Frequently Asked Questions (FAQs)

• Can I file tax reports electronically or file them using alternate methods?
• Can I pay taxes electronically?
• Can I register for a new California employer account number? Can I change an address or inactivate an existing employer account number?
• Do I have to report and pay taxes on family members who work for me?
• Do nonprofit organizations and public entities have to pay California payroll taxes?
• Does EDD have free tax seminars?
• How can I lower my UI rate?
• How do I get tax forms and publications?
• How do I report new hires to the New Employee Registry?
• I own my own corporation. Do I have to have SDI?
• If back pay (wages) is awarded in a class action settlement, who is responsible for reporting the wages and payroll taxes?
• What are my rights as an employer?
• What are wages?
• What can I expect from a payroll tax audit?
• What is the difference between a common law employee and an independent contractor?
• What is SUTA dumping?
• Where do I get help if I have problems downloading?
• Where do I send the state copies of my W-2s and 1099s?
• Who is a domestic or household employer?
• Who is an employee?
• Who is an employer?

Can I pay taxes electronically?

Yes, all employers may pay their payroll taxes by electronic funds transfer (EFT); in fact, some employers are required to do so. The EDD will notify you if you become a mandatory EFT filer.

For additional information on EDD's EFT program or to voluntarily pay by EFT, call us at (916) 654-9130 or see Electronic Funds Transfer. You may also download the EFT Program Information Guide (DE 27) and EFT Authorization Agreement (DE 26), order them online, or call the Taxpayer Assistance Center at (888) 745-3886 to have them mailed to you.

You may also pay your payroll taxes by credit card.

Can I register for a new California employer account number? Can I change an address or inactivate an existing employer account number?

Yes, EZREG is EDD’s new alternative method offered to new employers and/or their agents to register online as well as to submit address changes and/or account inactivations on existing businesses.

For additional information on EZREG and other electronic filing options, see Electronic Filing, Registration and Payment Options.

Other EDD Payroll Tax Information

Do I have to report and pay taxes on family members who work for me?

All family employees' wages are reportable as California Personal Income Tax (PIT) wages and subject to PIT withholding.* However, the following family employees' wages are not subject to Unemployment Insurance (UI), Employment Training Tax (ETT), and State Disability Insurance (SDI):**

• Child under 18 employed by parent or partnership consisting only of parents. "Child" includes adopted children but does not include stepchildren or foster children.
• Individual employed by spouse or registered domestic partner.
• Parent employed by son or daughter. "Parent" includes adoptive parents but does not include stepparents or foster parents.

Examples:

• Karen owns a bakery and hires her 16-year-old son Jordan and 18-year-old daughter Victoria to work in the business. Since he is under 18, Jordan is an excluded family employee and his wages are not subject to UI, ETT, and SDI. Since Victoria is 18, she is not an excluded family employee and her wages are subject to UI, ETT, and SDI. Both children's wages are subject to PIT.



• Mark and Irene, husband and wife, co-own a pizza parlor. They hire Irene's 17-year-old son Chris (from her first marriage) to work in the business. Because one of the partners (Mark) is not his natural or adopted parent, Chris is not an excluded family employee and his wages are subject to UI, ETT, SDI, and PIT.



• Clay and Jeanette own all the stock in KCK Corporation. They hire their children, all under 18, to work for KCK. Since the children are employed by a corporation, they are not family employees and their wages are subject to UI, ETT, SDI, and PIT.



• Gordon and his daughter Flo are partners in a dental practice. They hire Marilyn (Gordon's wife and Flo's mother) as their bookkeeper. Since Marilyn is working for a partnership consisting only of her spouse and her daughter, she is an excluded family employee and is subject only to PIT.

For more information, see Information Sheet: Family Employment (DE 231FAM).

The EDD and IRS have different rules regarding family employment. See "Family Help" on the IRS Web site. For California rules, see the Information Sheet: Family Employment (DE231FAM).

*Some types of employment (for example, agricultural and household employment) are not subject to PIT withholding, though the wages may be reportable as PIT wages. See the "Types of Employment" table in the California Employer's Guide (DE 44).

**Excluded family employees may apply for SDI elective coverage on the Application for Elective Coverage by Disability Insurance (DE 1378J); for information about elective coverage, see Information Sheet: Specialized Coverage (DE 231SC).

Other EDD Payroll Tax Information

Do nonprofit organizations and public entities have to pay California payroll taxes?

Most nonprofit organizations* are subject to Unemployment Insurance (UI), Employment Training Tax (ETT), State Disability Insurance (SDI), and Personal Income Tax (PIT) withholding.

However, nonprofit entities that have an exemption under Section 501(c)(3) of the Internal Revenue Code (IRC) have a choice in the method of financing their UI costs. A nonprofit entity can elect to either:

• Pay the same UI taxes as those paid by commercial employers (experience rating method). See Information Sheet: California System of Experience Rating (DE 231Z) for more information on the experience rating method.
• Reimburse EDD for the full cost of all UI benefits paid to their former employees (reimbursable or cost-of benefits-paid method). See Potential Liability for Unemployment Insurance Benefits When Electing the Reimbursable Method of Financing Under the California Unemployment Insurance Code (DE 1378F)

To elect the reimbursable method, a nonprofit employer must file a Selection of Financing Method By a Nonprofit Organization (DE 1SNP), as well as a Registration Form for Nonprofit Employers (DE 1NP) when registering. If the DE 1SNP is filed at a later date, it will be effective the first day of the quarter in which it is filed.

*Special Exclusions: Certain types of employees who work for religious, charitable, educational, and other nonprofit organizations described in Section 501(c)(3) IRC are excluded from UI, ETT, and SDI. Except for certain religious workers, wages received by these employees are subject to PIT withholding and PIT wage reporting. These may include:

• Employees of a church or convention or association of churches or an organization operated primarily for religious purposes which is operated, supervised, controlled, or principally supported by a church or convention or association of churches.
• Duly ordained, commissioned, or licensed ministers in the exercise of their ministry and members of religious orders. Also excluded from PIT withholding.
• Persons receiving work-relief or work-training in a program financed by any government agency.
• Inmates of a custodial or penal institution.

Public entities (State of California, counties, cities, districts, public agencies and authorities, school districts, and community colleges) may elect the experience rating or reimbursable method of financing UI and must withhold PIT. Public entities are not subject to SDI but may elect it under certain circumstances.

Special exclusions: Some employees of public entities are excluded from UI and SDI coverage. These include:

• Elected officials (not considered employees).
• Members of legislative bodies or the judiciary.
• Members of the State National Guard or Air National Guard except those who provide services as regular State employees.

Under certain circumstances, nonprofit and public entities may elect UI and/or SDI coverage for employees whose services are not in subject employment. For more information, download our Information Sheet: Specialized Coverage (DE 231SC), call EDD's toll-free number (888) 745-3886, or visit your nearest Employment Tax Office.

Other EDD Payroll Tax Information

Does EDD have free tax seminars?

Yes, the EDD offers free Payroll Tax Seminars to help you better understand the payroll tax laws.

At our seminars, you will learn how to:

• Prepare payroll tax returns.
• Avoid unnecessary tax liabilities.
• Distinguish between independent contractors and employees.

You will also learn about:

• New laws and emerging issues.
• Services provided by EDD.
• Customized topics to meet specific needs.

If you would like to attend a seminar, please go to our seminars Web page. Select a seminar, then e-mail or call us for reservations. If you have any questions, please call our toll-free number (888) 745-3886 or visit your local Employment Tax Office.

Other EDD Payroll Tax Information

How can I lower my UI rate?

See our Information Sheet: California System of Experience Rating (DE 231Z) for several ways to help lower your UI rate. Note: Some employers participate in SUTA dumping or UI rate manipulation schemes. The EDD actively pursues and prosecutes such employers.

Other EDD Payroll Tax Information

How do I report new hires to the New Employee Registry?

You may report new employee information by any of the following:

• -File (iNER) - Submit your DE 34 online (minimum browser requirements: Internet Explorer 6.0 or Netscape 7.2). - New Employee Registry
• Report of New Employee(s) (DE 34)
• Magnetic media.
• An alternate paper form with the required information.
• A copy of the employee's W-4 form with the employee's start-of-work date, your California employer account number, and your federal employer identification number (FEIN) indicated on the W-4.

For reporting requirements, how to get forms, FAQs, and phone numbers, see New Employee Registry.

Other EDD Payroll Tax Information

I own my own corporation. Do I have to have SDI?

If you are a corporate officer and you (or you and your spouse) are the sole stockholder(s) of your corporation, you may be able to exclude yourself from SDI by sending a completed Sole Shareholder/Corporate Officer Exclusion Statement (DE 459) to EDD. The exemption becomes effective the first day of the quarter in which it is filed. You may get a DE 459 by calling (888) 745-3886, ordering it online, or downloading it.

Other EDD Payroll Tax Information

If back pay (wages) is awarded in a class action settlement, who is responsible for reporting the wages and payroll taxes?

When a class action litigation involves wage and hour issues and the settlement requires back pay to be made by a third-party administrator, the employer of the workers (the defendant) is responsible for reporting subject wages and paying Unemployment Insurance, Employment Training Tax, and State Disability Insurance. The third-party administrator who controls the payment of the back pay is responsible for reporting Personal Income Tax (PIT) wages and withholding PIT from the payments.

There are other complex issues associated with back pay. Please call (888) 745-3886 for more information.

Other EDD Payroll Tax Information

What are my rights as an employer?

We are committed to applying payroll tax laws in an equitable and impartial manner. Our Employers' Bill of Rights (DE 195) informs you of your rights during the employment taxation process. You may get the DE 195 by downloading it from our Web site, ordering it online, or contacting your local Employment Tax Office.

Other EDD Payroll Tax Information

What are wages?

All money, the value of meals and lodging, or other goods and services provided to an employee as payment for personal services are "wages." Payment may be by private agreement, consent, or mandated by law.

The method of payment does not change the taxability of wages paid to employees, no matter what terminology is used. Payments by the day, by the hour, by "piece rate," or any other measurement are wages, even if the employee is a casual worker, day or contract laborer, part-time, or temporary worker.

For more information, call our toll-free number (888) 745-3886 or visit your local Employment Tax Office. You may also download our Information Sheet: Wages (DE 231A).

Other EDD Payroll Tax Information

What can I expect from a payroll tax audit?

For an explanation of the payroll tax audit process, please see our Information Sheet: Employment Tax Audit Process (DE 231TA). You may get the DE 231TA by downloading it from our Web site, ordering it online, or contacting your local Employment Tax Office.

What is the difference between a common law employee and an independent contractor?

"Common law," as we know it, has evolved slowly over the centuries based upon judgments rendered by the courts on individual cases. The common law of employment, as it exists today, is the total of all court decisions related to the question of what constitutes an employment relationship.

• Whether or not the one performing the services is engaged in a separately established occupation or business.
• The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of a principal without supervision.
• The skill required in performing the services and accomplishing the desired result.
• Whether the principal or the person providing the services supplies the tools, equipment, and place of work for the person doing the work.
• The length of time for which the services are performed to determine whether the performance is an isolated event or continuous in nature.
• The method of payment, whether by time, a piece rate, or by the job.
• Whether or not the work is part of the regular business of the principal.
• Whether or not the parties believe they are creating the relationship of employer and employee.
• The extent of actual control exercised by the principal over the manner and means of performing the services.
• Whether the principal is or is not engaged in a business enterprise or whether the services being performed are for the benefit or convenience of the principal as an individual.
• Whether the worker can make business decisions that would enable him or her to earn a profit or incur a financial loss. Investment of the worker's time is not sufficient to show a risk of loss.