California Tax Updates and Conformity Issues

• California estimated tax payments for 2010 are now front loaded.  Estimated tax payments for individuals now require 30% for the first installment due April 15th, 40% for the second estimate installment due June 15th, no estimate installment is due on September 15th and 30% for the fourth estimate installment due January 15th.
• California withholding increased on November 1, 2009.  The state is withholding an addition 10% from paychecks effective November 1, 2009.  This is not a tax increase as tax rates were increased earlier in 2009.  The additional withholding will either decrease the amount owed with the 2009 tax return or increase the refund on the 2009 return.
• California has implemented new requirements for LLC's for 2009.  LLC's must now pay the estimate by the 15th of the sixth month of the year, meaning that a calendar year LLC must estimate and pay the full fee for 2009 by June 15, 2009.
• Tax credit for Home Purchase is available for qualified buyers who on or after May 1, 2010 purchase a qualified principal residence.  The buyer must reside in the home for a minimum of two years immediately following the purchase date.  California allocated $100 Million to the tax credit and buyers must apply for the credit allocation from the Franchise Tax Board.  The credit is $10,000 spread over 3 years.  California has announced the maximum amount has been allocated an are no longer accepting applications for the credit.
• California recently conformed mortgage forgiveness relief rules on foreclosures.  There are limitations on the amount of allowed to be forgiven without resulting in taxable income that are less than the amounts allowed under current federal law.  The California limits debt relief on a qualified residence to $800,000 for married, filing jointly and $400,000 for single taxpayers.
• California SDI rates for 2010 are 1.1% but the maximum wages qualifying increases to $93,316 making the maximum SDI withholding $1,026.48.
• The California teacher retention credit is longer allowed.
• California requires withholding of 3 1/3% on sales of real estate other than the sale of a personal residence.
• California now offers web payment of taxes and in certain cases for high income taxpayers now requires electronic tax payments.
• California has not conformed to the federal rules allowing the deduction of Health Savings Accounts, therefore, HSA's are not currently deductible in California.  Therefore, on California returns, the Federal HSA deductions are added back to income.  Income earned on HSA's in California is taxable income.
• California has conformed to the new limits on IRA's and Roth IRA's
• The IRS has ruled that the California Paid Family Leave insurance program is taxable income to the recipients on their federal income tax returns.  These benefits are not taxable for California.
• Net operating losses are suspended for 2008 and 2009.