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What is the payroll tax in California?

On: June 12, 2020

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Being a business owner in California means being responsible for making sure you cover and pay the payroll tax. While it is different in every state, Californians have to deal with them or possibly have to suffer the consequences of breaking tax law.  By staying on top of your job and knowing all the state and federal payroll taxes you have to deal with, you will most likely never see any problems. Here is what you need to know about the payroll tax in California. What is the payroll tax in California? If you are a licensed business with employees in the state, then you are going to have to pay payroll taxes. Employers, for the most part, are the ones responsible for taking out the required amount from each employee’s paycheck and paying the Employment Development Department. In California, the standard tax is currently 0.9 percent. California Personal Income Tax is the other California payroll tax that’s paid by employees rather than employers, but employers are again responsible for withholding it from their paychecks. In the United States, there are both federal and state payroll taxes that employers must pay. California has four state payroll taxes, all of which are given out by the Employment Development Department (EDD). These taxes are the unemployment insurance (UI) tax, employment training tax (ETT), state disability insurance (SDI) tax, and California personal income tax (PIT). When all of these are added up, it will depend on your business and how much each employee makes but will come out to around 6.2 percent of the total paycheck being taken out for payroll taxes on top of other taxes. Employers may withhold the payroll tax from the employee’s salary and pay it to the government on their behalf, which is usually the most common method, or contribute a certain amount that is decided by the employee’s wages. The employee’s wage or salary will ultimately determine the amount of payroll tax that is needed to be paid. What do I need to know about payroll tax? One of the first things you should do when you hire a new employee is to update yourself on employee laws.  It is also important to note that every California employer must report any information about their new employees to the California New Employee Registry within 20 days of their first day of work. This is very important as failure to do so can result in fines or even getting your business license revoked if you are not careful. You will report your payroll taxes electronically to the Employment Development Department through the Quarterly Contribution Return and Report of Wages (DE 9) and Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C), which can be found on their website and is done four times a year. Employers with 10 or more employees are required to electronically submit employment tax returns, wage reports, and payroll tax deposits to the EDD during the correct time. It is very important to not miss any deadlines and file on time, as it can come up during an audit that you did not do so and does not look good for you and your company. Always make sure to call Leading Tax Group and don’t attempt to do it yourself
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