Withholding Taxes: California

Federal law and guidance on this subject should be reviewed together with this section.

Author: Vicki M. Lambert, The Payroll Advisor

Summary

• Whether an employee is a resident or nonresident of California determines whether the employee is subject to income tax withholding in the state. Different income tax withholding rules apply when a California resident works in another state, when a nonresident works in California, and when an expatriate works abroad. See Withholding on Residents, Nonresidents and Expatriates.
• California employers use both IRS Form W-4 and state Form DE 4 for California personal income tax (PIT) withholding. See Employee Withholding Forms.
• Withholding on supplemental wage payments, such as bonuses, is calculated differently depending on whether or not the payments are made simultaneously with regular wages. See Supplemental Wages.
• Employers are required to provide certain information to employees on an annual basis. California employers must provide IRS Form W-2, Wage and Tax Statement, to current employees by January 31 of each year. See Form W-2 Requirements.
• Employers are required to provide all workers with an Earned Income Tax Credit (EITC) notice informing them of their eligibility for both the federal and California EITC.  They must also notify workers about their potential eligibility for the Voluntary Income Tax Assistance (VITA) program and CalFile. Employee Notification Requirements.
• Employers must keep the same records for state income tax purposes as is required to be kept for federal income tax purposes, and have them available for review by the DOTF. See Recordkeeping Requirements.
• Los Angeles and San Francisco have requirements pertaining to withholding taxes. See Local Requirements.