The CA Franchise Tax Board (FTB) announced that they have erroneously assessed underpayment penalties for some taxpayers with AGI of at least $1 million who did not pay 90% of their tax during 2009, a new requirement effective for years beginning on or after January 1, 2009.

While these taxpayers may not use the prior-year safe harbor, they are not subject to the underpayment penalty if, in the prior year, the taxpayer: (1) had a liability of $500 or less ($250 for married filing separately); and (2) made all payments in the prior year through withholding. (R&TC §19136(c)(2))

If the penalty should not have been assessed because taxpayer meets these two tests, taxpayer should contact their tax preparer or call the FTB Tax Practitioners’ Hotline at (916) 845-7057 to request abatement.