California taxpayers can check their W-4 or DE 4 if they want to keep the Franchise Tax Board (FTB) out of their personal income tax (PIT) withholding decisions. Careful attention to the choices and numbers on the form can stop the FTB from making the worker prove they are right or fill out a new form.

Unusual claims might not get accepted.

Not Taking Out Enough Taxes

There is a limit to how much a California worker can lower their taxes. The FTB keeps a watch on the W-4 and DE 4 claims that lower the taxes withheld too much. Zero can get a taxpayer the red light.

Two things can come to the FTB's attention. A claim for more than 10 withholding allowances. Or, when the employer expects weekly wages to be above $200, a claim the taxpayer is exempt from state or federal income tax withholding. The employer must send a copy of the Employee's Withholding Allowance Certificate to the tax board.

Working On As Usual

Employers keep their payroll account the same until the FTB tells them in writing to change the tax withholding. The W-4 or DE 4 is still treated as valid. They withhold the same amounts. If the FTB changes the marital status or the allowances, the employer will use the changed claim to decide the withholding amount. The new withholding continues unless the board becomes convinced the worker is right. A Californian can keep producing for the employer and earning money.

Proof and Penalties

When the FTB changes a status or allowances, the wage earner is not helpless. They can request a review by the board by writing to the W-4 Unit in Sacramento. The worker has to give the board proof they are incorrect.

The new withholding continues while the the claim is under review. Unless the FTB notifies the worker in writing they can change the withholding, the withholding on the employer's books since the official state decision does not change.

Claiming too many allowances and lowering the tax amount does get penalized. There is a $500 penalty for allowances claims outside a fair range. Claims that are not true will get a taxpayer in trouble.

The Right Deal

Employers tell their workers to take care when they fill out the W-4 or DE 4 because the FTB will find out if they are wrong. A California Notice To Employees informs workers that keep their eyes open on their responsibilities.

Soure:

California Employment Development Department, Notice To Employees, Form DE 35 (revised January, 2009).