Chief Counsel Corner January 2020 Tax News

Mandatory e-Pay Requirements for Individual Taxpayers

Jozel Brunett, Taxpayers' Rights Advocate.

Jozel Brunett
Chief Counsel

The individual electronic payment (e-Pay) requirement has now been a part of California law for over 10 years. Since its enactment, we have worked very hard to conduct education and outreach efforts to make sure affected individual taxpayers are aware of the requirement.  However, because we still see individual taxpayers who fail to make electronic payments when required under the law, we thought it would be helpful to review the e-Pay requirements to help individual taxpayers avoid potential penalties.

Below are answers to frequently asked questions about the individual taxpayer e-Pay requirements and penalty.

Am I required to pay electronically?

Individual taxpayers are required to pay electronically if the taxpayer:

  1. Makes an estimated tax or extension payment exceeding $20,000
  2. Files a tax return with a tax liability over $80,000[1]

Individual taxpayers who meet one or both of the specified threshold requirements must make all payments to us electronically.

May I get a discontinuance or waiver of the e-Pay requirement?

To request a discontinuance or waiver of the e-Pay requirement, you must submit Form FTB 4107, Mandatory e-Pay Election to Discontinue or Waiver Request. We will grant your request if you have not met the thresholds in the previous taxable year or if you have established the amounts paid in excess of the threshold amounts were not representative of your tax liability.[2] You must continue to make all payments electronically until you receive a letter from us granting the discontinuance or waiver.

What is the penalty amount and is there a first time abatement?

Failing to meet the e-Pay requirement will result in a penalty of one percent of the amount of payment not paid electronically, and there is no maximum penalty limitation.[3] For example, if a taxpayer with an e-Pay requirement makes three separate estimated tax payments by check in the amount of $100,000 each, we will impose three e-Pay penalties of $1,000 each, totaling $3,000.
The law allows us to abate the e-Pay penalty only for reasonable cause and lack of willful neglect.[4] Being unaware of the e-Pay requirement or arguing it is the taxpayer’s first failure does not establish reasonable cause because taxpayers are responsible for knowing and complying with the law.[5] This is true even if a taxpayer’s tax software or preparer does not advise the taxpayer to pay electronically.[6]

How do I pay electronically?

There are several ways for individuals to pay electronically:

  • Pay on our website using FTB Web Pay
  • Request an electronic funds withdrawal with an e-filed tax return
  • Pay by credit card
  • Pay by phone
  • Create and pay through your MyFTB account and receive other online services (view payments cancel payments, schedule future payments, view your tax returns and more)

Go to ftb.ca.gov and search for mandatory e-Pay for information on how to use each of these options.

[1] R&TC, Section 19011.5(a).

[2] R&TC, Section 19011.5(b), (d).

[3] R&TC, Section 19011.5(c).

[4] R&TC, Section 19011.5(c).

[5] See Appeal of John A. and Debora A. Porreca, 2018-OTA-095P, Aug. 23, 2018.

[6] Ibid.