California State Income Tax is organized through the State Franchise Tax Board, with headquarters in Sacramento. In California, individuals may file as single, married/registered domestic partner filing joint return, married/registered domestic partner filing separate return, head of household, or qualifying widow (er). Any resident of California with income over a certain amount is required to file income taxes.
- Individuals with gross income higher than the requirements must file separate California income tax even if you are listed as a dependent on another tax return or are over age 65. If you have low annual gross income (e.g., less than $40,000 for a married couple and less than $20,000 for a single person), it is best to check the State of California Franchise Tax Board web site each year to see if you are required to file state income tax forms. Even some minor children with investment income must file income tax forms.
- California state income tax went into effect with the adoption of the state constitution in 1879. Since then other state-run tax programs have been created, including the State Board of Equalization, State Comptroller, and Franchise Tax Commissioner. Income tax collected in recent years has reached $50 billion in California alone. Personal income tax is collected by the State of California Franchise Tax Board from all legal residents of California. Income is calculated as money made from any source. If you are a California resident and make money in a different state, you should still file taxes in California. In addition, non-residents who do business in the state are also taxed in California.
- Tax credits and deductions can lower your annual income tax payments. There are charts and worksheets (see link below) to help you calculate credits and deductions based on your personal finances. Tax credits for individuals allow you to reduce your actual tax bill, while deductions reduce the amount of your taxable income. California residents are eligible for both federal and state tax credits. Examples of tax credits include: a percentage of child and dependent care expenses, percentage of farmworker housing expenses, and a teacher retention credit. There are standard deductions based on each individual; other deductions include: vehicle license fees, some home mortgage interest, and some itemized deductions.
- Over the years, the tax code has increased in complexity, which brings confusion to many individual tax filers. In addition, the California Legislative Analyst’s Office and the IRS have seen cheating become more acceptable to the average taxpayer. For this reason, regular people may believe something to be legal that would be seen by the government as falsifying tax records. The biggest source of problems come when tax payers underreport their income. Underpayment of taxes and individuals who simply fail to file taxes are a smaller percentage of overall problems. In particular, cash income is still income and should be reported as such. Taxpayers must be proactive in reporting their income; if a bank or financial agency does not send you tax statements you must follow up. The likelihood is that the agency is reporting the income to the government and a spot audit would show you did not include the income on your tax return.
- California State Tax is due April 15 of each year. California offers an automatic extension to October 15 each year – you do not need to file for an extension. If you are due a refund, this will delay the payment of your refund. If you owe money to the state you must pay the amount owed along with form FTB 3519 (see link below) by April 15, but the remaining forms are not due until October 15. This automatic extension in no way affects the Federal Tax due date.