California Payroll Tax

Employers in the state of California must file and pay employment taxes, both to the Internal Revenue Service (IRS) and the state. Employment taxes, also called payroll taxes, help fund Social Security, Medicare, and unemployment insurance. Employers who don't keep accurate reports or pay their employment taxes can face penalties from California's state tax agencies.

A qualified California tax attorney can help you resolve any issues with payroll taxes you might have.

Taxes California Employers Must Withhold

In addition to federal withholdings, California employers must withhold state taxes from their employees' paychecks. The Employment Development Department (EDD) is in charge of assessing and collecting payroll taxes.

Unemployment insurance

Withholdings for unemployment insurance go toward a fund that disburses temporary payments to unemployed individuals. Employers are responsible for unemployment insurance if they've paid one or more employees $100 in a calendar year. The taxable wage limit for the unemployment insurance tax is $7000 per employee annually. As of 2020, new employers in California must pay a rate of 3.4% for unemployment insurance.

Employment training tax

The employment training tax funds training for workers in targeted industries to make California businesses more competitive. The employer pays this tax, which is 0.1% on the first $7000 in wages paid to each employee in a single year. Therefore, the maximum tax an employer pays is $7 per employee per year. Since the employment training tax is for specific industries only, not every employer has to pay it.

State disability insurance

The tax for state disability insurance is used to fund payments to workers for non-work-related illness, injury, or pregnancy. This program also disburses Paid Family Leave benefits in California. Paid Family Leave provides support to individuals who can't work because they must care for a seriously ill family member or new child. Employers don't pay this tax; it's withheld from employee paychecks. The state disability insurance tax is a percentage of the first $128,298 in wages to each employee each year. For 2021, the rate is 1.2%.

California personal income tax

Personal income tax is a tax on residents of California and nonresidents who earn income within California. These taxes go toward resources for the state, such as public services, schools, roads, parks, and health and human services. There is no wage limit for the personal income tax in California, and the rate is based on the Form W-4 or DE 4 on file with the employer.

Penalties for Not Paying Payroll Taxes in California

The EDD can assess 100% of payroll taxes owed if a business or person does not report and pay their payroll taxes. Late payments also accrue interest, and the EDD can issue a tax lien against you to collect your tax debt.

Get Help with California Payroll Tax Issues

The EDD takes California payroll taxes seriously. A qualified tax attorney can help you avoid penalties and stay current on your business taxes. Contact a California Tax Attorney today with your questions and to set up an initial consultation.

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