What Are the Payroll Taxes in California?

Payroll taxes are mandatory contributions deducted from employee wages and paid by employers to fund various public programs. Employers are responsible for collecting, reporting, and remitting these funds to government agencies. While federal payroll taxes apply nationwide, California imposes its own distinct set of payroll taxes in addition to federal requirements.

Key California Payroll Taxes

California employers and employees contribute to several state-specific payroll tax programs that provide a safety net and support for workers. Understanding these taxes is important for payroll compliance.

Unemployment Insurance (UI) is an employer-funded tax that provides temporary income support to eligible workers who lose their jobs through no fault of their own. The funds collected through UI taxes are used to pay weekly benefits to unemployed individuals. Employers pay this tax based on a taxable wage limit for each employee annually.

The Employment Training Tax (ETT) is another employer-funded tax, designed to provide funds for job training programs. These programs equip California’s workforce with skills for employment opportunities and enhance business competitiveness.

State Disability Insurance (SDI) is a mandatory, employee-funded program that provides partial wage replacement benefits to eligible workers. These benefits are available when workers are unable to perform their usual job duties due to a non-work-related illness or injury, or when they need time off to care for a seriously ill family member or bond with a new child. SDI encompasses both Disability Insurance (DI) and Paid Family Leave (PFL) benefits.

Personal Income Tax (PIT) Withholding is also an employee-funded tax, representing a prepayment of an individual’s estimated state income tax liability. Employers are required to withhold a portion of each employee’s wages and remit these amounts to the state.

Employer Responsibilities

Employers in California have specific obligations to ensure compliance with state payroll tax laws. These responsibilities begin before the first payroll is processed and continue throughout the employment lifecycle.

Before hiring employees, businesses must register with the California Employment Development Department (EDD) to obtain an employer account number. This unique identifier is necessary for reporting and remitting state payroll taxes. Registration can be completed online through the EDD’s e-Services for Business website.

Employers are responsible for accurately withholding employee-funded taxes, such as State Disability Insurance and Personal Income Tax. The amount to withhold for each employee is determined using information provided on federal Form W-4 and California Form DE 4, alongside official withholding tables or approved computational methods.

Depositing withheld taxes and employer contributions to the EDD on time is another core responsibility. The frequency of these deposits—whether daily, weekly, monthly, or quarterly—depends on the employer’s total payroll tax liability. Larger tax liabilities require more frequent deposits to ensure the state receives funds promptly.

Maintaining accurate payroll records for each employee is also a mandatory requirement. These records must include details such as employee names, Social Security numbers, dates of employment, wages paid, and taxes withheld. Such recordkeeping is essential for accurate reporting and responding to potential audits.

Filing and Payment Procedures

Employers must adhere to specific procedures for filing payroll tax returns and making payments, with an emphasis on electronic methods. California places a strong emphasis on electronic methods for these transactions.

Most employers in California are required to file payroll tax returns and make payments electronically. This mandatory electronic filing requirement simplifies the process.

The primary online portal for employers to manage their California payroll tax obligations is EDD e-Services for Business. This secure platform allows employers to register, file required reports, and make tax payments.

Key forms that employers must file include the Quarterly Contribution Return (Form DE 9) and the Quarterly Wage Report (Form DE 9C). Form DE 9 reports total wages and taxes due, while Form DE 9C details individual employee wages.

Payments can be made electronically through EDD e-Services for Business using various methods, including Electronic Funds Transfer (EFT). Meeting deadlines for filing and payment is paramount to avoid penalties.