Tax Tip: Is the 10% California Income Tax Increase True or False?
False!
Those of us lucky enough to live in California have heard rumors or seen memos from employers about a 10% increase in state tax withholdings. Let me clear up any major fear before any riots break out: California TAXES are NOT going up by 10%.
What is happening: The State of California has instructed your employer to increase your state income tax WITHHOLDINGS by 10%. If you currently have $100 withheld for California state income taxes each paycheck, you will now have $110 withheld. As reported in the LA Times on October 31, 2009, "Technically, it's not a tax increase, even though it may feel like one when your next paycheck arrives."
Why it's happening: To fill in California State Budget gaps. Plain and simple, the State of California is funding an interest-free loan from taxpayers' paychecks. From now until you file your tax return for 2009, the State of California will use your money (and any interest it can earn on it) for their fiscal needs.
What it means for you: Only your withholding rate increased, not your annual tax liability. Your payroll check is less right now, but when you file your 2009 tax return, you will receive a refund for any excessive withholdings. That means that if you were on-track to receive a refund, your refund will be larger and if you were on-track to owe taxes, you will owe less.
What is the answer? We strongly recommend Tax Planning at this time of year to make sure you understand how these changes will affect your tax liability. A qualified tax professional can review your most recent paystubs and to check if your withholdings are too high or too low. This is a free service we offer to our current tax clients. Be sure you avoid unpleasant tax-time surprises by planning NOW!
These kinds of conversations are all part of our overall services to our clients at NCH Wealth Advisors. Please contact our office if you have any questions: 714-459-7020. We are happy to help provide the direction you need.
Please feel free to pass this along to anyone you think might benefit from this information. We appreciate all referrals.
Those of us lucky enough to live in California have heard rumors or seen memos from employers about a 10% increase in state tax withholdings. Let me clear up any major fear before any riots break out: California TAXES are NOT going up by 10%.
What is happening: The State of California has instructed your employer to increase your state income tax WITHHOLDINGS by 10%. If you currently have $100 withheld for California state income taxes each paycheck, you will now have $110 withheld. As reported in the LA Times on October 31, 2009, "Technically, it's not a tax increase, even though it may feel like one when your next paycheck arrives."
Why it's happening: To fill in California State Budget gaps. Plain and simple, the State of California is funding an interest-free loan from taxpayers' paychecks. From now until you file your tax return for 2009, the State of California will use your money (and any interest it can earn on it) for their fiscal needs.
What it means for you: Only your withholding rate increased, not your annual tax liability. Your payroll check is less right now, but when you file your 2009 tax return, you will receive a refund for any excessive withholdings. That means that if you were on-track to receive a refund, your refund will be larger and if you were on-track to owe taxes, you will owe less.
What is the answer? We strongly recommend Tax Planning at this time of year to make sure you understand how these changes will affect your tax liability. A qualified tax professional can review your most recent paystubs and to check if your withholdings are too high or too low. This is a free service we offer to our current tax clients. Be sure you avoid unpleasant tax-time surprises by planning NOW!
These kinds of conversations are all part of our overall services to our clients at NCH Wealth Advisors. Please contact our office if you have any questions: 714-459-7020. We are happy to help provide the direction you need.
Please feel free to pass this along to anyone you think might benefit from this information. We appreciate all referrals.
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