What Is CASDI-E and How Does It Affect Your Payroll Taxes?
Understand CASDI-E's impact on payroll taxes, including obligations, calculations, reporting, and steps to correct withholding errors.
California State Disability Insurance (CASDI) is a component of payroll taxes for employees in California, funding disability and paid family leave benefits. Understanding CASDI’s impact on payroll taxes is essential for both employers and employees to ensure compliance and proper financial planning.
Employer vs. Worker Obligations
Navigating the obligations associated with CASDI requires understanding the responsibilities of both employers and employees. Employers must withhold CASDI contributions from employees’ wages. For 2024, the withholding rate is 1.1% of an employee’s gross wages, up to the annual taxable wage limit of $153,164, resulting in a maximum contribution of $1,684.80. Accurate calculations and timely remittance to the Employment Development Department (EDD) are critical for compliance.
Employees should be aware of how these deductions affect their take-home pay and the benefits they can access. CASDI provides short-term disability insurance and paid family leave for non-work-related illness, injury, or pregnancy. Familiarity with eligibility and the application process through the EDD’s online portal can help employees make informed decisions.
Employers are also responsible for maintaining accurate records of CASDI contributions and reporting them on employees’ W-2 forms. Compliance with state regulations is crucial to avoid penalties and interest charges. Regular payroll reviews and professional advice can help ensure adherence to current requirements.
Withholding Calculations
Accurate CASDI withholding is a key component of payroll management. Employers must calculate deductions based on employees’ gross wages, using the 2024 rate of 1.1% up to the taxable wage limit of $153,164. Once this threshold is reached, no further deductions should be made for the year.
Integrating these calculations into payroll systems ensures deductions adjust automatically as employees approach the wage limit. Payroll software often facilitates these processes, but employers must confirm their systems are updated annually to reflect current rates and limits.
Errors in withholding, whether over- or under-deducting, can lead to employee dissatisfaction or penalties from the EDD. Regular payroll audits can help identify discrepancies and maintain compliance with statutory requirements.
Reporting During Tax Season
Accurate reporting of CASDI contributions is essential during tax season. Employers must include CASDI withholdings on employees’ W-2 forms, specifically in Box 14. This information is critical for employees filing their state and federal tax returns. Errors can lead to confusion or audits.
Reviewing payroll records throughout the year, cross-referencing them with bank statements and payroll outputs, can help catch discrepancies before issuing W-2 forms. Consulting a tax advisor can provide guidance on any recent tax code changes affecting reporting.
Employers must meet the January 31st deadline for distributing W-2 forms to avoid penalties, which can reach $50 per delayed form.
What to Do If Withholding Is Incorrect
CASDI withholding errors can impact both a company’s financial records and employee satisfaction. Identifying the source of the error requires reviewing payroll records and calculations. Mistakes often stem from software issues, manual entry errors, or misinterpretation of regulations.
Once the error is identified, employers must act quickly. Over-withholding requires reimbursing employees and adjusting payroll records, while under-withholding necessitates notifying employees and possibly adjusting future withholdings. Engaging with the EDD to report and correct discrepancies helps prevent penalties.