Update (04/06/09): The new mandatory e-pay law requires certain taxpayers to remit their payments electronically. The first payment that would trigger the mandatory e-pay requirement does not have to be made electronically. For example, the 2009 taxable year first quarter estimated tax payment, due April 15th, 2009, can be made by check. After that payment is made, then all future payments should be made electronically. However, FTB realizes that some taxpayers and practitioners may need additional time to implement practices and procedures to comply with the requirement. Therefore, during the 2009 calendar year, taxpayers subject to the mandate who remit their payment by check instead of electronically will not be assessed an “e-pay penalty” (1% of the amount paid).
Mandatory e-pay Law
On September 30, 2008, Governor Schwarzenegger signed Assembly Bill 1389, adding Section 19011.5 to the California Revenue and Taxation Code. This new law requires individuals to remit all future payments electronically once they:
- Make an estimated tax or extension payment (by check or electronic method) over $20,000 for a taxable year beginning on or after January 1, 2009; OR
- File an original return with a tax liability over $80,000 for a taxable year beginning on or after January 1, 2009.
Fiduciaries, estates, and trusts are not required to make payments electronically, regardless of the amount owed.
Group nonresident/composite return filers may be required to make their payments electronically if they meet the mandatory e-pay requirements. We provide detailed instructions so group nonresident/composite filers can pay electronically using Web Pay.
Unlike corporations, there is no registration process for individuals or group nonresident/composite return filers subject to the mandatory e-pay law.
On December 1, 2008 we sent courtesy letters (see an example) to taxpayers who made an estimated tax payment in 2008 that was near or above the new mandatory e-pay threshold amount ($20,000). The letter informed these taxpayers of the law change, and that they may meet the requirement for mandatory e-pay in 2009.
Payments Covered by the Law
If you make a payment or file a return meeting the mandatory requirement, we will send you an FTB 4106 MEO, Mandatory e-pay Participation Notice advising you that all future payments must be remitted electronically. NOTE: If you do not receive notification from FTB, you are still required to remit payments electronically once you meet either of the above thresholds.
Some tax preparation software may also remind you to e-pay. If your tax preparation software generates paper Form 540-ES vouchers when you meet the mandatory e-pay threshold, you must still pay electronically.
Once you meet the mandatory e-pay threshold, you are required to make all subsequent payments electronically, regardless of the amount, type, or taxable year. For example: You make your first quarter estimated tax payment of $25,000 on 4/15/09 by paper check. Any payment made after that (for example, a bill payment from a previous year or your second quarter estimated tax payment) must be made electronically.
When you are required to make electronic payments but pay by other means, we can assess a penalty equal to 1 percent of the amount paid, unless your failure to pay electronically was for reasonable cause and not willful neglect.
Note: For the first year of implementation, FTB will not assess a penalty on a payment made by check that should have been made electronically. This will allow taxpayers and their representatives time to establish practices to meet the requirements.
Electronic Payment Methods
Make your tax payment using one of the following methods:
- Pay online with Web Pay.
- Request an Electronic Funds Withdrawal (EFW) on your e-file return.
- Pay by credit card.
A pay-by-phone option will be available in July 2009.
You may only send tax payments due to the Franchise Tax Board electronically using one of the methods above. If you owe tax to other agencies that require an electronic payment, you must make those payments directly to them.
NOTE: Making a payment using your bank’s online bill payment system is not an electronic payment. Your bank mails a paper check to FTB which does not meet the requirement to pay electronically.
e-file and e-pay
While you must make your tax payments electronically if you meet the e-pay criteria, you are not required to e-file your tax return. We encourage you to e-file if you prepare your own return, but we do not require it.
California law requires tax practitioners who prepare more than 100 California individual income tax returns annually and prepare one or more using tax preparation software to e-file all personal income tax returns. If you use a tax preparer that prepares more than 100 tax returns using software, we require the tax preparer to file your tax return electronically.
Waiving the Mandatory e-pay Requirement
You can request a waiver from mandatory e-pay if one or more of the following is true:
- You have not made an estimated tax or extension payment in excess of $20,000 during the current or previous income year; OR
- Your total tax liability reported for the previous income year did not exceed $80,000; OR
- The amount you paid is not representative of your total tax liability.
You must complete and submit form FTB 4107, Mandatory e-pay Election to Discontinue or Waiver Request. We will review your waiver request and notify you in writing when we approve or deny your request.
If we grant a waiver and you subsequently meet the mandatory e-pay requirements, you must resume making your payments using an electronic method.
Advantages of Electronic Payment Methods
Even if you are not required to make electronic payments, you can still take advantage of paying your personal income taxes (balance due, extension payment, estimated tax payment, or tax bill) online.
- e-file and schedule your tax payment for April 15.
- Ensure we receive your payments on time.
- Subscribe to receive an email reminder to remit your quarterly estimate payments.
- Schedule your estimate payments for the entire year at one time.
- Save the cost of mailing your return and payments to us.
Contact Us
If you have questions about e-pay or making your tax payment, call us at 800.852.5711.