For our California clients
Many of our clients have asked us if and how the passage of CA Proposition 30 in last November’s election will affect their 2012 tax returns. The following information is taken from the State of California’s Franchise Tax Board website:
Proposition 30 raises the California personal marginal income tax rate on individuals making more than $250,000 per year for the next seven years.
The income tax changes apply retroactively to all income earned or received since January 1, 2012. For tax year 2012, the maximum individual tax rate is 12.3 percent. If your income exceeds $1 million, there is an additional 1 percent mental health tax bringing the top rate to 13.3 percent. The maximum Alternative Minimum Tax rate (AMT) for individuals remains at 7 percent.
The good news is that taxpayers will not be required to “catch up” for the tax increase in the first three quarters, by increasing the fourth quarter estimate. Taxpayers will also not receive an underpayment penalty to the extent that the underpayment was created or increased by the passage of Proposition 30. However, for a taxpayer who does not pay the full balance of the 2012 liability by April 15, 2013, there will be a late payment penalty of 5% plus 0.5% for each month the payment is late.
Therefore, taxpayers may pay the balance due with the return without fear of receiving a notice from us for the penalty. Please be aware, however, that only the portion of the underpayment due to the tax increase will have the penalty waived.
If you have more specific questions, please give us a call or refer to the FTB website page at the following link: