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Payroll • Jan 15 2025 • ~8 min read

Tax content reviewed

Payroll Compliance Checklist for California Employers

A practical guide to setup, employee withholding, employer taxes, deposit deadlines, filings, and year-end tasks.

Quick note: This is general guidance. Rules and deposit schedules depend on your facts. Confirm deadlines in your IRS and EDD notices or ask a professional.

Contents

Before you run payroll: setup checklist

Accounts and registrations

  • Get FEIN and state employer account numbers.
  • Register with California EDD e Services for Business.
  • Set up EFTPS for federal deposits.
  • Choose a lawful pay schedule and document it. Most California employees must be paid at least twice each calendar month; specific exceptions and timing rules apply.

Employee onboarding

  • Collect W 4 and California DE 4 forms.
  • Complete I 9 within required timelines.
  • Report new hires to California within the required window.
  • Provide required notices and posters.

Every pay period tasks

  • Calculate gross pay, overtime, and required California premiums when applicable.
  • Withhold applicable federal and California income tax, employee Social Security/Medicare, and California SDI. Separately calculate employer Social Security/Medicare, federal unemployment (FUTA), and California UI/ETT. California UI and ETT are employer taxes, not employee deductions.
  • Fund retirement and benefit deductions per plan rules.
  • Deliver pay stubs with all California required information.
  • Back up payroll journals and update the general ledger.

Deposits

Determine the federal monthly or semiweekly deposit schedule using the IRS lookback rules; do not wait for an assignment notice. A $100,000 accumulated tax liability can trigger a next-business-day deposit. California PIT/SDI deposit timing depends on the federal schedule and California withholding thresholds; UI/ETT are generally quarterly. Filing a quarterly return does not postpone earlier deposits.

Monthly reminders

  • Reconcile payroll liability accounts to deposits and reports.
  • Verify benefit invoices match payroll deductions.
  • Confirm state and local rate changes in your system.
  • Archive payroll registers and approvals.

Quarterly filings

Federal

  • Generally file Form 941 by the last day of the month after quarter end. Some employers have different authorized forms or filing frequencies; weekends, holidays, and timely-deposit rules can affect the deadline.
  • Deposit FUTA when accumulated undeposited liability exceeds $500 at quarter end; otherwise carry it forward. Form 940 is an annual return, with its own January deadline and applicable extensions for timely deposits.

California

  • EDD DE 9 (quarterly return) and DE 9C (wage report) generally by the last day of the month after quarter end.
  • Pay UI/ETT quarterly and deposit PIT/SDI on the applicable deposit schedule through e-Services for Business.

Year end checklist

  • Verify employee names, addresses, SSNs, and totals before processing W 2 forms.
  • Issue W 2 to employees and file with SSA by the federal deadline.
  • Review contractor information returns separately from payroll. The general federal Form 1099-NEC service-payment threshold is $600 for 2025 payments and $2,000 for 2026 payments. Payee and payment-method exceptions, backup withholding, and California requirements must be checked separately.
  • Reconcile 4 quarters of 941 and state filings to W 3, W 2 totals, and ledger.
  • Update rates and unemployment notices for the new year.

Pro tip

Run a mock W 2 report in December. Fixing addresses and fringe benefits before the last payroll prevents corrected forms later.

California call outs

  • Use EDD e Services for Business for returns and deposits. It is faster and gives confirmation numbers.
  • Keep an eye on changes to minimum wage, overtime rules, and required paid sick leave. These affect payroll calculations and pay stub content.
  • California SDI, which includes Paid Family Leave benefits, is generally funded through employee SDI withholding. Check current rates, coverage exceptions, and any approved voluntary plan.
  • City level taxes or mandates may apply where you have employees. Check the city where work is performed.

Common pitfalls

  • Wrong deposit schedule. Determine it from the current lookback rules and monitor accelerated-deposit thresholds.
  • Late new hire reporting. Put it in your onboarding checklist.
  • Owner pay not processed as W 2 when required. S corp owners who work in the business generally need payroll.
  • Misclassifying employees as contractors. Apply California’s ABC test or the applicable statutory exception and other required standards. A contract, W-9, or Form 1099 alone does not establish contractor status.
  • Unreconciled liability accounts. Match every deposit to a report number each month.

Want this handled for you?

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Frequently asked questions

How do I know my federal deposit schedule?

Determine it from the IRS lookback-period rules in Publication 15. Monthly depositors generally pay by the 15th of the next month; semiweekly depositors follow the weekday schedule. The $100,000 next-business-day rule can override either schedule.

What forms do I file each quarter in California?

Most employers file DE 9 and DE 9C quarterly by the last day of the following month, subject to weekends and holidays. UI/ETT are generally paid quarterly, but PIT/SDI deposits may be due earlier. Use EDD’s filing and deposit schedules separately.

Do I need workers' compensation before the first payroll?

Yes, California employers generally must carry workers' compensation insurance once you have employees. Coordinate with your broker before you pay wages.

We pay contractors too. Are 1099s part of payroll?

They are not payroll, but they are part of year end reporting. Collect W 9 forms and issue 1099 forms when required. Review worker classification first.

Official sources

Reviewed October 8, 2026. Use the forms and limits for the tax year you are filing; linked agency pages may be updated for later years.

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