Congratulations on your new business! As a new business-owner, you will be encountering a myriad of business, tax, and legal issues related to your new business. This sheet is intended to give you an overview of the tax matters that could apply to you. This sheet is not and should not be considered legal advice, as it does not consider the unique circumstances of your business and business activities. If you need legal advice concerning your business activities, please contact us and we will be more than glad to assist you.
- Registration as a State Employer. Businesses are required to file a registration form within 15 days after paying more than $100.00 in wages to one or more employees. No distinction is made between full-time and part-time or permanent and temporary employees in meeting this requirement. Remember that employees include officers of a corporation. To report a new employee, click here: https://eddservices.edd.ca.gov and here: http://www.edd.ca.gov/Payroll_Taxes/Am_I_Required_to_Register_as_an_Employer.htm
- Federal Payroll Taxes. Generally, employers must report wages, tips and other compensation paid to an employee by filing the required form(s) to the IRS. You must deposit federal income tax withheld, and both the employer and employee social security and Medicare taxes. There are two deposit schedules, monthly and semi-weekly. For information about federal deposit requirements, click here: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Depositing-and-Reporting-Employment-Taxes . Due dates are here: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Employment-Tax-Due-Dates.
- State Payroll Taxes. California has four State payroll taxes which are administered by the Employment Development Department (EDD). They areUnemployment Insurance (UI) and Employment Training Tax (ETT), which are employer contributions, and State Disability Insurance (SDI) and Personal Income Tax (PIT), which are withheld from employees’
- Deposits. You will need to submit deposits for taxes and withholding regularly. Penalties are assessed for late deposits. For more information on deposits and how to deposit, click here: https://eddservices.edd.ca.gov.
- Quarterly Contribution Return & Report of Wages. You will also need to submit regular reports of contributions and reports of wages for wages paid and PIT withheld for each employee, each quarter. For more information on how to submit quarterly reports, click here: click here https://eddservices.edd.ca.gov.
- Unemployment Insurance, State Disability Insurance, Employer Training Tax (ETT). 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. The SDI tax allows the Disability Insurance Fund to pay Disability Insurance (DI) and Paid Family Leave (PFL) benefits to eligible claimants. The DI benefits are paid to eligible workers experiencing a loss of wages when they are unable to perform their regular or customary work due to a non-work-related illness or injury, pregnancy, or childbirth. The UI and SDI Programs are funded through payroll taxes paid by the employer. The ETT provides funds to train employees in targeted industries to improve the competitiveness of California Businesses. The ETT is an employer-paid tax. Your UI, ETT, and SDI tax rates are combined on a single rate notice, Notice of Contribution Rates and Statement of UI Reserve Account (DE 2088) that is sent each year in December.
- Required Notices and Pamphlets. Once an employer registers with EDD, they receive a notice to post, which informs their employees of their rights under the Unemployment Insurance (UI), Disability Insurance (DI), and Paid Family Leave (PFL) programs. This notice must be posted in a prominent location that is easily seen by the employees. For information on required notices and pamphlets that you must post, please click here: http://www.edd.ca.gov/Payroll_Taxes/Required_Notices_and_Pamphlets.htm.
- Meals & Lodging. You are obligated to reimburse employees for meals and lodging. For information about the applicable rates, please click here: http://www.edd.ca.gov/Payroll_Taxes/Rates_and_Withholding.htm.
- Discrimination Law. Harassment or discrimination in employment is prohibited if it is based on a person’s race, ancestry, national origin, color, sex (including pregnancy), sexual orientation, religion, physical disability (including AIDS), mental disability, marital status, medical condition (cured cancer), and refusal of family care leave. Discrimination in housing, public services and accommodations is also prohibited. Employers must post the Harassment or Discrimination in Employment notice (DFEH162) and provide their employees with a copy of the DFEH’s information sheet on sexual harassment (DFEH 185) or a statement that contains equivalent information. Employers must also provide notice of an employee’s right to request pregnancy disability leave or transfer, as well as notice to request a family and medical care leave (CFRA). Employers with 5 or more employees must maintain all personnel records for a minimum of 2 years. For information about what constitutes prohibited conduct, click here: http://www.dfeh.ca.gov/Publications_StatLaws.htm.
- OSHA. You may need to obtain special licenses, permits, certifications, or registrations for occupational safety reasons. Please click here for more information: http://www.dir.ca.gov/permits-licenses-certifications.html. Businesses with employees must prepare an Injury and Illness Prevention Plan. The state provides a no-fee consultation service to assist employers with preventing unsafe working conditions and workplace hazards. Certain Permits/Licenses/Certifications may be required for compliance with Health & Safety Standards, General Industry Safety Order, Carcinogen Regulations and Construction Safety Orders i.e. excavation/trenching, asbestos related work, crane/derrick operation, air/liquid-petroleum gas tanks, etc. For more information, click here: http://www.dir.ca.gov/DOSH/.
- Wage/Hour Laws. Businesses with employees must comply with laws establishing minimum standards for wages, hours and working conditions. For more information, please visit the California Department of Industrial Relations, http://www.dir.ca.gov/dlse/dlseWagesAndHours.html.
- Worker’s Compensation. Businesses with employees must maintain Workers’ Compensation Insurance coverage on either a self-insured basis, or provided through a commercial carrier, or the State Workers’ Compensation Insurance Fund. For more information, please visit the California Department of Industrial Relations, http://www.dir.ca.gov/DWC/dwc_home_page.htm
- Proof of Employee Residency. Employees hired after November 6, 1986 must provide proof of eligibility to work in the United States. All U.S. employers must complete and retain a Form I-9 for each individual they hire for employment in the United States. This includes citizens and noncitizens. For more information about U.S. Immigration & Naturalization Services, click here: http://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7543f6d1a/?vgnextoid=84c267ee5cb38210VgnVCM100000082ca60aRCRD&vgnextchannel=84c267ee5cb38210VgnVCM100000082ca60aRCRD.
- Employment / Independent Contractor Agreements. We strongly recommend you use agreements for employees and independent contractors. If you need forms prepared, please contact us.
This is a summary highlighting some of the tasks that will be involved with your business. If you need assistance, please let us know and we will be happy to help.