Now that Prop. 30 has passed, here are some nuts and bolts you need to know about how your income taxes may change this year.
Prop. 30 will increase personal income tax for seven years on Californians earning more than $250,000. It will be implemented retroactively, starting Jan. 1, 2012. Those earning between $250,000 and $300,000 will pay 1 percent more. People making between $300,000 and $500,000 will pay 2 percent more, and people making more than $500,000 will pay 3 percent more in taxes.
But how do you pay retroactive taxes?
I spoke with Jay Chamberlain, chief of financial research at the California Department of Finance. He said that taxpayers, and particularly high-income earners, pay four estimated payments for each tax year. The next estimated payment is due on Jan. 15 for the 2012 tax year.
But the law also says that when there's a law change that affects taxes that year, the additional money that would go into that estimated payment can be waived without a penalty, Chamberlain said. Instead, people can just include the extra taxes in their final payment on April 15, he said.
"They could send us a check today if they wanted," Chamberlain said. "But there's nothing compelling them. There's no penalty if they just want to wait until April 15, which we think most taxpayers will do."
The income tax is expected to generate about $6 billion this year; it will remain in place for seven years. Starting in January 2013, state sales tax will rise by 1/4 of a cent for four years. That's roughly one cent on a $4 latte or 25 cents on a $100 purchase.