California Love Note to Small Employers

Let's say your very small business has grown to the point where you want to hire an employee. You dutifully want to comply with labor rules, regulations, and costs (workers compensation insurance, unemployment tax, state disability insurance, etc.). Maybe you're old school and want to fill out the forms by hand. Maybe you're distrustful of electronic communications, maybe you don't have an Internet computer (you do have a cellphone, let's not be ridiculous), or maybe you just like the feel of paper originals and like to keep a paper copy for your files.

Effective January 1, 2019, the State of California penalizes you for paper submittals of reports that it demands.

From the February, 2019 newsletter of the California Department of Tax and Fee Administration:

E-file and E-pay Mandate for Employers—Penalties for Paper Submittal

AB 1245 (Stats. 2015, Ch. 222) requires all employers to electronically submit employment tax returns, wage reports, and payroll tax deposits to the Employment Development Department (EDD). Effective January 1, 2019, penalties will be charged on paper filing and payment of payroll taxes as follows:

Tax Returns: $50 per return

DE 9, Quarterly Contribution Return and Report of Wages

DE 3HW, Employer of Household Worker(s) Annual Payroll Tax Return

DE 3D, Quarterly Contribution Return

Wage Reports: $20 per wage item

DE 9C, Quarterly Contribution Return and Report of Wages (Continuation)

DE 3BHW, Employer of Household Worker(s) Quarterly Reports of Wages and Withholding

Wage Reports: 15% of amount due

DE 88, Payroll Tax Deposit

These penalties can be prevented by using EDD’s e-Services for Business at www.edd.ca.gov/Payroll_Taxes/e-Services_for_Business.htm to comply with the E-file and E-pay mandate. Express Pay can also be used for online payment by visiting www.edd.ca.gov/Payroll_Taxes/File_and_Pay.htm.

You can still use paper forms if you grovel:

Employers who cannot file and pay electronically due to lack of automation, severe economic hardship, current federal exemption, or other good cause, must submit a DE 1245W, E-file and E-pay Mandate Waiver Request form, which can be found at www.edd.ca.gov/pdf_pub_ctr/de1245w.pdf. Employers with an approved waiver will continue to receive paper tax forms and payment coupons in the mail, and will not be subject to a penalty for paper submittal.

The new California motto should be of the State, by the State, and for the State.

Afterthought: a State that hates paper requires businesses to post signage that no one ever reads: