estimated taxes for CA

You can certainly file a W4 with a request "Please withhold an additional $X for state taxes each paycheck". I don't know if your employer is required to cooperate.

Seth

State and federal withholding are calculated separately. They should be listed separately on your pay stub. You use federal Form W-4 to adjust your federal withholding, and California Form DE 4 to adjust your California withholding.

You can download Form DE 4 from the following link:

Bob Sandler

Folks,

My CPA miscalculated my state taxes (CA) for 2010. The taxes were actually higher than what they should have been. He applied the the refund that he mistakenly calculated towards estimated taxes for

2011.

So now, I have missed paying my estimated taxes for the first 2 qtrs. I was wondering how I should remedy this. Should I just write the FTB a check today with the amount I should have paid? Do I accompany this payment with 540ES? If so for which quarter?

Also since I do have W2 income, I can increase my withholding. However, I am not if that increased withholding can be applied towards State taxes only (since my Fed. estimated taxes are OK).

Thanks.

If you pay the estimated taxes now you will minimize the penalty. See the instructions for FTB form 5805

4, worksheet II For each of the estimated payment dates such as 4/15 and 6/15 payments they have lines 10 and 11:

8 Line 8 is essentially the tax due for that quarter 10 Number of days from the date shown above to the date the amount on line 8 was paid or 04/15/11, whichever is earlier 11 Penalty = Line 8 X (line 10/365) X .04

So it looks like the penalty will be 4% of the amount due time the the number of years late for that period. If you pay today the 4/15 period will be 3.5 months late, and the 6/15 payment will be 1.5 months late.

You will need a program or professional to figure out the amount to pay.

You can pay online at

In an ideal world, the tax preparer who screwed up should pay the penalty and interest based on their mistake. If you became aware of the problem on 5/15 and are only letting him know about it now, he/she should be only be responsible for the penalty and interest till 5/15.

It is true that you can increase your CA withholding through form DE-4. This way you can take advantage of prior year safe harbor (pay

110% or some other percentage of last year's total tax through withholding) or current year safe harbor (pay 90% or some other percentage of this year's total tax through withholding).

However, two things to note:

(1) If your AGI is $1,000,000 or more, you cannot take advantage of prior year safe harbor. This is a recently passed special rule for California. Prior year safe harbor still works for federal.

(2) The DE-4 form lets you specify the number of exemptions and additional tax withheld. Your employer might have maximum limits for these numbers. For example, at my company they allow a maximum of 99 exemptions. In your case you probably want 0 exemptions and an additional dollar amount, and they might have a cap on the maximum amount.

The advantage of adjusting your withholding is that withholding is assumed to have been paid evenly throughout the year, rather than at a particular date like an estimated tax payment. You can avoid a penalty for underpayment of estimated taxes if you adjust your California withholding so that it will cover at least the lesser of

90% of your 2011 tax liability or 100% of your 2010 corrected tax liability (110% if your 2010 AGI was over $150,000).

Katie in San Diego

text -

Good adice Katie: Stop paying any installments Increase withholding through the rest of the year by the amount of your 4 installments. It will be applied evenly over the 4 quarters. This makes your error disappear without a penalty. You don't have to send anything.

ed

Evenly? I'm sure Katie never said evenly.

This is California, which has no "evenly" in its estimates :-(

OK.

,

True, but I think Ed was talking about withholding, not estimates. Withholding is treated as having been paid evenly over the year even if it is all taken out of one paycheck. And it doesn't have to be paid in accordance with the estimate schedule.

Katie in San Diego

Maybe I?m missing something, but if the refund was applied to estimated taxes for 2011, doesn't it takes the place of that amount of quarterly estimated tax payments?

For example, if $3,000 of refund was applied, and the first two estimated tax payments would have totaled $3,000, it seems to me you?re even as far as CA is concerned (until the next payment, anyhow). Essentially, you made the payments early.

Of course, your numbers are different, so you might owe something; no need to pay twice, though.

[Disclaimer: I?m not a tax pro, but this sort of thing has happened to me.]

zvkmpw: You misinterpreted his vague statement. His preparer applied the refund to his first 2 instllments but when corrected there was no refund, so nothing got applied to his 2011 return.

ed