Mandatory e-Payment requirements have now been in place for 10 years August 2020 Tax News
For tax years beginning on or after January 1, 2009, an individual is required to make all future payments electronically if they have:
- A total tax liability greater than $80,000
- Estimated tax or extension payments that exceeds $20,000
This is regardless of type, amount, or tax year.
Once taxpayers meet the mandatory e-Pay requirement, they must make all payments electronically or they will be assessed a penalty of 1% of the amount paid. There is a reasonable cause exception to the penalty and under certain circumstances, a taxpayer may be granted a waiver of the mandatory e-Pay requirement.
Exception to the penaltyRevenue and Taxation Code section 19011.5(c) provides that the mandatory e-Pay penalty may only be abated if the taxpayer shows that his or her failure to pay electronically was due to reasonable cause and not the result of willful neglect. Being unaware of the mandatory e-Pay requirement or arguing that it is the taxpayer's first failure does not establish reasonable cause because taxpayers are responsible for knowing and complying with the law. This is true even if a taxpayer's tax software or preparer does not advise the taxpayer to pay electronically.
General mandatory e-Pay waiver
Taxpayers can request a general waiver from mandatory e-Pay if one or more of the following is true:
- They have not made an estimated tax or extension payment in excess of $20,000 for the previous income year.
- The tax liability they reported for the previous income year did not exceed $80,000.
- The amount they paid is not representative of their total tax liability.
- They had a one-time event, such as lottery winnings or inheritance.
If a waiver is granted and the taxpayer subsequently meets the mandatory e-pay requirements, they must resume making electronic payments.
Combined 1st and 2nd quarter 2020 estimated tax payments due to COVID-19
If your combined estimated tax or extension payment is more than $20,000, you will be required to make all future payments to us electronically. You may request a waiver of this mandatory e-Pay requirement by completing FTB Form 4107. Refer to the General Mandatory e-Pay Waiver section above for more information.