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State Income Tax Filing Season Opens

Released: January 12, 2010

Sacramento – The Franchise Tax Board (FTB) today updated state taxpayers on several law changes for the upcoming filing season, and outlined a variety of services provided by the tax department.

Law Changes

A new tax law raises California’s personal income tax rates by .25 percent for 2009 and 2010.

Standard deduction The standard deduction for single or filing separately decreased from $3,692 to $3,637. For joint, surviving spouse, or head of household filers, it changed from $7,384 to $7,274.

Personal exemption credit The personal exemption amount for single, filing separately, and head of household filers is reduced from $99 to $98. For joint or surviving spouses, it decreased from $198 to $196. The dependent exemption credit decreased from $309 to $98 per dependent.

New estimated tax payment percentages – Effective January 1, 2010, the quarterly estimated payment schedule percentages are changed for both corporate and personal income taxes to 30 percent, 40 percent, zero, and 30 percent for the first through the fourth quarter installments, respectively.

New backup withholding requirements Effective January 1, 2010, generally payers that are required to withhold and send backup withholding to the IRS are also required to withhold and send seven percent to FTB except for:

  • Payment of interest and dividends.
  • Any release of loan funds made by a financial institution in the normal course of business.

Small business new jobs tax credit For 2009 new hires, provides a $3,000 tax credit for each additional qualified full-time employee hired by a qualified small business employer. Qualified employers need to act fast as the credit funding is limited to $400 million. The credit must be claimed on a timely-filed original (not amended) 2009 return received before the $400 million limit is reached. This credit is not subject to the 50 percent limitation for business credits in 2009.

Generally speaking, employers qualify for the credit if they employed 20 or fewer employees on the last day of the preceding taxable year (for calendar taxpayers this would be December 31, 2008). And, they have a net increase in qualified full-time employees in 2009 compared to the number of full-time employees employed in the preceding taxable year.

Military spouses residency relief Effective January 1, 2009, federal law provides that civilian spouses of military personnel who are in California only because of their spouses’ military orders, do not become California residents. They are also exempt from state income tax on their “service income” earnings such as wages, commissions, or other personal service income earned in California. To qualify, civilian spouses must have the same “domicile” as their military spouses. One’s “domicile” is generally the place they consider to be their true home and where they intend to return to make their permanent home.

540NR booklets Booklets for FTB Form 540NR, California Nonresident or Part-Year Resident Income Tax Return, will no longer be mailed directly to taxpayers. The 540NR Booklet and any other related tax forms and instructions are available online at ftb.ca.gov.

Net operating losses suspended For 2009, net operating losses from prior years cannot be deducted by taxpayers whose net business income is $500,000 or more. Instead, they will need to carry them forward. The time limit to carry forward net operating losses increases from 10 to 20 years. New with 2011 net operating losses, taxpayers can carry back those losses for two years. Taxpayers with net business income of less than $500,000 or with disaster loss carryovers are not affected by the net operating loss suspension rules.

Business tax credit limitations For 2009, tax credits are limited to 50 percent of the net tax for taxpayers with net business income of $500,000 or more. Be sure to review our tax forms instructions for more details.

Taxpayer Assistance

Self Services

FTB encourages taxpayers and practitioners to explore its many self-service applications. In addition to the interactive voice response options available through FTB’s call center phone lines, there are also several online web-based applications that provide useful information and services during the filing season. Some of these applications are discussed below.

Voluntary Income Tax Assistance – Starting February 1, more than 1,000 centers statewide open through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. These sites offer free help with tax form preparation. Some offer services in Spanish, Chinese, Vietnamese, and Korean. For information on locations throughout California, visit ftb.ca.gov and click on the free filing assistance link.

Phone service FTB provides 24-hour toll-free automated phone service at 800.338.0505. To speak with a customer service representative, FTB staffs its general toll-free phone line, 800.852.5711, from 8 a.m. to 5 p.m., weekdays excluding state holidays.

Field Offices FTB has six regional field offices that provide walk-in service from 8 a.m. to 4 p.m., weekdays in Los Angeles, Oakland, Sacramento, San Diego, San Francisco, and Santa Ana. For directions, visit ftb.ca.gov and click on the Contact Us tab.

Customer Service Availability Due to limited resources, reaching a customer service representative in the call center or in an FTB field office may be more difficult this upcoming filing season. If you need to speak to a representative, the best times to call are Tuesday through Friday and either before or after lunch. FTB suggests you contact them early in the tax filing season to avoid the crowd of last-minute tax filers.

ReadyReturn Some taxpayers qualify for FTB’s online ReadyReturn program that completes the tax return for the taxpayer. It is based on information already collected from employers such as W-2s. More than 2 million taxpayers will qualify who last year:

  • Earned wages from a single employer.
  • Filed either as single or head of household.
  • Took the standard deduction.
  • Claimed no more than five dependents.

Taxpayers who are renters and who can be claimed as a dependent are also eligible.

CalFile More than 6.5 million taxpayers are qualified to use CalFile, FTB’s no-cost, direct-to- FTB, online filing program. Taxpayers type in their tax return information on FTB’s website and transmit their return directly to FTB. CalFile accepts taxpayers with income of up to $321,483, itemized deductions, and some tax credits.

My FTB AccountThis online service allows taxpayers to get information such as estimated tax payments, any balances due, state W-2 information, or FTB issued 1099 forms. Use this information to avoid claiming the wrong amount of estimated tax payments, which is the top error made on returns.

Answers to Frequently Asked Questions – Find answers to questions about various tax topics such as return filing requirements, tax credits and the requirements to be able to use the Head of Household filing status online at ftb.ca.gov.

Pay Taxes Online FTB's Web Pay allows taxpayers to authorize a payment from their bank account to pay their return balance due or extension payment. Payment must be made on or before April 15 to avoid penalties and interest. Taxpayers can also make estimated tax or any bill payments online, and sign up for email reminders of upcoming estimate payment due dates. Taxpayers can schedule estimated tax payments up to one year in advance. For a fee, taxpayers can pay their taxes with their American Express, Discover/NOVUS, MasterCard, and Visa cards. FTB also accepts payments made via Western Union.

Can’t Pay Your Taxes Timely? Monthly installment payment plans are available to people who cannot pay what they owe when it is due. Generally taxpayers who owe less than $25,000 and can repay the tax within five years qualify for a payment plan. Sign up online at ftb.ca.gov and select payment options and installment agreement request.

Tax Tips

Federal Earned Income Tax Credit – This is a federal incentive for low-income individuals and families. Taxpayers earning less than $48,279 can qualify for a “refundable” credit that can total up to $5,657. “Refundable” means that you do not have to have a tax liability to get a refund check from the government. If you think you might qualify, visit the IRS website at irs.gov and search for EITC Assistant. California has no comparable state credit.

Record keeping – Keep a copy of your state tax returns and all supporting records. FTB may request information from you regarding your tax return at any time within the California statute of limitations period, which is generally four years from the return's due date.

For more information on other taxes and fees in California, visit www.taxes.ca.gov.