The following post includes answers to some of the most frequently asked questions about California payroll tax.
What organization oversees payroll tax in the state?
The Employment Development Department (EDD) is responsible for administration of payroll taxes and the collection of taxes. Qualifying employers must register with the EDD.
Who does the state consider an employer?
An employer includes an entity that employs one or more employees in a given quarter who are paid $100 or more in a given quarter. Employer entities include but may not be limited to sole proprietors, partnerships, various types of corporations, limited liability entities, not-for-profit organizations, state and federal agencies, associations, and trusts.
California distinguishes an employer from a household employer, which is when someone pays an individual to come to their home to do work. These workers could include but may not be limited to maids, babysitters, yard workers, and healthcare workers. A household employer must pay payroll taxes when they employ one or more employees in a given quarter who are paid $750 or more in a given quarter.
What types of payroll tax does the state collect?
The state collects the following types of payroll tax:
- Unemployment insurance, which provides for unemployment benefits to individuals who lose their job, is paid fully by the employer
- Employment training tax, which provides training funds for the state to use in developing businesses, is paid fully by the employer
- State disability insurance, which provides payments to individuals unable to work on a temporary basis because of pregnancy or other non-work injury or illness, is paid fully by the employee
- California personal income tax, which is money withhold for payment of an employee’s state income tax, is paid fully by the employee
What payroll tax rates are used by the state?
For unemployment insurance, the employer pays a percentage of the first $7,000 in wages for each employee. The percentage is 3.4 percent for the first three tax years and then it varies between 1.5 and 6.2 percent depending on the employer.
For employment tax training, the employer typically pays .1 percent of the first $7,000 in wages of each employee.
For state disability insurance, the rate varies by year. For 2013, the rate is 1.0 percent of the first $100,880 in wages paid to each employee.
The California personal income tax amount is based solely on the Form W-4 completed by the employee.
What forms are used for payroll tax?
The following forms are used for California state income tax:
- DE 1, the Registration Form, that an employer must submit after paying at least one employee $100 or more in a single quarter
- DE 34, the Report of New Employee, to notify the state of each new employee hired by the employer
- DE 88, the Payroll Tax Deposit Coupon, to include with any payroll taxes sent to the EDD
- DE 9 and DE 9C, the Quarterly Contribution Return and Report of Wages, to report the total wages the employer paid for the quarter that are subject to the various payroll taxes
When are payroll taxes and tax forms due?
The due date varies depending on the type of form:
- Form DE 1 is due within 15 days after an employer pays its first employee $100 or more in a given quarter
- Form DE 34 is due within 20 days of the first day an employee works for an employer
- Form DE 88 is due quarterly
- Forms DE 9 and DE 9C are due the first day of the month after each quarter of the calendar year (i.e., April 1, July 1, October 1, and January 1)
If you have questions about your payroll taxes or need help filing the appropriate returns, you may contact a tax attorney by completing the form on this web site or calling the phone number located at the top of this page.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.