If You Have People Working for You
The Employment Development Department (EDD) administers California's payroll taxes, including Unemployment Insurance, Employment Training Tax, State Disability Insurance (including Paid Family Leave), and California Personal Income Tax withholding. Employers conducting business in California are required to register with and file reports and pay taxes to EDD.
- Who is an employer?
- Who needs to register with EDD and when?
- What are California's payroll taxes and who pays them?
- What are California's rates and wage limitations?
- What forms do I need and where do I get them?
- When are the forms and taxes due?
- Where do I get help or answers to questions?
- My employees work in more than one state. To which state(s) do I pay taxes?
- Do nonprofit/exempt organizations have to pay payroll taxes?
The Internal Revenue Service (IRS) administers federal payroll taxes, including social security, Medicare, federal unemployment insurance and federal income tax withholding. For more information, see:
Employers are required to display posters and notices about employment and working conditions. Below is information about those requirements.
Who is an employer?
An employer is a person or legal entity who hires one or more persons to work for a wage or salary. Employers include sole proprietors, partnerships (including co-ownerships), corporations, S corporations, limited liability companies, limited liability partnerships, nonprofit organizations, associations, trusts, public entities, and state and federal agencies.
Private households, local college clubs, and local chapters of fraternities and sororities who employ workers to perform household services are household employers.
Who needs to register with EDD and when?
An employer registers with EDD after paying over $100 in total wages to one or more employees in a calendar quarter:
- 1st Quarter: January, February, March
- 2nd Quarter: April, May, June
- 3rd Quarter: July, August, September
- 4th Quarter: October, November, December
A household employer must register with EDD after paying $750 in cash wages to one or more employees in a calendar quarter.
What are California’s payroll taxes and who pays them?
- Unemployment Insurance (UI) is paid by employers. UI provides temporary payments to individuals who are unemployed through no fault of their own.
- Employment Training Tax (ETT) is paid by employers. ETT provides training funds to empower workers, promote business and boost California's economy.
- State Disability Insurance (SDI) is deducted (withheld) from employees' wages. SDI provides temporary payments to workers who are unable to perform their usual work because of a pregnancy or a nonoccupational illness or injury (work-related disabilities are covered by workers’ compensation). SDI also includes Paid Family Leave (PFL), which provides benefits to workers who need to care for a seriously ill family member or to bond with a new child. Beginning July 1, 2014, California workers may be eligible to receive PFL benefits when taking time off of work to care for a seriously ill parent-in-law, grandparent, grandchild, or sibling.
- California Personal Income Tax (PIT) is withheld from employees’ wages and credited toward the amount due for the employees' annual California state income tax.
Additional California state payroll tax information is available at EDD’s Rates, Withholding Schedules, and Meals and Lodging Values page.
What are California's rates and wage limitations?
- UI: Most* employers pay a percentage on the first $7,000 in wages for each employee in a calendar year. The UI rate and taxable wage limit may change each year. The new employer rate is 3.4 percent (.034) for a period of two to three years. The UI tax rate for experienced employers varies based on each employer’s experience and the balance in the UI Fund.
- ETT: The ETT rate is 0.1 percent (.001) and is paid, like UI, on the first $7,000 in wages for each employee in a calendar year. All new employers pay ETT for the first tax year. After that, most employers pay ETT, but those with a negative reserve account balance do not.
- SDI: The SDI rate and taxable wage limit may change each year. The current years rates are available on the EDD’s Rates, Withholding Schedules, and Meals and Lodging Values page.
- PIT: The amount withheld is based on the employee's W-4 or DE 4 filed with the employer.
- The California Withholding Schedules are available on EDD’s website.
- *Nonprofit organizations with an IRS 501(c)(3) exemption and government employers may elect the reimbursable method of UI financing in which they reimburse the UI Fund on a dollar-for-dollar basis for all benefits paid to their former employees.
What forms do I need and where do I get them?
The Employment Development Department (EDD) offers employers the ability to register, file reports, make deposits, and manage their account online using a computer, smart phone or tablet.
- Visit the Register for Employer Payroll Tax Account Number page to obtain a California Employer Account Number and tax rate information.
- Enroll in e-Services for Business to manage your account.
For additional registration information or options go to EDD’s Am I Required to Register as an Employer page.
When are the forms and taxes due?
- Under California law, employers are required to report specific information periodically. The following forms are the most common forms employers are required to file with the EDD.
- Report of New Employee(s) (DE 34)
- Report of Independent Contractor(s) (DE 542)
- Quarterly Contribution Return and Report of Wages (DE 9)
- Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C)
- Payroll Tax Deposit (DE 88)
- As of January 1, 2018, all employers are required to electronically file employment tax returns, wage reports, and payroll tax reports. For more information on this requirement, visit E-file and E-pay Mandate for Employers.
For additional information about required forms and due dates, go to EDD’s Required Filings and Due Dates page.
Where do I get help or answers to questions?
See Contact Us.
My employees work in more than one state. To which state(s) do I pay taxes?
In today’s mobile, computerized society, many employees work away from their employer’s office. Their work may be performed in two or more states. The question of to which state to pay taxes is divided into two parts - Unemployment Insurance (UI) tax and Personal Income Tax (PIT).
- Unemployment Insurance Tax: All 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands use the same four tests to determine where wages should be reported for UI (and for ETT and SDI in California). Application of a test must result in reporting wages to California or another state, or that test does not apply. The tests are applied to each employee, not the employer, and they are applied in descending order. The employee must perform some services in California before the tests can be applied.
- Localization - If California is the one state in which all or most of the employee’s services are performed, UI (and ETT/SDI) taxes are paid to California (EDD). If another state is the one state in which all or most services are performed, UI is paid to that state. If this test doesn't apply in any one state, the next test is.
- Base of Operations - The more or less permanent place from which the employee usually starts work and returns to receive the employer’s instructions. If this base is in California, UI (and ETT/SDI) is paid to EDD. If this base is in another state, UI is paid to that state. If this test doesn't apply in any one state, the next test is.
- Place of Direction and Control - The place from which the employer gives basic and general direction and control over all the employee’s services. If this place is in California and if the employee does some work in California, UI (and ETT/SDI) is paid to EDD. If this place is in another state and the employee does some work in that state, UI is paid to that state. If this test doesn’t apply in any one state, the last test is.
- Residence of Employee - If the other tests don't apply and the employee resides in California and does some work in California, UI (and ETT/SDI) is paid to EDD. If the employee resides in another state and does some of his or her work in that state, UI is paid to that state. If the employee doesn’t do any work in his or her state of residence, there are special circumstances that may apply, such as employees who work in foreign countries or on American vessels or aircraft. Call EDD’s toll-free number (888) 745-3886 or visit your nearest Employment Tax Office or for more information, refer to Information Sheet: Foreign Employment and Employment on American Vessels or Aircraft (DE 231FE).
- Personal Income Tax: Wages paid to a California resident for work done in or out of California and wages paid to a nonresident for work done in California are both subject to state income tax and are usually subject to PIT withholding. If employees work and/or reside in more than one state, employers may need to withhold PIT and the income tax of other state(s), political subdivision(s), or the District of Columbia. Call EDD’s toll-free number (888) 745-3886 or visit your nearest Employment Tax Office for more information.
Refer to EDD’s Information Sheet: Multistate Employment (DE 231D) for additional information.