http://www.sacbee.com/business/story/1959523.html
Act now to avoid ugly tax surprise, California warns
By Claudia Buck
cbuck@sacbee.com
Published: Friday, Jun. 19, 2009 - 12:00 am | Page 8B
Don't get stuck with a bigger tax bill next year. It could happen, given changes in California's tax laws that could cost the average married couple with two kids an extra $670 next April 15.
To avoid that unpleasant surprise, the state Franchise Tax Board is reminding taxpayers to adjust the withholding rates on their paychecks now.
"Our concern is that if people don't adjust their withholding, they may be in for a big surprise next April when their 2009 tax bill is due," said Brenda Voet, spokeswoman for the state tax board. "People who may have been expecting a $500 refund, for instance, may instead owe money."
The tax changes, adopted by the Legislature in February as part of the state's efforts to close its budget gap, added 0.25 percent to California's personal income tax rates and reduced the tax credit by $210 for each dependent claimed on a tax form.
In other words, your tax rate is higher and you can't deduct as much for each child or dependent. (Last year, for instance, a married couple with two kids claimed $99 in personal exemption credits for each spouse and $309 for each child; starting this year, the exemption for each child/dependent drops to $99, same as for the adults.)
The new rates are effective back to January, but employers did not receive the state's new withholding tables until April.
"By the time employers could get their computers set up with the necessary changes to withholding schedules, the new withholding may not have happened until May, even June," said Voet.
That means your withholding may have been too low for the first four to six months of this year to accommodate the increased tax rate. In addition, taxpayers who claim exemption credits for dependents may need to change the number of allowances they claim.
Those who make quarterly tax payments may want to increase the amounts to avoid getting caught short April 15.
For more details, go to the FTB's Web site, www.ftb.ca.gov (search under "Individuals" and "Plan for next year"), or call (800) 852-5711. You can also calculate your withholding rates using Form DE 4 at the Employment Development Department's site, www.edd.ca.gov.
See an accompanying graphic at http://www.sacbee.com/business/story/1959523-a1959811-t46.html
