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California paystub taxes rules: How much tax is deducted from Paystub?

Are you planning to move to California? If yes, tax rules are one of the first things you should learn because your career depends on them. Moreover, you need to understand the basic definition and difference between types of taxes. According to the record of the small business association:

“Around 99.2% of California companies registered as small businesses.”

For instance, some people run ice cream stalls, and some run tiny startups. But there is one common thing in between all these, and that is payroll taxes. Thus, if you plan to move there, understand the payroll taxes.

What are payroll taxes in California?

If the Californian government has asked for paystub taxes, you must understand this term first. However, you must be mindful of payroll taxes if you run a business and bring employees on board. Apart from this, it should be in your knowledge that IRS doesn’t manage payroll taxes; instead, it’s organized by “The employment development department.”

Types of California state payroll taxes:

California is among the most taxed states, and you are eligible to pay if you have spent more than $100 on one or more employees. But it’s vital to mention that employees and employers pay payroll taxes. The obligation of tax payment begins within the hiring of the first 20 days. So, according to the law, every employer is responsible for reporting to the authorities after hiring a new person. Here are major tax types in California:

The state unemployment tax is charged to provide temporary support to those who don’t work. However, the employers are liable to pay this tax. In addition, the employment training tax is to grow the labor market in California. So, the state uses these funds to provide training in targeted industries. The disability tax supports people who cannot work due to temporary disability. But it’s crucial to mention that the California payroll tax differs from the income tax. The personal income tax is applied to residents and non-residents earning in the state.

Overview of the California state paystub taxes:

California has the highest tax rates in the country, which undoubtedly impacts paycheck earning. In addition, California is more significant and has ten income tax brackets designed to take tax. However, here is the chart that gives a sneak peek of varied tax rates for single filers:

Taxable income bracket Tax ratio
$0-$8015 1%
$8015-$19001 2%
More than $19,001 4%
> $29,989 6%
>$41,629 8%
More than $52,612 9.30%
More than $268,750 10% and so on

But you don’t need to feel confused between payroll and income taxes. Generally, the burden of income tax is entirely on employees, whereas payroll tax is split between employee and employer. There are different payment and tax filing options that you can use to submit payroll taxes.

Payroll tax rates in California:

Payroll tax calculation is complicated, and you must calculate each type separately. Earlier, we mentioned different kinds, which are calculated at different rates. Here is the tax percentage of each category individually:

Unemployment insurance rate 3.4% for the first 2-3 years; currently, the highest rate is around 6.2%
Employment training tax rate 0.1% on the first $7,000 of taxable wages, and min is $7 per employee
Disability tax rate It changes annually and is deducted from employees’ salaries. In 2022 it is 1.1%/employee for one year.


However, there is enough information provided by the state for the people who are newbies. Above all, the state conducts in-person seminars to educate people about the process.

How to file payroll taxes in California? A step-to-step guide:

Now you are familiar with the California payroll taxes and labor laws. But if you don’t know how to submit taxes, then here is the step-to-step process:

Follow tax rules & gather employee documents:

We can say it’s a mixture of two steps where you should be aware of the correct state and federal tax rules. For instance, prepare federal form 941 & state forms DE9 & DE9C quarterly. But once you miss submission, employers will have to bear a penalty. Apart from this, as an employer, you should gather necessary employee documents. Here is the list of all papers that should be prepared:

  • Get a digital or printed version of the new employee like DE 34 forms.
  • A complete W-4 form
  • Or an in-house form that satisfies California’s new employee registry requirements

Moreover, it’s vital to mention here that the submission of payroll information is necessary within the first 20 working days. You will have to bear a penalty if you don’t do this.

Calculate hours & deduct federal & state taxes:

After picking up the correct payroll information, now calculate different taxes. For instance, you need to calculate UI taxes, ETT, SDI, and PIT taxes. But while calculating state-level taxes, don’t forget to:

  • Put 1% of income in ETT
  • Ensure employees have completed the W-4 form & DE 4 to report PIT

However, at this step, you can take the help of online paystub generator software to make the process easy. Besides, at the next step, you must deduct state and federal-level taxes. So, here is the list of taxes you will remove on behalf of the employees.

Federal income tax FICA
Contributions that you will do in saving accounts Misc. deductions

The exact payroll calculation method is vital because you can’t afford mistakes. For instance, if you have high-income skills but commit errors while calculating tax. Later, you will have to pay a considerable amount for the fines. However, to avoid this, it’s good to use payroll software.

Process payroll & keep the record:

Record keeping is most important, but at first, pay attention to methods of check distribution. For instance, you can distribute checks manually or by using digital means. Direct deposit is the fastest method, and you also have the option of automating the process entirely. In the end, storing all payroll documents for the record is vital because you need to report to federal and state government authorities. Here are a few essential items that you should maintain:

Full name & address of employees Social security number Employee’s schedule
Total working hours Type of payment (Salary or wages) Overtime earning
All deductions Payment dates Period

But it would help you learn which record you need to keep for a short and extended period. Moreover, the state and federal laws keep changing, so keep an eye on the updated rules and avoid unnecessary penalties.