March 2009 - Update on California Tax Legislation

REQUIRED CALIFORNIA ELECTRONIC FUNDS TRANSFER

FOR INDIVIDUAL YEAR 2008 EXTENSION PAYMENTS

AND YEAR 2009 ESTIMATED TAX PAYMENTS

March 10, 2009

As we notified you in January, California is now requiring all payments made by an individual (for tax years beginning AFTER January 1, 2009—regardless of taxable income) to be remitted electronically to the Franchise Tax Board (FTB) AFTER the individual has either:

• Made a single estimated tax or extension payment greater than $20,000 for a taxable year beginning on or after January 1, 2009; or
• Filed an original return with a tax liability greater than $80,000 for a taxable year beginning on or after January 1, 2009.

The very first year 2009 payment (if it meets the above criteria) may be made by paper check. However, this will be the “triggering event” and will require ALL future payments to be made electronically.

In other words, once an individual meets either of the tests noted above, future payments must be made electronically. The penalty for failure to electronically remit payments due is 1% of the amount paid. There are two exceptions available (in future years) if you find yourself subject to electronic remittance requirements:

1. Instances in which the threshold requirements are not met in the preceding taxable year, and
2. By obtaining a waiver from the FTB if it is determined that amounts paid in excess of the threshold amounts were not representative of the taxpayer’s normal tax liability.

We are aware of, and ready to help with, these new requirements and will contact you in plenty of time to abide by these new rules. We are also available to assist you in any way as to the mechanics of remitting electronically.

As always, thank you for this opportunity to be of service. Please contact us should you have any questions regarding these new California payment requirements.