2023 Instructions for Form 540-ES Estimated Tax For Individuals

Installment Payments – Installments due shall be 30 percent of the required annual payment for the 1st required installment, 40 percent of the required annual payment for the 2nd required installment, no installment is due for the 3rd required installment, and 30 percent of the required annual payment for the 4th required installment. Mandatory Electronic Payments – You are required to remit all your payments electronically once you make an estimate or extension payment exceeding $20,000 or you file an original tax return with a total tax liability over $80,000. Once you meet the threshold, all subsequent payments regardless of amount, tax type, or taxable year must be remitted electronically. The first payment that would trigger the mandatory e-pay requirement does not have to be made electronically. Individuals who do not send the payment electronically will be subject to a 1 percent noncompliance penalty. Electronic payments can be made using Web Pay on the Franchise Tax Board’s (FTB’s) website, electronic funds withdrawal (EFW) using tax preparation software, or your credit card. For more information, go to ftb.ca.gov/e-pay.

A. Purpose

Use Form 540-ES, Estimated Tax for Individuals, and the 2023 California Estimated Tax Worksheet, to determine if you owe estimated tax for 2023 and to figure the required amounts. Estimated tax is the tax you expect to owe in 2023 after subtracting the credits you plan to take and tax you expect to have withheld. If you need to make a payment for your 2022 tax liability or make a separate payment for any balance due on your 2022 tax return, use form FTB 3519, Payment for Automatic Extension for Individuals. Certain taxpayers are limited in their use of the prior year’s tax as a basis for figuring their estimated tax. See Section C for more information. Check for estimated payments we have received at ftb.ca.gov and login or register for MyFTB. Increasing your withholding could eliminate the need to make a large payment with your tax return. To increase your withholding, complete Employment Development Department (EDD) Form DE 4, Employee’s Withholding Allowance Certificate, and give it to your employer’s appropriate payroll staff. You can get this form from your employer, or by calling EDD at 888-745-3886. You can download Form DE 4 from EDD’s website at edd.ca.gov or go to ftb.ca.gov and search for de 4. Form DE 4 specifically adjusts your California state withholding and is not the same as the federal Form W-4, Employee’s Withholding Certificate.

B. Who Must Make Estimated Tax Payments

1. 90% of the tax shown on your 2023 tax return; or
2. 100% of the tax shown on your 2022 tax return including Alternative Minimum Tax (AMT).

Note:

• You do not have to make estimated tax payments if you are a nonresident or new resident of California in 2023 and did not have a California tax liability in 2022. See Section C for more information.
• If you are a military servicemember not domiciled in California, do not include your military pay in your computation of estimated tax payments. If you are the nonmilitary spouse of a servicemember, you may or may not need to include your pay in your computation of estimated tax payments. For more information, get FTB Pub. 1032, Tax Information for Military Personnel.

If you and your spouse/RDP paid joint estimated tax payments, but are now filing separate income tax returns, either of you may claim all of the amount paid, or you may each claim part of the joint estimated payments. If you want the estimated tax payments to be divided, notify the FTB before you file the income tax returns so that the payments can be applied to the proper account. The FTB will accept in writing, any divorce agreement (or court ordered settlement) or a statement showing the allocation of the payments along with a notarized signature of both taxpayers. The statements should be sent to:

Mail: Joint Estimate Credit Allocation MS F283
Taxpayer Services Center
Franchise Tax Board
PO Box 942840
Sacramento, CA 94240-0040

C. Limit on the Use of Prior Year’s Tax

Individuals who are required to make estimated tax payments, and whose 2022 California adjusted gross income is more than $150,000 (or $75,000 if married/RDP filing separately), must figure estimated tax based on the lesser of 90 percent of their tax for 2023 or 110 percent of their tax for 2022 including AMT. This rule does not apply to farmers or fishermen.

Taxpayers with 2023 California adjusted gross income equal to or greater than $1,000,000 (or $500,000 if married/RDP filing separately), must figure estimated tax based on their tax for 2023.

D. When to Make Your Estimated Tax Payments

Pay your estimated payments by the dates shown below:

• 1st payment: April 18, 2023
• 2nd payment: June 15, 2023
• 3rd payment: September 15, 2023
• 4th payment: January 16, 2024

Due to the federal Emancipation Day holiday observed on April 17, 2023, tax returns filed and payments mailed or submitted on April 18, 2023, will be considered timely.

Filing an Early Tax Return In Place of the 4th Installment – If you file your 2023 tax return by January 31, 2024, and pay the entire balance due, you do not have to make your last estimated tax payment. In addition, you will not owe a penalty for the fourth installment.

Annualization Option – If you do not receive your taxable income evenly during the year, it may be to your advantage to annualize your income. This method allows you to match your estimated tax payments to the actual period when you earned the income. You may use the annualization schedule included with the 2022 form FTB 5805, Underpayment of Estimated Tax by Individuals and Fiduciaries.

Farmers and Fishermen – If at least two-thirds of your 2022 or 2023 gross income is from farming or fishing, you may do either of the following:

• Pay all of your estimated tax by January 16, 2024.
• File your tax return for 2023 on or before March 1, 2024, and pay the total tax due. In this case, you do not need to make estimated tax payments for 2023. Use the 2022 form FTB 5805F, Underpayment of Estimated Tax by Farmers and Fishermen, to determine if you paid the required estimated tax. If the estimated tax is underpaid, attach the completed form FTB 5805F to the back of your tax return.

Fiscal Year – If you file your tax return on a fiscal year basis, your due dates will be the 15th day of the 4th, 6th, and 9th months of your fiscal year and the 1st month of the following fiscal year. If the due date falls on a weekend or legal holiday, use the next business day.

Mental Health Services Tax – If your taxable income or nonresident California source taxable income is more than $1,000,000, complete the worksheet below.

1. Taxable income from Form 540, line 19, or Form 540NR, line 35
2. Less: $(1,000,000)
3. Subtotal
4. Tax rate – 1%: × .01
5. Mental Health Services Tax – Multiply line C by line D. Enter this amount here and on line 17 of the 2023 California Estimated Tax Worksheet below.

E. How to Use Form 540-ES Payment Form

Use the California Estimated Tax Worksheet and your 2022 California income tax return as a guide for figuring your 2023 estimated tax. Be sure that the amount shown on line 21 of the California Estimated Tax Worksheet has been reduced by any overpaid tax on your 2022 tax return which you chose to apply toward your 2023 estimated tax payment.

Note:

• If you filed Form 540 2EZ for 2022, do not use the Form 540 2EZ instructions to figure amounts on this worksheet. Instead, get the 2022 California 540 Personal Income Tax Booklet.
• Complete Form 540-ES using black or blue ink:
  1. Complete the Record of Estimated Tax Payments below for your files.
  2. Paying your tax: Web Pay – Make a payment online or schedule a future payment (up to one year in advance). Go to ftb.ca.gov/pay for more information. Do not mail Forms 540-ES to us. Electronic Funds Withdrawal (EFW) – Individuals can make an extension or estimated tax payment using tax preparation software. Check with your software provider to determine if they support EFW for extension or estimated tax payments. Do not mail Forms 540-ES to us. Credit card – Use your Discover, MasterCard, Visa, or American Express Card to pay your tax. Call 800-272-9829 or go to officialpayments.com, use code 1555. ACI Payments, Inc. (formerly Official Payments) charges a fee for this service. Do not mail Forms 540-ES if you pay by credit card. Check or money order – There is a separate payment form for each due date. Be sure you use the form with the correct due date shown in the top margin of the form. Fiscal year filers: Enter the month of your fiscal year end (located directly below the form’s title). Print your name, address, and social security number (SSN) or individual taxpayer identification number (ITIN) in the space provided on Form 540‑ES. If you have a foreign address, enter the information in the following order: City, Country, Province/Region, and Postal Code. Follow the country’s practice for entering the postal code. Do not abbreviate the country name. Complete the amount of payment line of the form by entering the amount of the payment that you are sending. Using black or blue ink, make your check or money order payable to the “Franchise Tax Board.” Write your SSN or ITIN and “2023 Form 540-ES” on it and mail to the address in Section F. Make all checks and money orders payable in U.S. dollars and drawn against a U.S. financial institution.

F. Where to Mail Estimated Tax Payments

G. Failure to Make Estimated Tax Payments

If you do not make the required estimated payments, if you pay an installment after the date it is due, or if you underpay any installment, a penalty may be assessed on the portion of estimated tax that was underpaid from the due date of the installment to the date of payment or the due date of your tax return, whichever is earlier. Get the 2022 form FTB 5805 for more information.

2023 California Estimated Tax Worksheet

Keep this worksheet for your records.

1. Residents: Enter your estimated 2023 California AGI. Nonresidents and part-year residents: Enter your estimated 2023 total AGI from all sources. Military servicemembers/spouses, get FTB Pub. 1032, Tax Information for Military Personnel.
2. 1. If you plan to itemize deductions, enter the estimated total of your itemized deductions.
   2. If you do not plan to itemize deductions, enter the standard deduction for your filing status:
      • $5,202 single or married/RDP filing separately
      • $10,404 married/RDP filing jointly, head of household, or qualifying surviving spouse/RDP
   3. Enter the amount from line 2a or line 2b, whichever applies.
   1. Enter your estimated 2023 California taxable income from Schedule CA (540NR), Part IV, line 5.
   2. Compute the California Tax Rate: Tax on total taxable income from line 4 ÷ Total taxable income from line 3
   3. Multiply the amount on line 5a by the California Tax Rate on line 5b.
   1. Residents: Enter the exemption credit amount from the 2022 instructions for Form 540.
   2. Nonresidents or part-year residents: Enter the CA credit proration percentage. Divide line 5a by line 3. If more than 1 enter 1.0000
   1. Multiply line 18 by 90% (.90). Farmers and fishermen multiply line 18 by 66 2/3% (.6667).
   2. Enter the sum of line 48, line 61, and line 62 from your 2022 Form 540 or the sum of line 63, line 71, and line 72 from your Form 540NR.
   3. Enter the amount from your 2022 Form 540, line 17; or Form 540NR, line 32.
   4. Is the amount on line 19c more than $150,000 ($75,000 if married/RDP filing separately)?
      • Yes. Go to line 19e.
      • No. Enter the lesser of line 19a or line 19b. Skip line 19e and line 19f and go to line 20.
   5. Multiply 110% (1.10) by line 19b.
   6. Enter the lesser of line 19a or line 19e and go to line 20 (If your California AGI is equal to or greater than $1,000,000/$500,000 for married filing separately, use line 19a.).

   Record of Estimated Tax Payments

   Payment form number	(a) Date	(b) Web Pay/Credit card and confirmation number	(c) Amount paid	(d) 2022 overpayment applied	(e) Total amount paid and credited – add (c) and (d)
   1	$	$	$
   2
   3
   4
   Total			$	$	$

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