EDD DE 44: California Employer's Guide

Supplemental wages include, but are not limited to, bonuses, overtime pay, sales awards, commissions, stock options, vacation pay, and dismissal or severance pay. Under certain circumstances, bonuses and stock options are taxed at a different flat rate than other types of supplemental wages. Refer to Supplemental Wages below. This only applies to stock options that are considered wages subject to PIT withholding. If the supplemental wage is given to the employee at the same time as the employee’s regular wages are paid, you are required to treat the sum of the payments as regular wages and withhold PIT based on the regular payroll period using the PIT withholding schedules. If the supplemental wage is not given to the employee at the same time as the employee’s regular wages are paid, you may use either of the following two options: 1. Compute the amount of PIT to withhold from the supplemental wage based on the combined regular wages and the supplemental wage. Compute the PIT withholding on the total of the supplemental wage and the current regular gross wage payment using the PIT withholding schedules. From that amount, subtract the PIT you withheld from the regular wages. The difference is the PIT amount you should withhold from the supplemental wages. or 2. Withhold the percentage below on the following types of supplemental wages without allowing for any withholding allowances claimed by the employee: Supplemental Wages Percentage Bonuses and stock options 10.23 percent (.1023) Other types (such as overtime pay, commissions, sales awards, severance, and 6.6 percent (.066) vacation pay) To find out if stock options are wages subject to PIT withholding, refer to Information Sheet: Stock Options (DE 231SK) (PDF) (edd.ca.gov/pdf_pub_ctr/de231sk.pdf) or contact the Taxpayer Assistance Center at 1-888-745-3886. Quarterly Estimated Payments Wages are subject to mandatory California PIT withholding at the time they are paid to the employee. Quarterly estimates paid directly to the FTB are intended to satisfy taxes on income that is not subject to withholding. Quarterly estimates paid by an employee directly to FTB instead of proper withholdings from wages may result in an assessment to the employer. If you have questions regarding quarterly estimated payments, contact FTB at 1-800-852-5711. Wages Paid to California Residents If Then Wages paid to the resident employee are subject to California PIT withholding, and A California resident PIT must be withheld from all wages paid, following the employee’s DE 4. Refer to the performs services in withholding requirements on page 16. California or in another The wages paid must be reported as PIT wages on the Quarterly Contribution Return state. and Report of Wages (Continuation) (DE 9C). The PIT withheld must also be reported on the DE 9C. Make the withholding required by the other jurisdiction, and either: