If you live in California, and hire one or more persons to work for a wage, salary, or other compensation then every calender quarter, you are required to report wages paid and personal income withheld for each employee. Employers are also responsible for reporting unemployment insurance tax, employment training tax, state disability insurance tax and California personal income tax due on wages paid to their workers.
Employers filing quarterly employment reports may be sole proprietors, corporations, public entities, private households hiring domestic help, and local churches or college clubs
California Taxable Wages
In California, wages eligible for reporting include compensation paid by check or cash, or cash value payments such as meals and lodging. Supplemental payments such as bonuses, overtime pay, or commissions,should also be reported. Wages are reported on Employer Development Department's form DE 9C.
Two categories of cumulative wages are reported for each employee: subject wages on line "F" and personal income tax wages (or gross taxable wages) on line "G." If you employ one or more persons for household work then use Form DE 3BHW. Employers covered by California's wage payment law are required to pay wages at least twice in a calendar month and report those payments quarterly.
Understanding Subject Wages
Subject wages are the compensation amount an employer uses to calculate the amount of unemployment insurance, state disability insurance and paid family leave benefits an employee should receive. Subject wages are the full amount of wages, regardless of the unemployment insurance or state disability insurance taxable wage limits.
Consider also: Do the Self-Employed Pay Unemployment Taxes?
Understanding PIT Wages
Personal income tax or PIT wages are cash and non-cash payments to employees subject to state income tax. These are wages employees report on their annual individual California income tax returns. Therefore, employee wages reported on DE 9C should correspond with the amount reported on that employee's federal Wage and Tax Statement (Form W-2).
Consider also: W-2 Forms: What It Is, Who Gets One & How It Works
Differences Between the Two
For most types of employment, subject wages and PIT wages are exactly the same. However, in certain cases what are considered as subject wages paid to the employee may differ from his PIT. The most frequent examples include the following:
- Wages paid to student nurses, post-secondary school adjunct instructors or election campaign workers are reported as subject wages but are not reported as PIT wages.
- Employee salary reduction contributions to a qualified retirement or pension plan are reported as subject wages but not as PIT wages.
- Wages paid to a son or daughter under the age of 18, domestic partner, spouse, or parent are not reported as subject wages but as PIT wages.
- Payments made to employees of churches are not reported as subject wages but as PIT wages.
- Supplemental unemployment compensation plan benefits are not subject wages but are reported as PIT wages
- Vacation pay, sick pay and holiday pay are not reported as subject wages but as PIT wages.