California Payroll Tax Problems

California Payroll Tax Problems

As a business owner, one of your responsibilities is to file and pay the payroll taxes for your staff. The Employment Development Department (EDD) administers this type of tax in the State of California. The EDD also identifies and investigates any potential California payroll tax problems.

In California, EDD is one of the largest departments. It regulates payroll tax regulations for businesses and individuals in this state. It administers the following areas:

Employment Training Tax. It is retained at a rate of 0.1 percent with a wage limit of $7,000. This tax provides funds for training employees to make California a more competitive state in business.

Unemployment Insurance. It is taxed at 0.1% with a limit of $7,000. This tax is part of a national program that provides temporary payment for unemployed individuals through no fault of their own.

Personal Income Tax. It is levied on the income of the residents of the state and derived from the state’s non-residents. The EDD and Franchise Tax Board utilize these taxes to provide funds for state public services.

State Disability Insurance. It offers temporary benefit payments to all workers with non-work related disabilities.

Are EDD and IRS the same?

Even though the tax regulations in this state are comparable to the federal taxes, they are not identical. California payroll tax problems occur in employee classification. The IRS and the EDD want to know whether a worker is an employee or an independent contractor. Bear in mind that an employer file and pay employment taxes for their employees but not for independent contractors. A person is an employee of a company if he has the right to control over the manner, method and means of how the service is being performed, then he is considered as an employee.

Another California payroll tax problem you will face if you have a business is that when you filed payroll taxes late. You will incur penalties and interest.

Miscalculations and underpayment can also be California payroll tax problems. Miscalculating your taxes will result in an assessment. If you underpay, it can lead to a penalty. Concealing the existence of a worker or failure to file a Form 1099, then you will also have a problem with the EDD.

How to resolve California payroll tax problems?

The ideal way to address these problems is to pay the government the full amount, including penalties and interest. You should also consider having a tax lawyer to work with you if you want to dispute the EDD’s findings. Bear in mind that in California, payroll tax assessment and appeals can be a complicated procedure for individuals without an expertise of the state tax law and the regulations of EDD.

You would need a lawyer if you want to appeal your case to a judge if negotiations with the EDD did not result in a resolution. Our tax attorneys at the Enterprise Consultants Group know how to abate penalties and work out payment arrangements that won’t put you out of business.  Give us a call for a free confidential consultation at  800-950-2237

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