What payroll tax accounts should new businesses register for?

Payroll Tax Accounts for New Businesses in California

When starting a business in California, registering for the correct payroll tax accounts is essential to ensure compliance and smooth operations. These accounts allow you to manage employee payroll taxes, unemployment insurance, and other withholding obligations.

Essential Payroll Tax Accounts to Register

• California Employment Development Department (EDD) Employer Payroll Tax Account: This account covers state payroll taxes including Unemployment Insurance (UI), Employment Training Tax (ETT), State Disability Insurance (SDI), and California Personal Income Tax (PIT) withholding. You must register with the EDD within 15 days of paying wages.
• Internal Revenue Service (IRS) Employer Identification Number (EIN): Required for federal payroll tax reporting and withholding. Obtain your EIN before hiring employees.
• California Department of Tax and Fee Administration (CDTFA) Seller’s Permit: While not a payroll tax account, if your business sells tangible goods, you need this permit for sales tax collection and reporting. It’s important to separate sales tax obligations from payroll tax accounts.

Additional Operational Considerations

• Workers’ Compensation Insurance: Mandatory for California employers. This insurance covers employee injuries and is separate from payroll tax accounts but critical for compliance.
• Recordkeeping and Reporting: Maintain accurate payroll records and submit timely tax returns to the EDD and IRS. Automated payroll systems can help streamline tax withholding, payments, and filings.
• Employee Classification: Correctly classify workers as employees or independent contractors to avoid payroll tax misclassification issues.

As of 2026, always verify registration deadlines and account requirements on official California state websites to stay current with any regulatory updates.