EDD DE 44: California Employer's Guide

Independent Contractor Reporting Law (DE 542FAQ) (PDF) (edd.ca.gov/pdf_pub_ctr/de542faq.pdf) and Independent Contractors Misconceptions Brochure (DE 573M) (PDF) (edd.ca.gov/pdf_pub_ctr/de573m.pdf) provide more information. • Payroll Tax Webinars – EDD offers free webinars online to help employers comply with the California payroll tax laws. To enroll, visit Payroll Tax Webinars (edd.ca.gov/payroll-tax-webinars) or contact the Taxpayer Assistance Center at 1-888-745-3886. Remember: • An employee includes a worker who is an employee under the ABC test or Borello test, and a worker whose services are specifically covered by law, such as a corporate officer. Refer to Information Sheet: Types of Employment (DE 231TE) (PDF) (edd.ca.gov/pdf_pub_ctr/de231te.pdf) for more information. • An employee may perform services on a temporary or less than full time basis. • We have several resources available to help you correctly classify your workers. Taxpayer Assistance Center 1-888-745-3886 7 DE 44 Rev. 52 (4-26) (INTERNET) Page 15 of 132 State Payroll Taxes State Payroll Taxes The Employment Development Department (EDD) administers the following California payroll tax programs: • Unemployment Insurance (UI) Tax • Employment Training Tax (ETT) • State Disability Insurance (SDI) Withholding • California Personal Income Tax (PIT) Withholding Note: Paid Family Leave (PFL) is a component of the SDI program. UI and ETT are employer paid contributions. SDI and PIT are withheld from employee wages. Wages are generally subject to all four payroll taxes unless otherwise stated by law. Unemployment Insurance Tax What Is UI Tax? The UI program was established as part of a national program administered by the U.S. Department of Labor under the Social Security Act. The UI program provides temporary payments to individuals who are unemployed through no fault of their own. Who Pays It? The UI program is funded through payroll taxes paid by the employer. Tax-rated employers pay a percentage on the first $7,000 in wages paid to each employee in a calendar year. The UI rate schedule and amount of taxable wages are determined annually. New employers pay 3.4 percent (.034) for a period of two to three years. The UI rate could increase to a maximum of 6.2 percent (.062) or decrease to a minimum of 1.5 percent (0.015) based on an employer’s experience rating and the balance in the UI Fund. For an explanation of the experience rating method, refer to Information Sheet: California System of Experience Rating (DE 231Z) (PDF) (edd.ca.gov/pdf_ pub_ctr/de231z.pdf). Government entities and certain nonprofit employers may elect the reimbursable method of financing UI in which they reimburse the UI Fund on a dollar-for-dollar basis for all benefits paid to their former employees. Employment Training Tax What Is ETT? ETT provides funds to train employees in targeted industries to improve the competitiveness of California businesses. The ETT fund promotes a healthy labor market by helping California businesses invest in a skilled