Business attorneys at Gehres Law Group, P.C. advise companies on their obligations as employers. California imposes myriad requirements on companies that hire staff members. Among those requirements are rules related to payroll taxes.
California Payroll Tax Rules for Employers
The Employment Development Department in California provides a comprehensive guide to state payroll tax rules for companies. Some of the key rules that employers should know about include the following:
- Employers with one or more employees must register with the Employment Development Department if they pay any employee more than $100 in a calendar quarter. However, if you pay wages to gardeners, housekeepers or others who work around your home, you are considered a household employer and must register only after paying $750 or more in wages per calendar quarter.
- Employers with 10 or more employees are required to file and submit tax returns, wage reports and payroll tax deposits electronically as of January 1, 2017.
Anyone who is considered an employer in California must comply with payroll tax obligations. There are four payroll tax programs in California which are administered by the Employment Development Department. These payroll taxes include:
- Unemployment tax: Unemployment tax must be paid on the first $7,000 in wages employers pay to each employee during the calendar year. Employers pay this tax on a quarterly basis. Tax rates vary based on factors including whether the employer is a new employer as well as the employer’s experience with the unemployment program. Taxes could vary between 1.5% and 6.2%. This tax funds unemployment payments for workers who are laid off from their jobs.
- Employment training tax: Employment training tax is charged at a rate of .1% of the first $7,000 in wages employers pay to employees during each calendar year. The tax provides funding to train employees in industries necessary to keep California businesses competitive. Employers pay this tax.
- State disability insurance: State disability insurance is funded by a tax on employee wages. Employees pay this tax. Employers must withhold .9% of the first $110,902 in wages that are paid to employees during each calendar year. The taxes fund short-term disability payments and paid leave for eligible workers who take time off to care for a new child or for a sick child, parent, grandparent, sibling, spouse, or other close relative.
- California personal income tax withholding: California personal income taxes are paid by workers on income they earn within the state of California. Employers must withhold an appropriate amount of money from an employee’s entire salary based on the information provided by employees on their W-4 forms.
Employers are responsible for the payment and/or collection of each of these payroll taxes as well as for the timely submission of payroll tax forms and payments of all taxes due.
Getting Help from California Business Attorneys
Gehres Law Group, P.C. provides assistance to employers in understanding payroll tax obligations. Payroll tax obligations are just one of many legal requirements employers must comply with when operating a business within the state of California. Business attorneys at our firm can help you to understand the full range of laws applicable to your organization so contact our legal team for help as soon as possible after beginning operations or when you hire a staff member for the first time.