Assessing the Mandatory E-pay Penalty
Starting January 1, 2011, we began enforcing the mandatory e-pay penalty. The penalty is equal to one percent of the amount paid unless the failure to pay electronically was for reasonable cause and not willful neglect (California Taxation and Revenue Code Section 19011.5).
The penalty applies to personal income taxpayers whose tax liability is greater than $80,000, or who make an estimated tax or extension payment that exceeds $20,000 for taxable years beginning on or after January 1, 2009. Once either of these conditions is met, all future payments regardless of type, amount, or tax year must be remitted electronically.
Example: On April 15, 2011, Jane Doe sends us a check for $30,000 as an extension payment for her 2010 tax year. After we process Jane’s payment, we will send her FTB 4106 MEO, Mandatory e-pay Program Participation Notice informing her that she now must remit all future payments to us electronically. For instance, if Jane must make a June 15, 2011 estimated tax payment for her 2011 tax year, she must make that payment electronically or she may be subject to the mandatory e-pay penalty.
Taxpayers can request a waiver from mandatory e-pay if they meet certain requirements by filing FTB 4107, Mandatory e-pay Election to Discontinue or Waiver Request. We will notify the taxpayer in writing if the request is approved or denied. If the individual is granted a waiver and later meets e-pay requirements, the individual must resume making payments electronically. For more information on the mandatory e-pay requirement, visit our website and search mandatory e-pay.
Electronic payment methods include Electronic Funds Withdrawal (EFW), Web Pay, or credit card. For more information on Web Pay and credit card payment go to ftb.ca.gov and select payment options. For Electronic Funds Withdrawal (EFW), include your client’s banking information as instructed on his or her e-file return.
For payments made by check on or before December 31, 2010, we recognized that there could have been a delay in receiving payments postmarked on or before December 31, 2010 due to high year-end postal volumes. As a result, we are reviewing the accounts that were assessed the penalty to determine if the mail date of the payment occurred on or before December 31. If this was the case we will withdraw the penalty and send the taxpayer a letter.
If your clients received the mandatory e-pay penalty and you believe that:
- They sent us a check on or before December 31, 2010, and their penalty hasn’t been canceled, or
- They have reasonable cause to have the penalty withdrawn,
Contact us at 916.845.7057 or your client can call 800.852.5711. Please be prepared to provide the appropriate information to our call center agents so we can to determine if we should withdraw the penalty.
Important: Even if your client’s mandatory e-pay penalty is withdrawn, they are still required to make future payments electronically unless they are granted a waiver.