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California parents beware: Those little tax deductions running around the house are now worth less (in a strictly financial sense, of course).
SOURCE : SF CHRONICLE

To help balance its budget, California has reduced the state tax credit for dependents.

The change will increase a family's California taxes for 2009 by about $210 per dependent compared with 2008.

A family with one dependent that normally gets a state-tax refund will get back $210 less when they file their 2009 return next year. A family that normally owes money will have to pay $210 more. Multiply that by two or more dependents, and it really adds up.

This may come as a shock to parents who have been too busy shuttling between soccer games and viola lessons to keep up with the state's budget fiasco. The Franchise Tax Board is trying to get the word out, so families can prepare.

At issue is the exemption you get for each person listed on your tax return. The credit reduces your tax bill dollar for dollar. (The exemption credit phases out for couples with more than roughly $326,400 in adjusted gross income and singles with more than $163,200. This column applies to those under the limit.)

The change essentially takes us back to where we were before 1998.

Before then, the credit was the same for adults and dependents. But in 1998, when the state was awash in cash, it roughly tripled the amount for dependents.

In 2008, the exemption was $99 for each adult and $309 per dependent.

Now that the state is swimming in red ink, it decided to take away that gift to families and set the dependent credit equal to the adult amount for 2009 and 2010. So the dependent credit will shrink from $309 to roughly $99. (The credit is indexed for inflation; the final amount for 2009 will be announced later this summer.)

If you are in this boat and would rather not face a big tax bill early next year, you could pay more state tax this year, either by increasing the amount withheld from your paycheck or - if you are self-employed - by making bigger estimated quarterly tax payments.

To increase your withholding, file a new Form DE 4 with your employer. (This is the state version of the federal Form W-4.) You can get one at work or download it at links.sfgate.com/ZHLJ.

You don't have to do this now. The Franchise Tax Board will not slap you with an underpayment penalty that results from this change on your 2009 taxes. But it could for 2010.

If you don't increase your withholding, make sure you're saving enough to pay the tax next year, says Gina Rodriquez, Sacramento bureau chief with Spidell Publishing, which provides education and research to tax professionals.
Tax rates raised

At the same time it slashed the dependent credit, the state also raised all tax rates by one-quarter of 1 percent.

A married couple with $100,000 in taxable income that paid $4,689 in California income tax last year would pay $4,939 next year - a difference of $250.

The state sent new tax-withholding tables reflecting this change to employers in April. Employers should have started using them in May.

Many employees will have been underwithheld for the first four months of the year. That means a slightly bigger tax bill (or smaller refund) when they file their 2009 taxes.

Again, states won't penalize people for underwithholding that results from this tax change. So if you don't have dependents, there's probably no need to file a new Form DE 4 because of the change in the tax rates.

Just to be clear: The new withholding tables do not account for the decrease in the dependent credit. Parents who want to avoid that tax shock should consider filing a new DE 4.
Cash for clunkers

In case you missed it: Congress approved the cash for clunkers bill last week. President Obama is expected to sign it. I answered some questions about it in my blog on Friday and Monday. You can read about it at www.sfgate.com/blogs/ pender.
 

· Unhyphenated American
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And the hits will keep coming until they find a way to balance things out. In my opinion do away with the give away programs. If there is no income how can the government continue to spend on give away programs? They need to cut the spending not increase the revenue.
 

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Correct!! They didnt raise taxes just reduced exemptions. So you see they actually lowered something ;) ;) :D

Lol. You have to laugh to keep from cryin

The sad part is there are still somepeople who think their taxes aren't going up. I just LMAO at them :D


Well he said he wouldn't raise taxes.

Taking away tax credits isn't the same, its different :)sphss
 

· Colts fan & Stoker owner
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Unfortunately, the state government will never do away with these programs.


And the hits will keep coming until they find a way to balance things out. In my opinion do away with the give away programs. If there is no income how can the government continue to spend on give away programs? They need to cut the spending not increase the revenue.
 

· Unhyphenated American
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Unfortunately, the state government will never do away with these programs.

I agree, but it is the obvious right thing to do. I think drug testing and 40 hours a week volunteering your time to get welfare should be mandatory.
 

· Colts fan & Stoker owner
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Totally agree. The dems wont cut this stuff since this is the majority of their voters.


I agree, but it is the obvious right thing to do. I think drug testing and 40 hours a week volunteering your time to get welfare should be mandatory.
 

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http://www.leginfo.ca.gov/yourleg.html

send an email to your senator and assembleyman

I did this morning as they are due to vote again tomorrow:|err Tell them you oppose any bill that raises taxes or increases fees, and you support fundamental reforms that rein in spending by cutting out the waste fraud and abuse
Thank you for your correspondence expressing your opposition to increased taxes and new fees. I have consistently opposed and voted against all efforts to raise taxes and fees and will continue to fight against proposed tax increases now that the special election initiatives have been defeated and budget negotiations are underway.

The Joint Budget Conference Committee—composed of 10 members from both the Senate and the Assembly—continues to meet on a daily basis as the Legislature seeks solutions to California’s $24 billion budget deficit. Live video streaming of the public hearings can be accessed at www.calchannel.com.



I am committed to finding solutions that will result in a balanced, responsible budget. The Democratic majority’s proposal to increase taxes and fees in order to fund the state budget is inherently unjustified and bad economic policy. Raising taxes is a terrible idea at a time when global, national, and state economies are all declining.



The solution lies in meaningful reforms that implement across the board spending reductions whenever revenues decline or expenditures increase. Moreover, we must prevent future lawmakers and Governors from incurring excessive debt and overspending. We must enact zero-based budgeting, evaluate the performance of our programs, and justify every single dollar that the state receives instead of resorting to tax increases as the only way to stay afloat. I believe our top priority this year should be to jumpstart our economy to get more Californians back to work. It’s important to encourage business in California without raising taxes that will further damage an already weak economy



Again, thank you for taking the time to share your concerns with me. It is an honor to serve you in the California State Senate.

Sincerely,
GEORGE C. RUNNER, JR.

Senator, 17th District



PS. To learn more about the Senate Republican proposals to reform California, go to: www.RestoreCalifornia.com
 

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For some reason, I read it differently. Nothing serious I was just curious who RR was referring to.

CA has had taxes and fees raised and credits lowered
Our Governor has been doing this scenario since he got into office six years ago. Boy does it really get me going. The amount of money he's wasted rivals CA, when put into the context of dollars and population.
 
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