GetawaysRus
Level 2 Member
I’m new to the forum. As a first post, I’ll cover something that’s been very a major aggravation for me for the past few months.
I’m self-employed, and I pay quarterly estimated income taxes. For a number of years, I have paid my Federal estimates using the online providers (payUSAtax.com, pay1040.com, and officialpayments.com). Paying Federal estimated taxes to earn points/miles/cashback is a big topic, and I won’t cover that here.
I live in California. About a year to two ago, I got the bright idea that I would also try paying quarterly California estimated taxes online to earn points/miles. Only officialpayments.com allows this. Their fee is substantial, but it can be worthwhile if you have a way of making that fee tax-deductible and if you are in a high enough tax bracket.
Federal estimated tax payments have never been a problem. They have always posted quickly and correctly. They are easily verified a week or so later on the EFTPS (Electronic Federal Tax Payment System) website. I (mistakenly) assumed that the same would be true if I made quarterly estimated payments to California. And that is the moral here: the California Franchise Tax Board (FTB) is not nearly as competent as the IRS. Do NOT assume that your California estimated payments were received and credited correctly. You MUST check. There may be errors that will lead to headaches later.
To avoid a penalty for underpayment, I usually overpay my quarterly estimates. Then I apply that overpayment to the first quarter estimate for the subsequent tax year.
A few months ago, I got a short letter from the FTB that they were reducing my carry-forward from the 2015 tax year overpayment to my 2016 California income tax by several thousand dollars. There was no explanation as to why. So here is what I have learned:
1. If you are going to pay California estimated income tax online, you must set up an account with the FTB. The URL is https://webapp.ftb.ca.gov/MyFTBAccess/iUserName.aspx or https://www.ftb.ca.gov/online/webpay/index.asp. When you first register, they will snail mail you a password that you then can use to sign on and complete registration. Registration is only valid for one year (and then you will need to re-register).
2. Once I had registered, it was possible to search the history of my quarterly estimated payments to the FTB. Lo and behold, they had failed to correctly record and credit several thousand dollars of payments. I found 3 major errors.
3. After identifying the source of their errors, I had to hunt down all of the proofs of payment. I prepared a letter detailing their errors and providing proof of payments. It is possible to submit a response to the FTB via their website. When you do so, you get a message that it may take them 30 business days to respond.
4. So I waited, and I waited. But I never got a response. I finally signed back on to the FTB website, rechecked my schedule of estimated payments, and discovered that the missing payments had been credited back to my account. It is a mystery why they never wrote me back.
Going forward, I am undecided about whether to continue making quarterly estimated California income tax payments online. The value of the points earned may not outweigh the potential hassle if the FTB makes an error. So I’m paying the final (4th quarter) 2016 estimate by check.
But, by the way, do NOT assume that your check will be credited properly. One of those errors in my 2015 payments was a payment made by check. (And one of the proofs of payment that I submitted when trying to get the errors corrected was an image of the front and back of the canceled check.)
I’m self-employed, and I pay quarterly estimated income taxes. For a number of years, I have paid my Federal estimates using the online providers (payUSAtax.com, pay1040.com, and officialpayments.com). Paying Federal estimated taxes to earn points/miles/cashback is a big topic, and I won’t cover that here.
I live in California. About a year to two ago, I got the bright idea that I would also try paying quarterly California estimated taxes online to earn points/miles. Only officialpayments.com allows this. Their fee is substantial, but it can be worthwhile if you have a way of making that fee tax-deductible and if you are in a high enough tax bracket.
Federal estimated tax payments have never been a problem. They have always posted quickly and correctly. They are easily verified a week or so later on the EFTPS (Electronic Federal Tax Payment System) website. I (mistakenly) assumed that the same would be true if I made quarterly estimated payments to California. And that is the moral here: the California Franchise Tax Board (FTB) is not nearly as competent as the IRS. Do NOT assume that your California estimated payments were received and credited correctly. You MUST check. There may be errors that will lead to headaches later.
To avoid a penalty for underpayment, I usually overpay my quarterly estimates. Then I apply that overpayment to the first quarter estimate for the subsequent tax year.
A few months ago, I got a short letter from the FTB that they were reducing my carry-forward from the 2015 tax year overpayment to my 2016 California income tax by several thousand dollars. There was no explanation as to why. So here is what I have learned:
1. If you are going to pay California estimated income tax online, you must set up an account with the FTB. The URL is https://webapp.ftb.ca.gov/MyFTBAccess/iUserName.aspx or https://www.ftb.ca.gov/online/webpay/index.asp. When you first register, they will snail mail you a password that you then can use to sign on and complete registration. Registration is only valid for one year (and then you will need to re-register).
2. Once I had registered, it was possible to search the history of my quarterly estimated payments to the FTB. Lo and behold, they had failed to correctly record and credit several thousand dollars of payments. I found 3 major errors.
3. After identifying the source of their errors, I had to hunt down all of the proofs of payment. I prepared a letter detailing their errors and providing proof of payments. It is possible to submit a response to the FTB via their website. When you do so, you get a message that it may take them 30 business days to respond.
4. So I waited, and I waited. But I never got a response. I finally signed back on to the FTB website, rechecked my schedule of estimated payments, and discovered that the missing payments had been credited back to my account. It is a mystery why they never wrote me back.
Going forward, I am undecided about whether to continue making quarterly estimated California income tax payments online. The value of the points earned may not outweigh the potential hassle if the FTB makes an error. So I’m paying the final (4th quarter) 2016 estimate by check.
But, by the way, do NOT assume that your check will be credited properly. One of those errors in my 2015 payments was a payment made by check. (And one of the proofs of payment that I submitted when trying to get the errors corrected was an image of the front and back of the canceled check.)