns and up to November 16 2020 to file their California returns.

Note: There is no change in the filing deadline for S corporations, i.e. the filing date would be March 16 2020 and with extension, the returns can be filed on or before September 15 2020.

S Corporations
Filing date: March 16, 2020
With extension: September 15, 2020

C Corporations
Filing date: April 15, 2020
With extension Federal: October 15, 2020
With extension CA: November 16, 2020

Does a Single Member LLC (SMLLC) set up outside California by a resident of California, need to register in California?

Yes. If the member is a resident of California, he/she must file a Form 568, LLC Return of Income and pay the $800 annual tax. This applies if the member is a resident of California, and even if the real property is located outside California, and even if no business transactions are done in California.

If a Corporation outside California owns a California SMLLC, do they have to file a California return?

Yes. Apart from the Federal return and Form 568 for the LLC, a California return also needs to be filed by the Corporation. Since it owns the California LLC, the Corporation is considered to be doing business in California, and hence needs to file a California return as well.

Can a married couple own a SMLLC in California?

Yes. Since California is a community property state, a married couple can be a SMLLC.

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