[June 26, 2009]

The California Franchise Tax Board (FTB) advises taxpayers to plan ahead for changes to the state's personal income tax rates and exemption credits for the 2009 calendar year. You may need to change your withholding allowances for California income tax purposes due to a reduction in the dependent exemption credit and in the way withholding allowances are calculated.

A new tax law raises California's personal income tax rates by .25 percent to 1.25, 2.25, 4.25, 6.25, 8.2, 9.55 and 10.55 for California's income brackets. These increased rates will be reflected in paychecks for July earnings although the new rates are effective for all 2009 earnings.

The new withholding tables factor in the changes for the tax rate increase only, so taxpayers claiming dependent exemption credits may still need to modify their wage withholding on Form DE 4, Employee's Withholding Allowance Certificate, to make any needed changes to the number of allowances they claim. (For example, the prior DE 4 instructed employees claiming dependents to multiply each dependent by three. The new form instructs employees to multiply dependents by one. This means a married employee with two children may have previously claimed eight allowances. They may now want to change to four.)

If you determine that you need to change your withholding exemptions for state tax purposes, you can do so online by signing in to your personal account on At Your Service or by completing a new UC W-4/DE 4 to make these changes.

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