Free California payroll tax calculator (and CA tax rates)

Payroll calculator California employers use for IRS taxes

You can use our California payroll calculator to figure out your employees’ federal withholding as well as any additional taxes you are responsible for paying as the employer. Here’s a quick overview of what you need to know when you’re calculating federal payroll taxes. If you would like to get into each calculation in detail, check out our guide on how to calculate payroll tax with ease.

• Calculate Gross Wages:
  • For all hourly employees, multiply their hours worked by their pay rate (and don’t forget to pay the higher rate for any overtime hours worked).
  • For all salaried employees, divide each employee’s annual salary by the number of pay periods your business has.

• Calculate Any Pre-Tax Deductions:
  • If your employees contribute to 401(k), FSA, or any other pre-tax withholding accounts, subtract the amount of these calculations from their gross pay prior to applying payroll taxes.
• Deduct (and Match) FICA Taxes:
  • Social Security Tax: Withhold 6.2% of each employee’s taxable wages up until they reach total earnings of $176,100 for the year. As an employer, you will need to match this tax one-for-one.
  • Medicare Tax: Withhold 1.45% of each employee’s taxable wages up until they have reached total earnings of $200,000 for the year. Employers are also required  to match this tax. However, for earnings above $200,000, employees need to pay what’s called an Additional Medicare Tax of 0.9%, along with the 1.45%. Only the employee is responsible for paying the Additional Medicare Tax.
• Pay FUTA Unemployment Tax:
  • You will need to pay 6% of the first $7,000 of taxable income for each employee per year. If you pay state unemployment taxes, you are eligible for a tax credit of up to 5.4%, making your FUTA tax rate effectively 0.6%. FUTA tax is the sole responsibility of the employer. Your employees are not responsible for paying this tax.
• Deduct Federal Income Tax:
  • Federal income tax ranges from 0% to 37%. Further withholding information can be found through the IRS Publication 15-T.
• Subtract Any Post-Tax Deductions:
  • Your employees could be responsible for post-tax deductions such as court-ordered wage garnishments, child support, etc. If so, you will need to withhold these deductions from their paychecks.

Once you have all your withholding figured out, there are a series of quarterly and annual payroll tax filings you’ll need to perform. But before you write out your paychecks, you’ll need to calculate and withhold California state taxes as well.

Related reading: What is payroll processing?

What is the state payroll tax in California?

Now that we’re done with federal income taxes, let’s tackle California state taxes. The State of California wins for the highest top marginal income tax in the country. It’s a progressive income tax, meaning the more money your employees make, the higher the income tax. The following graph provides insight into the varied tax rates in place for single filers.

More information can be found on the California Franchise Tax Board website.

The Golden State has four (4) state payroll taxes administered by the Employment Development Department (EDD):

1) Unemployment Insurance, 2) Employment Training Tax, 3) State Disability Tax, and 4) Personal Income Tax. You’re responsible for paying half of those taxes, while the other half should be withheld from each employee’s paycheck. Details and rates can be found on the EDD website.

In addition, California’s employment development department has an employer’s guide, which includes information to help business owners stay compliant.

How often do you pay payroll taxes in California?

In the state of California, employers are required to make payroll tax payments on a quarterly basis. This applies specifically to employers that have paid more than $100 to one or more employees during the course of a calendar year. In addition, this requirement must be met no matter what type of business you run — whether it’s non-profit, for profit, or you simply hire a nanny to help around your home.

The two primary taxes employers are required to pay are:

• Unemployment Insurance (UI)
• Employment Training Tax (ETT)

In addition, some employers may also be required to pay State Disability Insurance (SDI) and California Personal Income Tax (PIT) on a quarterly basis, depending on the size of their payroll.

Unemployment Insurance: The state of California administers an unemployment insurance (UI) program that’s part of the national U.S. Department of Labor’s program. The funds from this program provided by employers are used to distribute temporary pay to individuals who become unemployed for various reasons that are beyond their control.

Employment training tax: A separate fund administered by the state of California, the employee training tax (ETT) provides money to train employees in certain industries. ETT funds are provided by employers in the state of California and are aimed at enhancing the skills of the workforce and ensuring that the state continues to have a healthy labor market.

Quarterly SDI and PIT payments are only required to be made by employers or businesses that accumulate less than $350 in state PIT — or Personal Income Tax — withholdings.

How is CA SDI tax calculated?

A program that’s fully funded by employee payroll tax deductions, here’s how to calculate California’s SDI tax as an employer.

• Multiply the total taxable wages for the payroll period by the current SDI rate. To do this, you’ll need to know the most current rate, which at the moment is 1.2% (You can check the rate here.) Using the rate of 1.2% — or 0.0120 — an employee who earned $500 in wages would pay a $6 SDI tax. (500 x 1.0120 = 506).
• Remember, the SDI rate changes each year, so be sure to double check to confirm you’re using the correct percentage in your calculations. The California Employment Development Department also mails a notice to employers each December to inform you of the rates for the following year.

Is California SDI paid by employer or employee?

SDI taxes in California are completely funded by employee contributions. The contributions to this fund are deducted from each employee’s payroll or salary payments. Employees are not able to opt out of this program, as is mandatory under the California Unemployment Insurance Code.

Is California SDI tax mandatory?

Yes, per the California Unemployment Insurance Code, employees must pay into the state disability program. There are two exceptions to this rule however.

Who is exempt from California SDI tax?

• Cases where the employer or a majority of employees in a company apply for approval of what’s known as a Voluntary Plan, which replaces the state’s SDI coverage. To find out more about this alternative visit Voluntary Plan Information here.
• The second exception to the mandatory SDI tax involves the employee adhering to the faith or teaching of a particular religion, denomination, or organization “whose creed, tenets, or principles require dependence on prayer for healing, they may request an exemption.” In such case, the employee is required to complete and submit via mail the Religious Exemption Certificate (DE 5067) (PDF).  This certificate must be mailed to the address provided on the form. Exemption is not automatic, is must be reviewed and approved by the state.

If crunching all the numbers gets to be much too much, you have options. To automate most of the processes, including withholding taxes and deductions, there’s many payroll service providers who handle the heavy lifting, so you have more time to focus on other aspects of your business.

How do I pay my California state payroll taxes?

California state payroll taxes can be paid in several ways:

• Via e-services for businesses: Employers can file wage reports, make payments, update payroll tax accounts, as well as register, close, or re-open an employer payroll tax account account using the e-Services for Businesses platform. The platform also allows employers to conduct many other tasks including reporting new employees and independent contractors.
• Express Pay: Another option, employers can make a payroll tax payment using Express Pay. No enrollment is necessary.

Employers also have several other options to submit payroll tax payments, including:

• Federal/State Employment Taxes (FSET) – Bulk Transmissions: The FSET platform offers businesses a standardized method for making tax payments and reporting employment tax and wage information in Extensible Markup Language (XML) through a secure application-to-application transmission.

• Electronic Funds Transfer (EFT): Payroll tax payments can be made this way via Automated Clearing House (ACH) Debit or Automated Clearing House Credit (ACH).

• Credit Card and PayNearMe – Employers also have the option to pay with credit card or from a participating PayNearMe location. This approach includes a transaction fee.

Submitting tax returns, wage reports and payroll tax deposit coupons by mail is no longer allowed unless your business has an “approved e-file and e-pay mandate waiver.”

Other items to keep in mind

Retirement requirements

Did you know that almost all employers in the state of California are required by law to provide their employees with access to a retirement savings plan? Learn more in our Calsavers program guide.

New hire reporting

All businesses are required to report new hires. In California, such hires must be reported to the state’s new employee registry within 20 days of the individual beginning their first day on the job. Once reported, the state will review your new employee against outstanding child support records in order to identify whether the individual owes back child support payments. If an outstanding payment turns up, the state will enforce payment orders via the employee’s paycheck.

Information provided to the state is also sent to a national directory of new hires to determine whether there may be outstanding child support payments from other states. Similarly, if this search finds payments due, the state will take action to recover that money from your employee’s paycheck.

As an employer you also have reporting responsibilities when rehiring an employee. The state defines a rehire as someone with whom:

• You had previously ended an employment relationship
• And who has been separated from your company for at least 60 consecutive days

Corporate income tax in California

If your small business is a C corporation, you may be required to file a California Corporation Franchise or Income Tax Return (known as Form 100). You will need to file this document with the state if your business is:

• Incorporated in California
• Doing business in California
• Registered to do business in California with the Secretary of State
• Receives California source income

In addition, there are specific guidelines surrounding your state income tax dues as a C corp in the Golden State. The state income tax rate for C Corps (excluding banks and financial institutions) is 8.84%.

Additionally, a minimum franchise tax of $800 must be paid the first quarter of each accounting period. This tax must be paid even if your corporation is inactive or operates at a loss. However, newly incorporated corporations do not have to pay the minimum franchise tax during their first year of business.

There are also exceptions to the franchise tax. If your business meets both of the following criteria, you get a free pass on the franchise tax bill:

• The tax year is 15 days or less
• Your business did not conduct any business in the state during those 15 days

Paid sick leave (law)

In California, employers must provide at least three days (or 24 hours) of paid sick leave per year to eligible full-time, part-time, and temporary workers who meet these employees under the permanent paid sick law (PSL).

Qualifications include:

• Employees that work for the same employer for at least 30 days within a year in California
• Complete a 90-day employment period before taking any paid sick leave

It accrues at a rate of one hour of sick leave for every 30 hours worked. Employers may choose to offer more than the minimum required amount of paid sick leave.

Additional California payroll tax resources

Our calculator is here to help, but of course, you can never learn enough, especially when it comes to payroll taxes. Here are some additional resources and contact information to help you run California payroll:

State of California Employment Development Department (EDD):
(866) 333-4606 | E-Services for Business | Register Online | Franchise Tax Board (payroll tax assistance): (800) 852-5711

Being a California employer isn’t always easy. If you want to take some of the administrative burdens off your shoulders, there are a number of terrific payroll software companies that can do all the heavy lifting for you.