California has four state-level payroll taxes, and as a small business owner you need to understand which ones you pay versus which ones you withhold from employees. Getting this wrong leads to penalties from the Employment Development Department that are completely avoidable.

Two taxes come out of your pocket as the employer. Unemployment Insurance (UI) funds the state unemployment system, and the rate for new employers is typically 3.4% on the first $7,000 of each employee’s wages per year. That rate adjusts over time based on your experience rating. Employment Training Tax (ETT) is a much smaller charge at 0.1% on the first $7,000 per employee. Both of these are your cost of doing business and should never be deducted from employee paychecks.

The other two taxes are withheld from employee wages. State Disability Insurance (SDI) covers short-term disability and paid family leave benefits. The rate changes annually and applies up to a wage ceiling that also adjusts each year. Personal Income Tax (PIT) is California’s state income tax withholding, calculated based on the employee’s DE-4 form (California’s version of the W-4) and the EDD withholding schedules. You hold both of these back from each paycheck and remit them to EDD on the required schedule.

To get set up, register with EDD within 15 days of paying $100 or more in wages during a calendar quarter. You can register online through the EDD e-Services for Business portal. You will need your federal EIN, business entity information, and details about your first employee. Once registered, EDD assigns you a state employer account number that you use for all filings and payments.

Filing happens quarterly using Form DE-9 (Quarterly Contribution Return and Report of Wages) and Form DE-9C (Quarterly Contribution Return and Report of Wages Continuation). These are due by the last day of the month following the end of each quarter, so April 30, July 31, October 31, and January 31. The DE-9 reports your total tax liability and the DE-9C reports individual employee wage details. Most businesses file these electronically through EDD’s system.

California also requires you to report new hires to EDD within 20 days of their start date. This is a separate requirement from payroll tax registration and applies to every new employee and every rehired employee. You can submit new hire reports online, by fax, or by mail.

Don’t forget the deposit schedule. How often you send payments to EDD depends on your total payroll tax liability. Smaller employers typically deposit quarterly along with their returns. Larger employers may need to deposit semi-weekly. EDD will notify you of your deposit schedule when you register.

All of this sits on top of your federal payroll obligations like Social Security, Medicare, and federal income tax withholding. Running full-service payroll through a professional means the calculations, deposits, and quarterly filings all happen on time without you having to track changing rates and deadlines yourself.

If you already have employees and haven’t registered with EDD yet, handle it immediately. The penalties for late registration and late tax deposits add up fast, and EDD does enforce them. As bookkeepers in Buena Park working with small businesses across Orange County and the Greater Los Angeles area, we see this come up often with newer employers who didn’t realize the 15-day registration window even existed. The setup process itself is straightforward once you know the steps. Staying compliant afterward is where consistent systems and proper payroll accounting make the difference.