California Salary Paycheck Calculator
If you’re a small business owner in The Golden State, paying employees can get complicated. It’s not as simple as taking their annual salary and dividing it by a set number of pay periods. You have to withhold the appropriate state and federal taxes from employee paychecks, pay and file payroll taxes, and follow numerous paycheck rules. Don’t worry, we’ve got you covered. Below, we’ve answered the most frequently asked questions about California payroll taxes and paycheck rules.
California payroll taxes
Here’s what you need to know about withholding payroll taxes in California.
- California payroll taxes start with employees filling out DE 44. This information helps you determine how much you should withhold.
- If an employee does not complete this form, you will need to withhold tax as though no exemptions were claimed.
- Employees need to update DE 44 in case of life events (such as marriage, divorce, birth or adoption of a child, etc.) that may impact their taxes.
- The personal income tax rate in California is 1.0%–13.30%.
- California does not have reciprocity with other states.
Additional California forms
In addition to DE 44 mentioned above, California employers also need to file the following forms:
- CA Report of New Hires (DE34)*
- Payroll Tax Deposit Coupon (DE88)*
- Quarterly Contribution Return and Report of Wages (DE 9)
- Combined Payroll Tax Payment Coupon (DE 9C)
California unemployment and disability insurance tax rates
California requires most employers to pay unemployment insurance tax to help compensate workers who are out of work through no fault of their own.
- Employers pay California unemployment tax on the first $7,000 (SUI & ETT) and $153,164 (SDI) of an employee’s wages.
- For 2023 the SDI tax is 0.9% and the maximum tax for an employee is $1,378.48.
- New employers pay at a rate of 3.4% (SUI).
- Experienced employers pay at a rate of 1.5–6.2% (SUI) 0.0%–0.1% (ETT).
- Unemployment tax in California should be paid quarterly to the Employment Development Department.
Paying California taxes
Here’s what you need to know about paying California taxes:
- How often employers pay depends on the amount of tax you withhold in a year.
- California’s payment frequencies are: quarterly, monthly, semi-weekly.
California salary threshold
Effective January 1, 2023, California’s minimum salary threshold increased to $64,480 annually or $1,240 a week (see California Department of Industrial Relations: Minimum Wage).
Requirements to obtain Workers’ Compensation vary by state. This table outlines some of these requirements. If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit—head to this article and click the workers’ comp audit reports dropdown for more information.
Employers in California need to report new employees.
- New hires must be reported to California’s New Employee Registry.
- New hires must be reported within 20 days of their first day of work.
You must provide a pay stub to every employee that includes:
- Company’s legal name and address
- Employee’s name and last four digits of their Social Security number
- Pay period beginning and end dates
- Total hours worked
- Rate of pay
- Gross wages
- The amount and reason for any deduction
Employers must pay final wages to employees on their last day.
California law requires employers to provide the following types of time off to employees.
- Jury duty
- Voting leave: In some circumstances, employers are obligated to provide up to two hours of paid time off to allow employees to vote.
- Family & parental leave: Employers with five or more employees, for bonding with a new child, for a serious health condition, or for active duty qualifying exigencies. All employers must allow employees to use paid sick leave to care for a sick family member.
- Sick leave must be provided by employers that pay $1,000 or more in wages in a calendar quarter.
- Domestic violence leave is required per the domestic violence and crime victim leave law and under paid sick and safe time law.
Federal payroll taxes
In addition to California-specific taxes, both you and your employees will pay a variety of federal payroll taxes. Check out the breakdown below.
Federal income tax
Unless they are exempt, your employees will pay federal income tax.
- You must withhold federal income tax from employees’ pay, unless they are exempt.
- Each employee’s Form W-4 will differ based on their filing status and dependents, among other details—so the amount of income tax to be withheld will vary.
- Form W-4 does not need to be sent to the IRS, but should be kept for your records.
Both you and your employees will pay Federal Insurance Contributions Act, or FICA tax.
- FICA is made up of the Medicare tax and the Social Security tax.
- In 2023, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $2,600.
- The Medicare tax requires employers and employees to each contribute 1.45% of all wages.
- See the IRS webpage for details, like maximum thresholds.
Like the state, the federal government also has an unemployment tax, called FUTA, which is paid by employers.
- FUTA is an annual tax an employer pays on the first $7,000 of each employee’s wages.
- The FUTA rate for 2023 is 6.0%, but many employers are able to pay less, for instance, up to 5.4% each year due to tax credits.
- Most employers will pay this tax annually with Form 940. But larger employers with more than $500 in tax due will have to pay quarterly.
Additional Medicare tax
The Additional Medicare tax is paid by employees. Here’s what you should know:
- For employees that earn over $200,000 per year, 0.9% of earnings will need to be withheld for the Additional Medicare tax.
- Whether or not your employee owes this tax may depend on their filing status.
Paying federal taxes
How often you’ll pay federal payroll taxes depends on how much you owe.
- Semi-weekly or monthly payments are required for federal withholding, Additional Medicare, and FICA taxes. And every quarter, a summary payroll tax return is due on Form 941, Employer’s Quarterly Federal Tax Return.
- Quarterly or annual payments are required for federal unemployment tax. Most employers will pay annually, but quarterly payments are necessary if you owe more than $500. Each time you make a payment, you’ll need to file a payroll tax return on Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.
We’re here to help
If you don’t love manual number crunching and payroll taxes sound overwhelming to you, take advantage of Gusto’s full-service payroll options or use an experienced accountant to help you with the process.