What payroll taxes do I need to pay in California?
California has four state-specific payroll taxes on top of federal requirements. Two come out of your pocket as the employer. Two get withheld from employee paychecks, but you’re responsible for collecting and remitting them to the state.
Unemployment Insurance (UI) is employer-paid. New employers typically start at 3.4% on the first $7,000 of each employee’s wages per year. Your rate changes over time based on your claims history and can range from 1.5% to 6.2%. Employment Training Tax (ETT) is also employer-paid at 0.1% on that same $7,000 wage base.
State Disability Insurance (SDI) comes from employee wages. You withhold it each pay period and remit it to the Employment Development Department. The rate changes annually, so check the current year’s schedule. Personal Income Tax (PIT) withholding also comes from employees based on their DE 4 form and California’s withholding tables.
Federal payroll taxes apply on top of these. You and your employees each pay 6.2% for Social Security and 1.45% for Medicare. Federal Unemployment Tax (FUTA) is employer-only at 6% on the first $7,000 per employee, though a credit typically reduces your effective rate to 0.6% if California’s trust fund remains solvent.
All California payroll taxes get reported to the EDD through quarterly filings using Form DE 9 and DE 9C. When you actually deposit the taxes depends on your total liability. Small employers with less than $350 in quarterly taxes deposit quarterly. Larger payrolls require monthly or semi-weekly deposits. The deadlines are strict and the EDD assesses penalties for late deposits separately from late filing penalties.
Most San Diego business owners handle federal deposits through EFTPS and state deposits through EDD’s e-Services. Getting payroll setup right from the start prevents problems. Registering with the wrong deposit schedule or missing that your UI rate changed in January creates headaches that stack up over time.
If this feels overwhelming, that’s normal. California has more payroll requirements than most states. Working with a small business bookkeeper who understands California payroll can help you stay compliant without spending hours learning the rules yourself.
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