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Underpayment of Estimated Tax Penalty

Purpose of bulletin

To inform staff of notices that were erroneously issued to 2009 high income taxpayers that were assessed the underpayment of estimated tax penalty.

Background

For tax year 2009, personal income taxpayers with adjusted gross income of $1,000,000 or more are required to pay 90 percent of current year tax in withholding and/or estimated tax payments. The taxpayer may be subject to the underpayment of estimated tax penalty if this requirement is not met.

Exception to the penalty:

The amount of the tax liability (not including 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 married/RDP filing separate).

Due to a processing error, penalties were erroneously assessed and notices were sent to taxpayers who met the exception.

Resolution

The processing error has been corrected for tax returns processed after June 29, 2010.

We have identified the affected 2009 tax returns and corrected accounts on July 20, 2010. 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.

If we receive contact from taxpayers or tax practitioners, staff should follow their unit procedures.

Forms

The 2009 Form 5805, Underpayment of Estimated Tax by Individuals and Fiduciaries, has information on the underpayment of estimated tax penalty and exceptions.

Tax Practitioner Inquiries

For questions on the underpayment of estimated tax penalty, tax practitioners may contact us at:

Tax Practitioner Hotline 916.845.7057
Fax 916.845.6377

Taxpayer Inquiries

For questions on the underpayment of estimated tax penalty, taxpayers can contact us at 800.852.5711, Monday through
Friday, 7 a.m. to 5 p.m.

Taxpayers can check their account balance at ftb.ca.gov, and search MyFTB.

Written correspondence may be sent to:

Franchise Tax Board
PO Box 942840
Sacramento, CA 94240-0040