The California Franchise Tax Board (FTB) has issued a public service bulletin announcing that, due to a processing error, some notices were sent erroneously assessing the underpayment of estimated tax penalty for tax year 2009 to high-income personal income taxpayers who met the exception to the penalty.
For tax year 2009, taxpayers with adjusted gross income of $1 million or more were required to pay 90% of their current year tax in withholding and/or estimated tax payments. Taxpayers are subject to the underpayment of estimated tax penalty if this requirement was not met. An exception applies if the amount of the tax liability (not including any tax on lump-sum distributions) less credits (including withholding), but not including estimated tax payments for either 2008 or 2009, was less than $500 (or less than $250 for married/registered domestic partner taxpayers filing separately).
The processing error has been corrected for tax returns processed after June 29, 2010. The FTB has identified the affected 2009 tax returns and corrected accounts. FTB 719PC, Underpayment of Estimated Tax Penalty, will be sent to taxpayers regarding the adjustment beginning July 26, 2010. If applicable, refunds will be mailed within two weeks of account correction.