Month-end close: payroll tax in California

California withholds income tax and disability insurance together, and SDI has no wage limit while unemployment tax stops at the first $7,000.

This is part of the payroll checklist. California payroll taxes are filed with the Employment Development Department (EDD). Do the federal steps first. An employer must register with the EDD within 15 days of paying more than $100 in wages in a calendar quarter [6].

Rate. Income tax (PIT) is withheld from the EDD's 2026 schedules. A new employer pays 3.4% unemployment insurance for two to three years and 0.1% ETT, both on the first $7,000 paid to each employee. SDI is withheld from employees at 1.3% on all wages.

Filing. PIT and SDI are deposited together. The schedule follows the client's federal schedule and how much PIT has built up: quarterly under $350, monthly at $350 to $400, next-day or semi-weekly above $400. DE 9 and DE 9C every quarter.

Due. DE 9 and DE 9C are due the 1st after the quarter and delinquent on April 30, July 31, November 2 and February 1. Monthly deposits are due the 15th of the following month.

The trap. A late payroll tax deposit costs 15% plus interest. A client with no wages still files the DE 9 and DE 9C.

The month-end steps

1. State income tax withholding. California has personal income tax (PIT), withheld from each paycheck. Work it out with the EDD's 2026 withholding schedules: Method A, wage bracket tables or Method B, exact calculation [1]. PIT and SDI are deposited together. How often depends on the client's federal deposit schedule (federal steps) and how much PIT has built up [2]:

Deposit by the date in the Deposit due column for the client's row. A late payroll tax payment costs a penalty of 15% plus interest [2]. Done when the PIT liability account is at zero after the month's deposits, or equals PIT withheld but not yet due.

2. Unemployment insurance (UI) and Employment Training Tax (ETT). Both are paid by the employer. Take the client's rates from its Notice of Contribution Rates and Statement of UI Reserve Account (DE 2088), which the EDD mails each December, dated December 31 [1]. For reference, a new employer pays 3.4% UI for two to three years, then 1.5% to 6.2%, and ETT is 0.1% for 2026, or none for an employer with a negative UI reserve balance [1] [3]. Both apply to the first $7,000 paid to each employee in a calendar year [3] [1]. Done when the UI and ETT liability accounts equal the month's taxable wages times the DE 2088 rates.
3. The quarterly returns, the DE 9 and DE 9C. The DE 9 reconciles the wages reported and the taxes paid for the quarter. If it shows an overpayment, the EDD refunds it, and tax still due is paid separately with a Payroll Tax Deposit (DE 88). The DE 9C reports each employee's wages. Both are filed every quarter, even a quarter with no wages. If a DE 9C isn't sent within 15 days of an EDD demand, the penalty is $20 for each unreported employee [4]. The 2026 dates [5]:

Done when the DE 9's wages tie to the quarter's payroll register, its taxes tie to the quarter's deposits, and the DE 9C's employee totals add up to the DE 9.

4. Owner and officer wages. If the client is a corporation that pays its officers, including the owner of an S corporation, ask its accountant how their pay is treated for these taxes before you run payroll. Done when the accountant's answer is on file.
5. State Disability Insurance (SDI). SDI is withheld from employees at 1.3% for 2026, on all wages, with no wage limit since January 1, 2024 [1]. It's on the DE 2088 too, and it's deposited with PIT (step 1). Done when the SDI liability account is at zero after deposits, or equals SDI withheld but not yet due.