How to Calculate a California Withholding

How to Calculate a California Withholding
An employee's W-2 form should include her state income tax withholding.

Step 1

Refer to the employee's W-4 form or his state employee withholding allowance certificate (DE4 form) for his withholding conditions. Ordinarily, you can refer to his W-4 form, which states his federal withholding conditions, such as filing status and allowances. But if he claimed a different number of allowances and filing status for state income tax purposes, refer to his DE4 form instead. Notably, the W-4 form does not include the “Head of Household” option, but the DE4 form does.

Step 2

Use the California withholding tax tables to figure PIT. You can get the withholding schedule online via the California Employment Development Department website. Use method A or method B to figure the tax withholding. Method A includes the wage bracket method, which can be used for salaries or wages up to $1 million. This method gives you the withholding amount based on the employee's filing status, pay period and number of allowances. Method B gives you the precise amount of tax to withhold based on allowances, filing status, pay period, standard deduction and credits for exemption allowance. Use the tables provided in method B to determine the standard deduction and exemption allowance credits.

Step 3

Withhold SDI tax based on the annual tax rate and yearly wage base. For 2010, the rate is 1.1 percent of taxable wages up to $93,316. The rates may change annually, but it's the same for all California employees.

Step 4

Calculate Medicare tax at 1.45 percent of all gross income, and Social Security tax at 4.2 percent of gross income, up to $106,800 annually. The rates are available on the Social Security Administration website and in IRS Circular E.

Step 5

Figure federal income tax withholding using the employee's W-4 form and the IRS withholding tax tables (Circular E). The withholding amount depends on the employee's filing status, pay period and allowances.