Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners — holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.
Technically, it’s not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers’ annual tax bills won’t change.
Think of it as a forced, interest-free loan: You’ll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.
A forced interest free loan. What will they think of next.
I was born in California and remember when it was a golden state. What you have there now is a political class at war with the rest of the public. It is sad to see a great state committing suicide.
See also this article:
http://www.city-journal.org/2009/19_4_california.html
Worse yet, the refund you get in April may be an IOU, not a check. Lord help my son, daughter in law, and granddaughter. I am thankful for the NW in NW Bob.
The terminator: “Everything you have are belong to me.”
Or Wimpy:
“I will gladly repay you Tuesday for your paycheck today.”
Can’t one simply increase the number of witholding allowances on their W4 to compensate for the illegal (violation of 4th Amendment) forced loan to the state?
One of the many benefits of being self employed. No withholding.
Yes they can, Sick & Tired of Nuance – but how many people will figure that out? Those who most need the money, the working poor, might not know that’s an option and the state won’t be advertising it. I’m a resident of California and it seems illegal to me, but then I don’t think the government should withhold anything from your paycheck – I think if we all had to write out our federal and state taxes once a year on April 15, we’d be a whole lot more vested in how much we’re paying and where it’s going.
Hi Branford,
I apologize if I seemed to be making light of the issue. I was not. I agree with you whole heartedly. I think that withholding is an unwarranted seizure of property. I personally adjust my withholding allowances to minimize the interest-free loan to the government. I was merely pointing out the option. I sincerely hope that the option for folks to adjust their W4s is publicized widely by the media and word of mouth to thwart the illegal seizure of the people’s money by an odious government.
And so many on the left say, with some (some) sincerity, “Do you really think you can build a party on saying government is bad/the problem?”
Well, even those oft-cited moderates are going to start saying “So a larger, more active government can more freely take stuff from me when they’re in a pinch? I think they should be smaller and weaker.” So i’d say “the party of No” might actually be a winning strategy at this rate.
This is California they are talking about. If Californians adjust the allowances on their W4s to avoid the higher California withholding, they will also reduce their federal withholding. And, as a result, they may find themselves hit with a big federal tax bill in April and quite possibly a penalty as well.
OK – if there isn’t a separate number of deductions for CA taxes, it’s a little harder – but you can still do it.
Crank up the witholding and then file 1040-ES with the feds for the difference.
11. RandomJoe wrote:
[blockquote]Crank up the witholding and then file 1040-ES with the feds for the difference.[/blockquote]
That probably won’t work either. My understanding of how that works (and mind you last spring I worked on the “underpayment” code for a major tax software provider), the IRS expects four equal quarterly payments. If you are underpaid in the first three quarters (which are for most people already past) and “make up the difference” in the final quarter, you will still be assessed a penalty and interest for the underpayment in the first three quarters. I know it is counter-intuitive, but much about IRS rules and procedures is counter-intuitive. And yes, it seems to me that it would create major problems with someone who won the lottery in the fourth quarter. When I raised that question with a tax accountant, I was told that the trick was to have the lottery withhold all taxes due, so that the estimated tax rules would not come into play.
But anyway, I would suggest anyone in California wanting to play this game consult with a good tax attorney or CPA before doing so. (Incidentally, the same applies to that lottery winner; consult the tax gurus [b]before[/b] claiming the prize — and get them on the hook for any penalties and interest resulting from their bad advice.
My understanding from another story I read is that California also has come up with some draconian penalties if you increase your allowances and then end up owing any tax. I don’t know the specifics.
Question, however, has California paid their IOUs on tax refunds from the present year? I know earlier this year some Californians I had been working with said they still hadn’t gotten anything back, but I don’t know if that has changed.
California is an example of what our current administration wants to do with the whole country. Get ready.
Does the name Pelosi ring a bell?
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