[May 26, 2009]

The California Employment Development Department (EDD) recently issued revised personal income tax tables which increase personal income tax rates for 2009. The new rates represent a one quarter of one percent (.0025) increase in the old tax rates. For example, if the old rate was 1.0%, the new rate is 1.25%.

In order to accommodate the rate changes, the payroll system is being reprogrammed. As a result of the programming changes, the new tax rates will not be in effect until paychecks are issued for July earnings. The revised rates, however, apply to all earnings in 2009 beginning January 1, 2009 and it is possible that you may owe taxes at the end of the year.

You can review the California State Form DE-4, "Employee Withholding Allowance Certificate" posted on the Payroll Coordination and Tax Services website to determine if you need to increase the amount of state tax withheld in order to avoid owing taxes at the end of the year. This form includes instructions about estimating your state income tax liability on an annual basis using the new tax rates.

If you determine that you will not have enough state income withheld, you can increase the amount of your state income tax withholding by reducing the number of exemptions you claim for state tax purposes or by having extra money deducted from your paycheck for state income taxes. You can change your state tax withholding online by signing in to your personal account on At Your Service or you can complete a new UC W-4/DE 4 to make these changes.

For more information about the new tax rates, visit the California EDD website.

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