Running a small business in California can be challenging, especially when it comes to managing payroll, and it’s why many businesses hire reputable payroll companies in San Diego, CA, to handle it for them. Payroll is the most important financial element of any business, and it requires diligence, accuracy, and knowledge of the latest payroll laws.
As a small business owner in California, it is essential to understand payroll regulations for the state and to be aware of all legal requirements. In the following article, we’ll take a look at the steps you need to take to set up payroll. Keep reading!
How do you set up payroll for a small business?
Setting up a payroll system can be time-consuming, but it is necessary for ensuring that employees are paid properly and in a timely manner. This guide will provide tips on how to set up payroll for small businesses in California.
Identify which payroll regulations apply to your business.
Prior to beginning payroll processing in California, you must recognize the pertinent regulations and laws. Ignoring these could lead to costly audits, fines, and penalties down the line. The payroll laws applicable to your business are determined by the size of your organization, geographic location, industry sector, and whether you hire regular or part-time personnel or contractors.
California laws that will affect your payroll include:
- Unemployment Insurance Tax (UIT): To aid those who were unfairly out of work, the U.S. Department of Labor initiated Unemployment Insurance Tax under the Social Security Act – an indispensable safety net for those who have lost their jobs due to causes beyond their control. Unemployment insurance provides financial protection for laid-off workers, providing them with a temporary source of income.
- State Disability Insurance (SDI): State Disability Insurance (SDI) is an employee benefit program enacted by the California Legislature to provide short-term benefits to eligible workers who are unable to work due to illness or injury. The program is funded through payroll deductions, so employers must deduct a portion of their employees’ wages and remit the money to the Employment Development Department (EDD).
- Employment Training Tax (ETT): The Employment Training Tax is another payroll tax applicable in California aimed at helping employers train their employees in order to become more competitive. Employers are obligated to pay a little over $7.00 per employee in the form of .1% on the initial $7,000 remunerated within a given calendar year.
- California Personal Income Tax (PIT): Under the California Personal Income Tax Law, employers are obliged to collect and submit their employees’ PIT withholding. The amount of PIT withheld for an employee depends on their income and filing status. Employers must then submit PIT withholding to the California Franchise Tax Board.
Register as an employer.
Once you have identified the payroll taxes applicable to your business, you must then register as an employer with the California Employment Development Department (EDD). The EDD is responsible for administering the state payroll taxes and issuing unemployment insurance, disability benefits, and employment training tax (ETT) to eligible workers in California. In addition to registering as an employer with the EDD, you must also register with the Internal Revenue Service (IRS). The IRS is responsible for collecting federal income tax from employees and employers, as well as Social Security and Medicare taxes.
Know your responsibilities.
As an employer in California, you are responsible for withholding taxes from your employees’ wages and remitting them to the appropriate state and federal agencies. You must also provide your employees with a W-2 form each year to report the wages they have earned and taxes that were withheld. Additionally, you are required to provide employees with a pay stub showing the amount of their gross wages and all deductions.
Hire a professional.
Although payroll processing can be done in-house, it is highly recommended that you enlist the services of a professional payroll service provider who specializes in California payroll laws. They can help you understand the applicable regulations and laws, ensure that all payroll taxes are calculated correctly and remitted accurately, as well as provide guidance in setting up a payroll system for your company. This will save you time and money while allowing you to focus on the other aspects of running your business.
Looking for assistance from one of the leading payroll companies in San Diego, CA? We’ve got you covered!
If you’re looking to set up payroll or need expert assistance with bookkeeping for your company, David York’s Tax Service is here to help. We are a trusted business serving the region around San Diego Bay and beyond, ready to assist your company with professional expertise. Don’t waste any more of your valuable time and resources managing complex financial records. Let us take care of the technicalities for you – quickly, reliably, and with top-notch service that brings you peace of mind. Schedule an appointment today!