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Withholding Taxes: California

Withholding Taxes requirements for other states

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.
  • An IRS Form W-4, Employee's Withholding Allowance Certificate, is normally used for California personal income tax (PIT) withholding. However, if an employee wants to claim a different marital status and/or a different number of allowances than are claimed for federal withholding purposes, the employee must file the California Form DE 4, Employee's Withholding Allowance Certificate. See Employee's Withholding Allowance Certificate.
  • 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. In addition, certain employers are required to provide all employees with an Earned Income Tax Credit (EITC) notice informing employees of their eligibility for both the federal and California EITC. See Form W-2 Requirements; Earned Income Tax Credit Notices.
  • 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.
  • The City of San Francisco imposes a Payroll Expense Tax. See Local Requirements.