The money or vouchers you received for the Cash For Clunkers program is not taxable for federal income tax purposes.

You may want to consider revising your California Income Tax Withholding Exemptions.  California is currently adding 10% to the withholdig tables to assist in the states cash flow problems.  They are effectively trying to borrow $1.5 billion from us taxpayers.  You can offset this reduction in your paycheck by increasing the number of exemptions you claim.  See [...]