California Paycheck Calculator

California State Payroll Withholding Information

Processing payroll in CA can seem daunting at first, but it is similar to other payroll systems. It very closely resembles the Federal system for payroll so if you are familiar with that, you will have a leg up in processing payroll for CA.

The overall view is that after creating paychecks, companies will typically deposit their taxes monthly and file their returns once a quarter. The two payroll returns that CA needs are the DE-9 and the DE-9c.

There are no annual reconciliation returns, the only returns are the quarterly ones.

For a more specific breakdown, first, we will discuss calculating the taxes on paychecks. CA has four taxes that usually need to be calculated on wages paid to employees.

The four taxes are:

• State Withholding Tax or (WH)
• State Disability Insurance or (SDI)
• State Unemployment Insurance or (SUI)
• State Employee Training Tax or (ETT)

State WH and SDI are paid by the employee while SUI and ETT are paid by the company. Unlike Federal taxes, there is no overlap in payment for certain taxes.

• State Withholding Tax (WH)

  State WH is calculated using a Progressive tax rate, like the Federal system. That means you pay a specific percentage of tax on certain dollar amounts of income and as you make more money, you pay a higher tax rate. The exact details can be found here.

• State Disability Insurance (SDI)

  State Disability Insurance or SDI, is a fixed percentage of Gross Wages. For 2024, there is no Wage Limit to the SDI Tax meaning all Gross Wage are subject to SDI tax. This is a change from before when there was a Wage Limit to SDI tax. SDI is only paid by the employee and not paid by the company.

• State Unemployment Insurance (SUI)

  State Unemployment Insurance or SUI, is a similar fixed-rate tax with a wage limit. For 2024, the wage limit is $7,000. However, the rate is different for different companies. The default rate is 3.4% but it can range between 1.5% to 6.2%. SUI is only paid by the company, not by the employee.

• State Employee Training Tax (ETT)

  Employee Training Tax or ETT, is a fixed rate as well with the same wage limit as the state UI. The standard rate is 0.1% and the Wage Limit is $7,000. However, if the CA UI rate is at the max rate of 6.2%, the ETT rate goes to 0%. ETT is also paid by the company only, the employee is not responsible for the tax.

In the taxes above, the term Wage Limit is used to describe the maximum amount of taxable income for that particular tax in a calendar year. So using SUI as an example, only the first $7,000 is subject to the tax. Once you make more than $7,000, the earnings are not subject to taxes. Wage Limit is a common term that is used for many other types of taxes as well.

These four taxes are the standard CA deductions for payroll calculations. All of these four taxes should be deducted each payday and paid out at the appropriate time.

In addition to taxes, there are also other parts to payroll that need to be accounted for. CA has implemented a mandatory sick pay which needs to be calculated and tracked each payday as well. This can be handled in several different ways but we will review the legally mandated requirements.

In determining the mandatory PTO, there are three main factors. First is the rate of accrual, the second is how many hours employees can use in a year, and finally how many hours can carry over each year. CA sets rules on what each of those factors can be if your company wants to offer a more generous plan that is acceptable as well.

The CA minimum rate of accrual is 1 hour of vacation time for every 30 worked. If we use the standard calculation of 2080 (40-hour work weeks * 52 weeks a year) working hours per year, that is a rate of 69.33 accrued hours per year.

The CA minimum allowed usage is 40 hours or 5 days a year. This is an increase from 2023 when CA only required that 24 hours or 3 days a year could be used. It may seem odd that the minimum rate of accrual is greater than the total number of hours an employee can use in a year but CA wants to ensure that all employees, not just full time can have access to PTO.

Finally, the CA minimum carryover is 80 hours or 10 days a year. This means that if you don't use all of your accrued PTO, you can carry it over to the next calendar year. This is where the higher rate of accrual comes into play since if you worked a full year, you would get 69.33 accrued hours. You could use 40 of them and then you would have 29.33 left. These 29.33 hours would carry over to the next year so you could use them or just keep accruing more as you work.

Instead of having PTO accrued by the requirements above, employers can also just directly give employees 40 hours per year without any accrual. This can make bookkeeping easier as the employer just needs to track the number of hours used instead of tracking the gain and usage each paycheck.

The above definitions are the most standard requirements for CA PTO. Other states have implemented similar programs but they will be discussed on their own individual state pages.

Moving on to reporting taxes, CA has two quarterly returns that need to be filed. The CA DE-9 and DE-9c. The CA DE-9 is used to report the quarterly totals of the four previously listed taxes along with the Gross Wages paid. The CA DE-9C is used to report the individual breakdown of Gross Wages, Subject Taxable Wages, and individual State Withholding (Personal Income Tax).

These returns are both due one month after the quarter ends. So for example, the 2024 Q1 return is due by April 30th.

If there are any corrections to be made, the form DE-9C ADJ is used to make changes to both returns. You don't have to change both returns at once but all changes should be made using that form.

Finally, for making tax payments, CA has several options. The most recommended method is to use the CA EDD e-Services online website to make payments electronically. You can create an account there and make your payments from your bank account or credit card.

If you don't want to pay electronically, you can send a check to the EDD along with a DE-88 Payment Coupon.

CA highly recommends using electronic payment methods to ensure your tax payments are made on time and accepted.