Employer compliance with federal and state tax laws can often be a time-consuming and costly endeavor for an employer. Employers must comply with the requirements of several state and federal taxing agencies and taxation requirements when conducting business inside California. Employers will need to comply with the requirements of the federal Internal Revenue Service (IRS), California Franchise Tax Board (FTB) and the California Employment Development Department (EDD). Employers have taxation and reporting requirements for several types of taxes, such as:
- Withholding federal and California income taxes;
- Withholding California State Disability Insurance taxes;
- Withholding federal Social Security or Medicare taxes;
- Payment of federal or state unemployment insurance taxes; and
- Payment of California Employment Training Tax.
Failure to comply with reporting and taxing requirements for employee wages can result in the assessment of penalties and interest charges, in addition to the original tax obligation. In addition, with regard to employment taxes, an employer’s failure to collect and deposit withholding taxes can result in the employer becoming personally liable for payment of the taxes, interest and penalties.