Payroll Taxes

Payroll Taxes 2013
Business Strategies


Payroll taxes must be withheld from an employee's paycheck. This is required by law. Employers must hand these withholdings over to various tax agencies.Payroll tax deductions include the following:

State income tax withholding
Federal income tax withholding
Social Security tax withholding
Medicare tax withholding
Various local taxwithholdings (such as city, county, or school district taxes, state disability or unemployment insurance).

As we mention payroll taxes are mandatory, but the amount of taxes withheld changes based onthe amount of money earned and the number of exemptions claimed by an individual.
To figure how much to withhold from each wage payment, we need to use the employee's Form W-4 and the methodsdescribed in Publication 15, Employer's Tax Guide and Publication 15-A, Employer's Supplemental Tax Guide.

State and Federal Payroll Taxes

California has four State payroll taxes which areadministered by the Employment Development Department (EDD). They are Unemployment Insurance (UI) and Employment Training Tax (ETT), which are employer contributions, and State Disability Insurance (SDI) andPersonal Income Tax (PIT), which are withheld from employees' wages.
Employers are required to report all employee wages to EDD each calendar quarter. The frequency of the employer's deposit scheduleis determined by the employer's federal deposit schedule and the amount of PIT (Personal Income Tax) withheld. An annual reconciliation of state income tax withholding is also required.
New employersin California pay 3.4% of the first $7,000 in wages per employee for Unemployment Insurance (UI) tax and 0.1% (also of the first $7,000 in wages) for Employment Training Tax (ETT). While the UI ratefor new employers doesn't change for the first three tax years, the ETT rate may be 0% (zero) for a new employer after his first year if his reserve account has a negative balance.

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