Chapter 2. Withholding And Payment Of Tax of California Unemployment Insurance Code >> Division 6. >> Chapter 2.

(a) (1) Every employer who pays wages to a resident employee for services performed either within or without this state, or to a nonresident employee for services performed in this state, shall deduct and withhold from those wages, except as provided in subdivision (c) and Sections 13025 and 13026, for each payroll period, a tax computed in that manner as to produce, so far as practicable, with due regard to the credits for personal exemptions allowable under Section 17054 of the Revenue and Taxation Code, a sum which is substantially equivalent to the amount of tax reasonably estimated to be due under Part 10 (commencing with Section 17001) of Division 2 of the Revenue and Taxation Code resulting from the inclusion in the gross income of the employee of the wages which were subject to withholding. The method of determining the amount to be withheld shall be prescribed by the Franchise Tax Board pursuant to Section 18663 of the Revenue and Taxation Code.
  (2) For each payroll period ending on or after November 1, 2009, the sum shall comport with the changes made to Section 18663 of the Revenue and Taxation Code, by the act adding this paragraph.
  (b) The department upon request may permit the use of accounting machines to calculate the proper amount to be deducted and withheld from wages, if the calculation produces an amount substantially equivalent to the amount of tax required to be withheld under subdivision (a).
  (c) Withholding shall not be required by this section with respect to wages, salaries, fees, or other compensation paid by a corporation for services performed in California for that corporation to a nonresident corporate director for director services, including attendance at a board of directors' meeting.

(a) Every employer required to withhold any tax under Section 13020 shall for each calendar quarter, whether or not wages or payments are paid in the quarter, file a withholding report, a quarterly return, as described in subdivision (a) of Section 1088, and a report of wages in a form prescribed by the department, and pay over the taxes so required to be withheld. The report of wages shall include individual amounts required to be withheld under Section 13020 or withheld under Section 13028. Except as provided in subdivisions (c) and (d), the employer shall file a withholding report, a quarterly return, as described in subdivision (a) of Section 1088, and a report of wages, and remit the total amount of income taxes withheld during the calendar quarter on or before the last day of the month following the close of the calendar quarter.
  (b) Every employer electing to file a single annual return under subdivision (d) of Section 1110 shall report and pay any taxes withheld under Section 13020 on an annual basis within the time specified in subdivision (d) of Section 1110.
  (c) (1) Effective January 1, 1995, whenever an employer is required, for federal income tax purposes, to remit the total amount of withheld federal income tax in accordance with Section 6302 of the Internal Revenue Code and regulations thereunder, and the accumulated amount of state income tax withheld is more than five hundred dollars ($500), the employer shall remit the total amount of income tax withheld for state income tax purposes within the number of business days as specified for withheld federal income taxes by Section 6302 of the Internal Revenue Code, and regulations thereunder.
  (2) Effective January 1, 1996, the five hundred dollar ($500) amount referred to in paragraph (1) shall be adjusted annually as follows, based on the annual average rate of interest earned on the Pooled Money Investment Account as of June 30 in the prior fiscal year:

Average Rate of Interest Greater than or equal to 9 $ 75 percent: Less than 9 percent, but greater than or equal 250 to 7 percent: Less than 7 percent, but greater than or equal 400 to 4 percent: Less than 4 percent: 500

(d) (1) Notwithstanding subdivisions (a) and (c), for calendar years beginning on and after January 1, 1995, if in the 12-month period ending June 30 of the prior year, the cumulative average payment made pursuant to this division or Section 1110 for any deposit periods, as described under Section 6302 of the Internal Revenue Code and regulations thereunder, was twenty thousand dollars ($20,000) or more, the employer shall remit the total amount of income tax withheld within the number of business days as specified for filing federal income taxes by Section 6302 of the Internal Revenue Code, relating to mode or time of collection, and regulations thereunder. For purposes of this subdivision, payment shall be made by electronic funds transfer in accordance with Section 13021.5, for one calendar year beginning on January 1. Payment is deemed complete on the date the electronic funds transfer is initiated if settlement to the state's demand account occurs on or before the business day following the date the transfer is initiated. If settlement to the state's demand account does not occur on or before the business day following the date the transfer is initiated, payment is deemed complete on the date settlement occurs. The department shall, on or before October 31 of the prior year, notify all employers required by this paragraph to make payments by electronic funds transfer of these requirements.
  (2) Effective January 1, 2017, paragraph (1) shall not apply to an employer subject to the electronic filing requirements of Section 1088. Effective January 1, 2017, an employer subject to the electronic filing requirements of Section 1088 shall remit the total amount of income tax withheld within the number of business days specified in Section 6302 of the Internal Revenue Code and the regulations adopted thereunder for filing federal income taxes. Payment shall be deemed complete on the date the electronic funds transfer is initiated if settlement to the state's demand account occurs on or before the business day following the date the transfer is initiated. If settlement to the state's demand account does not occur on or before the business day following the date the transfer is initiated, payment is deemed complete on the date settlement occurs.
  (3) Notwithstanding paragraphs (1) and (2), effective January 1, 1995, electronic funds transfer payments that are subject to the one-day deposit rule, as described by Section 6302 of the Internal Revenue Code and regulations thereunder, shall be deemed timely if the payment settles to the state's demand account within three business days after the date the employer meets the threshold for the one-day deposit rule.
  (4) Any taxpayer required to remit payments pursuant to paragraphs (1) and (2) may request from the department a waiver of those requirements. The department may grant a waiver only if it determines that the particular amount paid in excess of twenty thousand dollars ($20,000), as stated in paragraph (1) was the result of an unprecedented occurrence for that employer, and was not representative of the employer's cumulative average payment in prior years.
  (5) A state agency required to remit payments pursuant to paragraphs (1) and (2) may request a waiver of those requirements from the department. The department may grant a waiver if it determines that there will not be a negative impact on the interest earnings of the General Fund. If there is a negative impact to the General Fund, the department may grant a waiver if the requesting state agency follows procedures designated by the department to mitigate the impact to the General Fund.
  (e) An employer not required to make payment pursuant to subdivision (d) may elect to make payment by electronic funds transfer in accordance with Section 13021.5 under the following conditions:
  (1) The election shall be made in a form, and shall contain information, as prescribed by the director, and shall be subject to approval by the department.
  (2) If approved, the election shall be effective on the date specified in the notification to the employer of approval.
  (3) The election shall be operative from the date specified in the notification of approval, and shall continue in effect until terminated by the employer or the department.
  (4) Funds remitted by electronic funds transfer pursuant to this subdivision shall be deemed complete in accordance with subdivision (d) or as deemed appropriate by the director to encourage use of this payment method.
  (f) Notwithstanding Section 1112, interest and penalties shall not be assessed against an employer that remits at least 95 percent of the amount required by subdivision (c) or (d) if the failure to remit the full amount is not willful and any remaining amount due is paid with the next payment. The director may allow any employer to submit the amounts due from multiple locations upon a showing that those submissions are necessary to comply with subdivision (c) or (d).
  (g) The department may, if it believes that action is necessary, require any employer to make the report or return required by this section and pay to it the tax deducted and withheld at any time, or from time to time but no less frequently than provided for in subdivision (a).
  (h) An employer required to withhold any tax and that is not required to make payment under subdivision (c) shall remit the total amount of income tax withheld during each month of each calendar quarter, on or before the 15th day of the subsequent month if the income tax withheld for any of the three months or, cumulatively for two or more months, is three hundred fifty dollars ($350) or more.
  (i) For purposes of subdivisions (a), (c), and (h), payment that is not required to be made by electronic funds transfer is deemed complete when it is placed in a properly addressed envelope, bearing the correct postage, and it is deposited in the United States mail.
  (j) (1) In addition to the withholding report, quarterly return, and report of wages described in subdivision (a), each employer shall file with the director an annual reconciliation return showing the amount required to be withheld under Section 13020, and any other information the director shall prescribe. This annual reconciliation return shall be due on the first day of January following the close of the prior calendar year and shall become delinquent if not filed on or before the last day of that month.
  (2) The requirement to file the annual reconciliation return for the prior calendar year under this subdivision shall not apply to the 2012 calendar year and thereafter.
  (k) The requirement in subdivision (a) to file a quarterly return shall begin with the first calendar quarter of the 2011 calendar year.
  (l) The changes made to this section by Chapter 783 of the Statutes of 2012 shall apply on and after January 1, 2013.

(a) "Electronic funds transfer" means a transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, that is initiated through an electronic terminal, telephonic instrument, or computer or magnetic tape, so as to order, instruct, or authorize a financial institution to debit or credit an account. Electronic funds transfers shall be accomplished by an automated clearinghouse debit, an automated clearinghouse credit, Fedwire, or by other specific electronic funds transfer methods approved in advance by the department.
  (b) "Automated clearinghouse" means a federal reserve bank, or an organization established in agreement with the National Automated Clearing House Association, that operates as a clearinghouse for transmitting or receiving entries between banks and/or bank accounts and which authorizes an electronic transfer of funds between those banks or bank accounts.
  (c) "Automated clearinghouse debit" means a transaction in which the state, through its designated depository bank, originates an automated clearinghouse transaction debiting the employer's bank account and crediting the state's bank account for the amount of tax. Banking costs incurred for the automated clearinghouse debit transaction shall be paid by the state.
  (d) "Automated clearinghouse credit" means an automated clearinghouse transaction in which the employer, through its own bank, originates an entry crediting the state's bank account and debiting its own bank account. Banking costs incurred for the automated clearinghouse credit transaction charged to the employer and to the state shall be paid by the employer.
  (e) "Fedwire" means a transaction originated by the employer and utilizing the national electronic payment system to transfer funds through the federal reserve banks, pursuant to which the employer debits its own bank account and credits the state's bank account. Electronic funds transfer payments may be made by Fedwire only if prior approval is obtained from the department and payment cannot, for good cause, be made pursuant to subdivision (a). Banking costs incurred for the Fedwire transaction charged to the employer and to the state shall be paid by the employer.
  (f) "Business day" means any day other than a Saturday, Sunday, legal holiday as recognized by the Internal Revenue Service, statewide legal holiday as recognized by the State of California pursuant to Section 6700 of the Government Code, or a day in which the department is closed pursuant to Section 12b of the Code of Civil Procedure.
  (g) "Settlement date" means the date on which an exchange of funds with respect to an entry is reflected on the books of the Federal Reserve Bank.
  (h) For the purposes of Section 13021, the "cumulative average payment" means the cumulative dollar amount of deposits divided by the number of payments submitted during a given period. For the purposes of this section, the "cumulative average payment" may also be defined as a single annual deposit, when only one payment is made during the 12-month period ending June 30.

In determining the amount to be deducted and withheld under Section 13020, the wages may, at the election of the employer, be computed to the nearest dollar.

The department may, by regulation, permit employers to estimate the wages which will be paid to any employee in any quarter of the calendar year, to determine the amount to be deducted and withheld upon each payment of wages to such employee during such quarter as if the appropriate average of the wages so estimated constituted the actual wages paid, and to deduct and withhold upon any payment of wages to such employee, during such quarter such amount as may be necessary to adjust the amount actually deducted and withheld upon the wages of such employee during such quarter to the amount that would be required to be deducted and withheld during such quarter if the payroll period of the employee were quarterly.

The department may provide by authorized regulation, under such conditions and to such extent as it deems proper, for withholding in addition to that otherwise required under Section 13020 in cases in which the employer and employee agree to such additional withholding. Such additional withholding shall for all purposes be considered a tax required to be deducted and withheld under this division.

In the case of remuneration paid in any medium other than cash for services performed by an individual as a retail salesperson for a person where the service performed by such individual for such person is ordinarily performed for remuneration solely by way of cash commission an employer shall not be required to deduct or withhold any tax under this division with respect to such remuneration, if such employer files with the department such information with respect to such remuneration as the department may prescribe by regulation.

An employer shall not be required to deduct and withhold any tax under this division upon a payment of wages (except wages exempt from federal income tax but not exempt under this division) to an employee if there is in effect with respect to such payment a withholding exemption certificate, in such form and containing such other information as the department may prescribe, furnished to the employer by the employee certifying that the employee--
  (a) Incurred no liability for federal income tax imposed under subtitle A of the Internal Revenue Code of 1954 for his or her preceding taxable year, and
  (b) Anticipates that he or she will incur no liability for federal income tax imposed under subtitle A of the Internal Revenue Code of 1954 for his or her current taxable year.

In the case of tips which constitute wages, subdivision (a) of Section 13020 shall be applicable only to such tips as are included in a written statement furnished to the employer pursuant to Section 13055, and only to the extent that the tax can be deducted and withheld by the employer, at or after the time such statement is so furnished and before the close of the calendar year in which such statement is furnished, from such wages of the employee (excluding tips, but including funds turned over by the employee to the employer for the purpose of such deduction and withholding) as are under the control of the employer. An employer who is furnished by an employee a written statement of tips (received in a calendar month) pursuant to Section 13055 to which paragraph (2) of subdivision (n) of Section 13009 is applicable may deduct and withhold the tax with respect to such tips from any wages of the employee (excluding tips) under his or her control, even though at the time such statement is furnished the total amount of the tips included in statements furnished to the employer as having been received by the employee in such calendar month in the course of his or her employment by the employer is less than twenty dollars ($20). Such tax shall not at any time be deducted and withheld in any amount which exceeds the aggregate of such wages and funds.

(a) For purposes of this division (and so much of Part 10 (commencing with Section 17001) and Part 10.2 (commencing with Section 18401) of Division 2 of the Revenue and Taxation Code as relates to this division) pensions, annuities, and other deferred income, as described in Section 3405 of the Internal Revenue Code, are wages and subject to withholding under this division. Amounts withheld shall be treated as if the amounts are withheld by an employer for a payroll period and only amounts withheld shall be reported to the department pursuant to Section 1088 and Section 13021.
  (b) If an individual makes an election under Section 3405(a)(2) or Section 3405(b)(2) of the Internal Revenue Code not to have tax withheld, that election shall apply to withholding under this division, unless the individual elects, with the consent of the payer, to have those payments subject to withholding under this division. If an individual has not made an election under Section 3405(a)(2) or Section 3405(b)(2) of the Internal Revenue Code, that individual may elect to exclude those payments from withholding under this division. Elections provided in this subdivision shall be made pursuant to regulations of the director.
  (c) Where Section 3405 of the Internal Revenue Code provides that tables or other computational procedures shall be prescribed by the Secretary of the Treasury, for the purposes of this division, any of the following amounts may be withheld, upon election of the payer:
  (1) An amount determined by the method prescribed under Section 13020.
  (2) A designated dollar amount as requested by the payee.
  (3) Ten percent of the amount of federal withholding computed pursuant to Section 3405 of the Internal Revenue Code.
  (d) Where the amount of withholding computed pursuant to subdivision (c) is less than ten dollars ($10) per month, the payer shall not be required to withhold that amount.
  (e) This section shall not apply to pensions, annuities, and other deferred income of payees with addresses outside this state, as shown on the most current records of the payer.
  (f) The department shall, in consultation with the affected payers and payees, issue regulations to implement this section. Those regulations shall provide for delay (but not beyond July 1, 1987) of the application of this section with respect to any payer or class of payers until that time as the payers are able to comply without undue hardship with the requirements of this section. In that case, no retroactive compliance shall be required.

If the director determines that nonpayment of tax by a nonresident under the income tax laws of this state may occur, the director shall notify the payer of payments described in subdivision (a) of Section 13028 that withholding shall be made from those payments. Upon notice from the director, the payer shall withhold from those payments as if they were subject to Section 13020. The director shall also notify the payee that withholding has been ordered pursuant to this section, and the reason for his or her determination that nonpayment of tax may occur.

(a) For purposes of this division (and so much of Part 10 (commencing with Section 17001) and Part 10.2 (commencing with Section 18401) of Division 2 of the Revenue and Taxation Code as relates to this division) any supplemental unemployment compensation benefit paid to an individual shall be treated as if it were a payment of wages by an employer to an employee for a payroll period.
  (b) For purposes of subdivision (a), "supplemental unemployment compensation benefits" means amounts which are paid to an employee, pursuant to a plan to which the employer is a party, because of an employee's involuntary separation from employment (whether or not that separation is temporary), resulting directly from a reduction in force, the discontinuance of a plant or operation, or other similar conditions, but only to the extent those benefits are includable in the employee's gross income.

(a) For purposes of this division (and so much of Part 10 (commencing with Section 17001) and Part 10.2 (commencing with Section 18401) of Division 2 of the Revenue and Taxation Code as relates to this division), any payment to an individual of sick pay which does not constitute wages (determined without regard to this subdivision), if at the time the payment is made a request that such sick pay be subject to withholding under this division is in effect, shall be treated as if it were a payment of wages by an employer to an employee for a payroll period.
  (b) For purposes of this subdivision, "sick pay" means any amount which satisfies both of the following:
  (1) Is paid to an employee pursuant to a plan to which the employer is a party.
  (2) Constitutes remuneration or a payment in lieu of remuneration for any period during which the employee is temporarily absent from work on account of sickness or personal injuries.
  (c) If a payee makes a request that any sick pay be subject to withholding under this chapter, the amount to be deducted and withheld under this chapter from any payment to which that request applies shall be an amount (not less than a minimum amount determined by the Franchise Tax Board) specified by the payee in that request. The amount deducted and withheld with respect to a payment which is greater or less than a full payment shall bear the same relation to the specified amount as that payment bears to a full payment.
  (1) A request that any sick pay be subject to withholding under this chapter shall satisfy all of the following:
  (A) Shall be made by the payee in writing to the person making the payments and shall contain the social security number of the payee.
  (B) Shall specify the amount to be deducted and withheld from each full payment.
  (C) Shall take effect with respect to payments made more than seven days after the date on which that request is furnished to the payer, or as the department shall by regulations prescribe. That request may be changed or terminated by furnishing to the person making the payments a written statement of change or termination which shall take effect in the same manner as provided in the preceding sentence. At the election of the payer, any such request (or statement of change or revocation) may take effect earlier than as provided in this subparagraph.
  (2) Any sick pay paid pursuant to a collective bargaining agreement between employee representatives and one or more employers which contains a provision specifying that this paragraph is to apply to sick pay paid pursuant to that agreement and contains a provision for determining the amount to be deducted and withheld from each payment of that sick pay as follows:
  (A) The requirement of paragraph (3) of subdivision (a) that a request for withholding be in effect shall not apply.
  (B) Except as provided in Section 13026, the amounts to be deducted and withheld under this chapter shall be determined in accordance with that agreement. The preceding sentence shall not apply with respect to sick pay paid pursuant to any agreement to any individual, unless the social security number of that individual is furnished to the payer and the payer is furnished with that information as is necessary to determine whether the payment is pursuant to the agreement and to determine the amount to be deducted and withheld.

The department may by authorized regulations provide for withholding--

(a) From remuneration for services performed by an employee for his or her employer which (without regard to this section) does not constitute wages, and

(b) From any other type of payment with respect to which the department finds that withholding would be appropriate under the provisions of this division,

if the employer and the employee, or in the case of any other type of payment the person making and the person receiving the payment, agree to the withholding. The agreement shall be made in the form and manner as the department may by authorized regulations provide. For purposes of this division (and so much of Part 10 (commencing with Section 17001) and Part 10.2 (commencing with Section 18401) of Division 2 of the Revenue and Taxation Code as relates to this division) remuneration or other payments with respect to which the agreement is made shall be treated as if they were wages paid by an employer to an employee to the extent that the remuneration is paid or other payments are made during the period for which the agreement is in effect.

If wages are paid with respect to a period which is not a payroll period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days, including Sundays and holidays, equal to the number of days in the period with respect to which such wages are paid. In any case in which wages are paid by an employer without regard to any payroll period or other period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days equal to the number of days, including Sundays and holidays, which have elapsed since the date of the last payment of such wages by such employer during the calendar year, or the date of commencement of employment with such employer during such year, or January 1st of such year, whichever is the later. In any case in which the period of time described, or the time prescribed in the preceding sentence in respect of any wages, is less than one week, the department may by authorized regulation permit an employer, in computing the tax required to be deducted and withheld, to use the excess of the aggregate of the wages paid to the employee during the calendar week over the withholding exemption allowed by Section 13020 for a weekly payroll period.

If the remuneration paid by an employer to an employee for services performed during one-half or more of any payroll period of not more than 31 consecutive days constitutes wages, all the remuneration paid by such employer to such employee for such period shall be deemed to be wages, but if the remuneration paid by an employer to an employee for services performed during more than one-half of any such payroll period does not constitute wages, then none of the remuneration paid by such employer to such employee for such period shall be deemed to be wages.