As part of an attempt to balance California's budget, the payroll withholding tables
were modified to cause taxpayers to be overwithheld by 10%. The extra withholding
amounts to a loan from the taxpayers to the state that will be repaid when the taxpayers'
income tax returns are filed. Not only is this increased withholding a hardship
for some taxpayers, the extra state refund may be taxable for itemizers the following
year.
Taxpayers can adjust their state withholding so that they are not overwithheld by
changing the number of allowances claimed on Form DE 4. If the taxpayer knows the
current rate of pay and number of allowances being claimed on Form DE 4 in previous
year, then this module will calculate the number of allowances to use in current
year to maintain the same rate of withholding. Enter the gross pay, non-taxable
pay (if any), pay period, current withholding filing status on Form DE 4, current
withholding allowances claimed, and current additional withholding (if any). If
the taxpayer did not complete Form DE 4, then use the status and allowances from
federal Form W-4. Enter the allowances as regular allowances (line 1A). Click the
Calculate button when finished. Complete a new Form DE 4 for the employer using
the calculated allowances for line 1A and line 1B and extra withholding on line
2, if any, to eliminate the 10% increase in withholding.
DISCLAIMER: The withholding adjustments shown above are based on the taxpayer's
current withholding allowances and filing status. It is the user's responsibility
to verify that the settings above will achieve the desired withholding results.
The use of CFS W-4 Withholding Calculator is recommended to accurately match the
taxpayer's withholding to their estimated tax liability for the year.