Employee Federal Tax Witholding

Employee Tax Withholding Increase
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Beginning November 1, 2009 all California employees will see an increase in payroll withholdings. As part of the California State budget (AB X417) that was passed late in July of this year, The new withholding tables reflect a mandatory 10% increase on all regular employment wages.

Exerpt from Sacramento Bee, Nov 1, 2009: Some call it California's cash advance. That might sound like a tax increase, but state officials insist that's not the case. Tax experts agree, saying this bump up in withholding taxes gives the state some wiggle room in managing California's treasury in a year that saw a titanic political battle to get a handle on the state's budget. The increased withholding comes on top of a 0.25 percent state income tax increase and a reduction in the dependent credit, also enacted as part of the state budget. Essentially, the accelerated withholding program does not generate additional tax revenue. Instead, it front-loads it, bringing cash in more quickly in an effort to keep the state treasury stocked with funds, which is where the "cash advance" tag comes in. State officials have estimated that the move will generate an additional $1.7 billion in the current fiscal year. The bottom line is that a worker's total annual income tax bill won't rise, and the amount owed at April 2010 tax time will be adjusted accordingly. Simply put, if you owe taxes when April 15 comes along, the balance due will be less based on what was withheld from your paycheck in the last two months of the year. If you're due a refund, you can expect a little more.
Taxpayers can evade the accelerated withholding schedules simply by increasing the number of allowances on the withholding forms filed with their employers. That won't make much difference for the calendar 2009 tax year, but it will have a bigger impact for 2010 and perhaps beyond. "The changes that are happening are only for about nine weeks for 2009, so the impact for 2009 is minor," said Brenda Voet, spokeswoman for the state Franchise Tax Board. "But we're trying to warn people to go to their personnel and human resources departments for 2010 to make sure they have the proper amount of tax withheld and make any adjustments they need to make. We don't want people to be surprised by anything."
Even with the increases, state withholding will remain less than half the amount withheld for federal taxes. The withholding increase taking effect today is open-ended. The Legislature could call it off at some point, but financial analysts don't see that happening in the near future, given California's recent struggles to balance its budget. Besides increased withholding, a state income tax increase approved by the Legislature as part of February's budget deal will raise rates by 0.25 percentage points for each tax bracket for the 2009 and 2010 tax years. Also in the mix: A new tax law lowered the state dependent exemption credit from last year's $309 to $98 for the 2009 and 2010 tax years. "With all of the changes, it's a good time to sit down and figure out the proper amount of tax you're going to pay for your particular situation," Voet said.