Just like other states in the US, California has an estimated tax payment method for individuals and businesses that operate independently, like freelancers, business owners, and independent contractors, whose taxes are not withheld from their income by their employer.
The estimated tax in California is designed so that individual business owners can pay their state income taxes on a quarterly basis rather than waiting until the end of the year. So, if you’re self-employed, then you must pay your income tax through an estimated tax payment. As a private business owner, it is important to know the due dates for each quarterly installment to enable you to pay your tax on time and avoid late fees. Calculating the estimated tax is simple, and paying your tax amount is hassle-free since there are different payment methods that you can use to pay.
Overview of California Estimated Tax Payments
California estimated tax payments are a method designed for individuals and businesses to pay their state income taxes on a quarterly basis rather than waiting until the end of the year. These payments are essential for those who don’t have taxes withheld from their income, such as freelancers, independent contractors, and business owners.
Estimated tax is that particular tax that you’re owing for the current year after removing taxes that you have withheld and the exact credit you want to take.
Ordinarily, if you’re employed, your employer will subtract your tax from your check and send it to the California tax board. So, if you file a tax return, you will find out whether you underpaid or overpaid your tax. If you paid in excess, you will be refunded, but if you paid too little, that means you’re owing taxes.
Meanwhile, if you’ve planned on owing a certain tax amount, it is best to spread your tax payment throughout the year via estimation to enable you to fulfill your civic obligation with ease. Also, ensure that you pay your taxes when they are due to avoid paying late fees.
Meanwhile, due to the 2022–2023 winter storms, those who were affected are qualified to postpone their estimated tax payment and then pay on a quarterly basis. Therefore, all the payments that were due on January 17, 2023, April 18, 2023, June 15, 2023, and September 15, 2023 can now be paid on November 16, 2023. So, those who were affected by the winter storm now have enough time to pay their estimated taxes
California Estimated Tax Payment Methods
There are different methods that you can use to pay your estimated tax in California. They are enumerated below:
- Via online by visiting payment options
- Through mail, you can use Estimated Tax for Individuals (Form 540-ES), send it to Franchise Tax Board, PO Box 942867, Sacramento, CA 94267-0008.
It is important to note that each due date has its own form; hence, endeavor to use the particular form that is associated with each due date to avoid making mistakes. For more inquiries on how to pay your estimated tax, kindly go to Instructions for Form 540-ES.
Taxpayers who are Expected to Make Estimated Tax Payment
On a general note, taxpayers are mandated to make an estimated tax payment if, in the previous year, they owed the minimum of the tax amount below:
- $250 if married/ registered domestic partner (RDP) filing separately
- $500 If you also expect your credits or withholding to be lower than the following tax conditions
- 90% of your present year’s tax and
- 100% of the previous year’s tax, i.e., alternative minimum tax inclusive.
You’re also required to make an estimated tax payment.
Restriction on the Use of Previous Year’s Tax in California
In California, if you’re expected to make an estimated tax payment and your previous year’s modified total income is greater than:
- $75,000 if married/registered domestic partner (RDP) filing separately, or
- $150,000
Then your estimated tax payment must be centered on a tax amount lower than:
- 90% of your tax for the year under review
- 110% of your tax amount for the previous year; alternative minimum tax is also included.
N/B: There are exceptions to this rule; hence, fishermen and farmers are not included in this rule.
High Level Income Estimated Tax
If you’re a resident of California and your modified gross income for the year under review is greater or equal to:
- $500,000 if married/ registered domestic partner (RDP) filing separately, or
- $1,000,000
You will be required to pay an estimated tax that is based on 90% of your tax amount for the present year.
How to calculate California Estimated Tax
Calculating the California estimated tax can be done using a worksheet. It is quite simple and easy to calculate. To get started, kindly visit Instructions for Form 540-ES.
For accuracy purposes, you can recalculate your estimated tax amount to be sure that you get it correctly.
Important Dates for California Estimated Tax Payments
Paying your estimated tax behind schedule attracts a penalty. To avoid that, ensure that you know the four different installment dates for your California estimated tax. The date is listed below:
| S/N | Tax Amount | Due Date |
| 1. | 30% | April 18, 2023 |
| 2. | 40% | June 15, 2023 |
| 3. | 0 | September 15, 2023 |
| 4 | 30% | January 16, 2024 |
N/B:
Due to the 2022–2023 winter storms, those who were affected are qualified to postpone their estimated tax payment and then pay on a quarterly basis. Therefore, all the payments that were due on January 17, 2023, April 18, 2023, June 15, 2023, and September 15, 2023 can now be paid on November 16, 2023.
Conclusion
As an individual or business owner in California, understanding their estimated tax policy will help you perform your civic responsibility with ease. Ensure that you are well informed about their deadline, know how to calculate your payment, and use their different payment options. You will be rest assured that you can handle your California estimated tax without hitches.
