What California Form 540-ES Is For
California Form 540-ES is used by individuals who expect to owe at least $500 in state income tax for 2019 ($250 if married/RDP filing separately) after withholding and credits. It applies to income that does not have automatic withholding—such as self-employment income, rental income, interest and dividends, capital gains, retirement distributions, and other taxable earnings.
The form uses a “pay-as-you-go” system, requiring taxpayers to pay throughout the year rather than waiting until the annual return is filed. Form 540-ES includes four payment vouchers and a worksheet that helps calculate the correct amounts based on projected 2019 income or safe-harbor rules using 2018 tax liability. Individuals with uneven income, little withholding, or large non-wage income typically rely on estimated payments.
When You’d Use California Form 540-ES
Form 540-ES is required when your withholding will not cover 90% of your 2019 tax or 100% of your 2018 tax (110% if high income). The 2019 installment due dates were:
- April 15, 2019 (30%)
- June 17, 2019 (40%)
- September 16, 2019 (0%—no payment due)
- January 15, 2020 (30%)
If you paid late or less than required, you may owe an underpayment penalty calculated on Form FTB 5805. Filing your 2019 return by January 31, 2020, and paying the entire balance due eliminated the need for the January 15 payment. Fiscal-year filers adjust dates based on their year-end.
Estimated payments are not amended like a return. If income changes, you simply adjust later installments. Special rules apply to farmers and fishermen, who may pay all tax by January 15, 2020, or file by March 2, 2020, without making quarterly payments.
Key Rules or Details for 2019
Who Must Pay Estimated Tax
You must make payments if you expect to owe at least $500 ($250 if filing separately) and your withholding and credits will be less than:
- 90% of your 2019 tax, or
- 100% of your 2018 tax (110% if prior-year AGI exceeded $150,000; $75,000 if filing separately).
If your 2019 AGI reaches $1,000,000 ($500,000 if filing separately), you must base payments on actual 2019 tax—prior-year safe harbor does not apply.
When Estimated Tax Is Not Required
You do not need estimated payments if:
- You were a new resident or nonresident in 2019 with no 2018 California tax.
- Your withholding will reduce your balance due below $500.
- Withholding equals at least 90% of 2019 tax or 100% of 2018 tax (110% for high-income taxpayers).
Mandatory Electronic Payments
If any single estimated payment or extension payment exceeded $20,000, or if your total tax liability was over $80,000, you must make all future payments electronically. Noncompliance results in a 1% penalty.
Mental Health Services Tax
Taxpayers with taxable income above $1,000,000 must include an additional 1% Mental Health Services Tax in estimated calculations.
Step-by-Step (High Level)
Step 1: Determine Whether You Need Estimated Payments
Use projected 2019 tax liability and compare it with expected withholding. If the remaining amount is at least $500 and fails safe-harbor rules, you must make estimates.
Step 2: Complete the Estimated Tax Worksheet
Using 2018 Form 540 as a reference, calculate projected 2019 AGI, deductions, taxable income, tax, and credits. The worksheet determines your required annual payment, which is the basis for all installments.
Step 3: Apply Safe Harbor Rules
Compare:
- 90% of projected 2019 tax, and
- 100% (or 110%) of 2018 tax.
Use the smaller amount as your required annual payment to avoid penalties.
Step 4: Calculate Each Installment
Multiply the required annual payment by:
- 30% for April
- 40% for June
- 0% for September
- 30% for January
This uneven schedule is unique to California and must be followed precisely.
Step 5: Choose a Payment Method
Options include:
- Web Pay at ftb.ca.gov
- Electronic Funds Withdrawal via tax software
- Credit card (fee applies)
- Check or money order using paper vouchers
Do not mail vouchers when paying electronically.
Step 6: Make Payments by Each Due Date
Write your SSN/ITIN and “2019 Form 540-ES” on check payments. Mail to:
Franchise Tax Board, PO Box 942867, Sacramento, CA 94267-0008.
Step 7: Keep Records
Retain the payment log included with the form. You will need the totals when filing your 2019 return and verifying FTB records.
Common Mistakes and How to Avoid Them
- Using equal 25% installments: California requires 30-40-0-30. The old 25% structure triggers penalties.
- Mixing payments for different tax years: Do not combine estimated payments with prior-year balance-due payments.
- Mailing vouchers when paying online: This causes processing delays and potential misapplied payments.
- Missing SSN/ITIN on checks: Without clear identification, payments may not post correctly.
- Ignoring high-income rules: If 2018 AGI exceeded limits, you must use 110% of 2018 tax—not 100%.
- Failing to adjust for income changes: Update remaining installments as income rises or falls.
- Overlooking prior-year overpayments: If you applied a 2018 overpayment to 2019 estimates, subtract it from the worksheet.
- Not using annualization for uneven income: Form FTB 5805 allows matching payments to actual income—helpful for seasonal or fluctuating earners.
- Mailing forms when no payment is due: Only submit vouchers with payments.
What Happens After You File
Payment Processing
The FTB records estimated payments and posts them to your account. You can check your history anytime using MyFTB to confirm that payments were credited correctly.
Reconciliation on Your 2019 Return
When filing Form 540 or 540NR, you report your total estimated tax payments. The FTB compares these amounts with actual tax due. Overpayments result in refunds or can be applied to 2020 estimated tax; underpayments increase your balance owed.
Underpayment Penalties
If payments were late or insufficient, the FTB determines penalties using Form FTB 5805. Penalties may apply even if you receive a refund at filing because they are based on whether enough tax was prepaid throughout the year.
Penalty Exceptions
No penalty applies if:
- You met 90%/100%/110% safe-harbor rules.
- Your total remaining tax after withholding was under $500.
- You filed and paid by January 31, 2020.
- You qualify for retirement-age or disability exceptions or for disaster relief.
Notices and Adjustments
If the FTB identifies an error—such as incorrect withholding or misapplied payments—they will send a notice explaining the adjustment. Respond promptly with supporting documentation if needed.
Carrying Forward Overpayments
Taxpayers may apply any 2019 overpayment to 2020 estimated tax, reducing required payments for the next year.
FAQs
How do I know if I must pay estimated tax?
You must pay if withholding won’t cover expected 2019 tax and you will owe at least $500. The worksheet helps determine whether payments are required and how much to pay.
Can I increase W-2 withholding instead of using Form 540-ES?
Yes. Increasing employer withholding eliminates the need for estimated payments. California treats withholding as paid evenly throughout the year for penalty purposes.
What if my income varies?
Use the annualized income method with Form FTB 5805. It matches payments to when income is earned and often lowers penalties for taxpayers with uneven income.
How do spouses/RDPs split joint estimated payments?
You may divide payments between returns by notifying the FTB in writing with signatures from both individuals or providing a court order. Otherwise, the first spouse to claim the payments typically receives credit.
Is there an exception for retirees?
Yes. If you retired in 2018 or 2019 after turning 62 (or became disabled), you may qualify for a penalty exception if the underpayment is due to reasonable cause.
Can I pay all estimated tax at once?
Yes. You may pay the full amount early, which eliminates the risk of late-installment penalties.
What if I moved out of California during 2019?
File Form 540NR for part-year residency. Estimated payments cover income earned while a resident; you may need to adjust remaining payments based on your move date.
For the official Form 540-ES (2019), visit: https://www.ftb.ca.gov/forms/
