California Form 5805 is the Franchise Tax Board worksheet that determines whether you owe a penalty for underpaying your state estimated income tax, and if so, how much. It also gives you two ways to reduce that penalty: the annualized income installment method, and a written waiver request for certain hardships. Because California’s installment schedule is front-loaded compared to the federal one, taxpayers who paid the right annual total can still land on this form.
Do You Need to File It?
You only have an estimated tax obligation in California if you expect to owe $500 or more after withholding and credits ($250 if married or in a registered domestic partnership filing separately).1Franchise Tax Board. Estimated Tax Payments Below that, Form 5805 doesn’t apply to you.
Above it, filing the form is often optional. The FTB can run the standard calculation itself and send you a bill. The reason to complete Form 5805 proactively is to show the FTB that you owe less than that standard calculation — either because the annualized income method produces a smaller penalty, or because you qualify for a waiver.2Franchise Tax Board. 2025 Instructions for Form FTB 5805 Skip the form, and the standard method stands.
California’s 30/40/0/30 Installment Schedule
This is where most underpayment penalties come from. California does not use four equal quarterly payments. The required annual payment is split like this:3Franchise Tax Board. 2026 Instructions for Form 540-ES Estimated Tax for Individuals
- First installment, due April 15: 30%
- Second installment, due June 15: 40%
- Third installment, due September 15: 0%
- Fourth installment, due January 15 of the following year: 30%
Seventy percent of the year’s required payment is due by June 15. The federal system, by contrast, has only 50% due by that date. If you make four equal payments on federal habit, you will underpay the first two California installments and overpay the fourth, and Form 5805 will show a penalty even though your annual total was correct. The penalty is calculated separately for each installment period, so timing is what matters.
Safe Harbors That Avoid the Penalty
Your combined withholding and estimated payments avoid the penalty if they meet either of these benchmarks:
- At least 90% of the tax shown on your current year’s return.
- At least 100% of the tax shown on your prior year’s return, as long as that return covered a full 12 months.1Franchise Tax Board. Estimated Tax Payments
The prior-year test gets tougher at higher incomes. If your California AGI in the prior year was more than $150,000 ($75,000 if married or in an RDP filing separately), you must pay 110% of the prior year’s tax rather than 100%.4Franchise Tax Board. 2025 Instructions for Form 540-ES Estimated Tax for Individuals – Section: C. Limit on the Use of Prior Year’s Tax
At $1,000,000 or more of AGI, the prior-year safe harbor disappears entirely. You must pay at least 90% of your current year’s tax. A modest prior year does not help at that income level.
How the Penalty Is Calculated
Form 5805 first establishes your required annual payment using the safe harbor rules, splits it across the four periods at 30/40/0/30, and compares each required installment to what you actually paid by its due date.2Franchise Tax Board. 2025 Instructions for Form FTB 5805 Any shortfall for a period is your underpayment for that period.
The penalty is interest on each underpayment, not a flat percentage. Interest runs from the day after the installment due date until the shortfall is covered, either by a later estimated payment or by the balance paid with your return. A missed April installment costs more than a missed January one because the money is outstanding longer.
The FTB sets the rate semi-annually using a formula tied to federal short-term rates.5California Legislative Information. California Revenue and Taxation Code RTC 19521 For 2026, the personal income tax underpayment rate is 7% for both halves of the year.6State of California Franchise Tax Board. Interest and Estimate Penalty Rates The form walks you through a day-count calculation for each period and sums the four results into your total penalty.
Reducing the Penalty With the Annualized Income Method
The 30/40/0/30 schedule assumes your income arrives evenly through the year. If it didn’t — a Q4 capital gain, a business sale, a December bonus — the standard method penalizes you for not paying tax on money you hadn’t received yet. The annualized income installment method recalculates your required installment for each period based only on the income you actually earned through the end of that period.
You complete Part III of Form 5805 (Sides 3 and 4) to use it.2Franchise Tax Board. 2025 Instructions for Form FTB 5805 The method divides the year into four cumulative periods ending March 31, May 31, August 31, and December 31. For each one you compute tax on the income earned through that date, multiply by an annualization factor (4, 2.4, 1.5, and 1 respectively), and derive a required installment from that figure. The form takes the smaller of the annualized installment or the regular installment for each period, so it only helps you.
One rule to know: if you use the annualized method for any installment period, you must use it for all four. You can’t apply it only where it helps.
Penalty Waivers
Even when the math shows a penalty, the FTB may waive it in two situations:7Franchise Tax Board. 2025 Instructions for Form FTB 5805 – Section: C. Waiver of the Penalty
- Casualty, disaster, or other unusual circumstance beyond your control, where imposing the penalty would be inequitable. Examples include a house fire that destroyed financial records or a sudden medical emergency.
- Retirement after age 62 or disability occurring during the current or prior tax year, where the underpayment was due to reasonable cause and not neglect.
You request a waiver in writing with a narrative of what happened and why it prevented timely payments. Checking a box is not enough.
Disaster relief is handled separately. When the FTB postpones filing and payment deadlines for a federally or state-declared disaster, the extended deadlines replace the original installment due dates for penalty purposes, which can reduce or eliminate the underpayment on its own.8State of California Franchise Tax Board. Emergency Tax Postponement Check the FTB’s emergency relief page for current declarations affecting your area.
Farmers and Fishermen Use a Different Form
If at least two-thirds of your gross income comes from farming or fishing in either the current or prior tax year, Form 5805 is not your form. Use Form 5805F instead.9Franchise Tax Board. 2025 Instructions for Form FTB 5805F Underpayment of Estimated Tax by Farmers and Fishermen Qualifying taxpayers can also avoid the estimated tax penalty entirely by paying all 2026 estimated tax in a single installment by January 15, 2027, or by filing the 2026 return and paying in full by March 1, 2027.3Franchise Tax Board. 2026 Instructions for Form 540-ES Estimated Tax for Individuals The same casualty and retirement/disability waivers apply.
Filing the Form
Attach the completed Form 5805 to the back of your annual California return: Form 540, Form 540NR for nonresidents, or Form 541 for estates and trusts.10California Franchise Tax Board. Form 5805 – Underpayment of Estimated Tax by Individuals and Fiduciaries If you e-file, your software carries the data through. When you use the annualized income method, also check the designated box on your return: line 113 of Form 540, line 123 of Form 540NR, or line 45 of Form 541.2Franchise Tax Board. 2025 Instructions for Form FTB 5805 The penalty from Form 5805 is entered on the designated line of your return and added to your total tax due.
If the FTB has already billed you a penalty and you believe the annualized method or a waiver would lower it, file Form 5805 with an amended return. Without the form, the standard calculation is what the FTB has, and the standard calculation is what you’ll owe.