PRESIDENT'S MESSAGE  

SECRETARY'S MINUTES 

PAYROLL TAX HIGHLIGHTS    

Damitz, Brooks, Nightingale, Turner & Morrisset, Certified Public Accountants

California - Paid Family Leave - California will continue the Paid Family Leave Program (PFL).  All California workers who are covered by the State disability Insurance (SDI) program will also be covered for PFL benefits.  Beginning January, 2004, and through calendar year 2005, the SDI withholding rate will include an additional 0.08 percent to cover the initial cost of PFL benefits.

California - New Employees - All employers must report all newly hired workers within 20-days of hire.  Employers may use Form DE 34, Report of New

Employee(s), or a copy of Form W-4, Employee(s) Withholding Allowance Certificate.

California - Independent Contractors (Form 542) - A service recipient (anyone hiring an independent contractor) must report specified information to the Employment Development Department for inclusion in the Independent Contractors Registry.  The service recipient must report the information within 20-days of either first making payments that in the aggregate equal or exceed $600 in any year, or entering into a contract or contracts with an independent contractor for payments that in the aggregate equal or exceed $600, whichever is earlier.  This means that in 2005, you must again report independent contractors whom you previously reported.  Penalties will be assessed for failure to comply with the rules.

Household Employers and Nanny Tax - Please note that if a client is subject to Federal and California "Nanny Tax" they will need to obtain a Federal Employer Number (FEIN) and a California Employer account from the Employment Development Department (EDD). 

Federal Requirements - The 2005 threshold for FICA tax liability on amounts paid for domestic service

in a private home of the employer is $1,400 per calendar year per domestic employee.  Schedule H is to be filed with the employer's Form 1040 for the reporting of employment taxes on wages paid to domestic employees.  Household employers need to satisfy their payroll tax obligation by increasing their quarterly federal estimated tax payments or increasing federal tax withholding from their wages.

California Requirements - California household employee payroll tax requirements differ from the federal requirements.  Please note that you will not be considered a household employer until you pay CASH wages of $750 or more in a calendar year.  The following is a breakdown of the filing requirements based upon the amount of wages paid per quarter (in the aggregate):

                          $0-$749 ------------------------  Not required to file

                          $750-999 ----------------------  Required to report for State Disability Insurance (SDI)

                            $1,000 and over -------------  Required to report for SDI and State Unemployment  Insurance (SUI) purposes (and SIT if the employee requests  withholding).
 

The IRS and the Employment Development Department (EDD) will normally mail the required payroll tax forms to an employer after the initial filing.  However, many of the quarterly payroll forms can now be downloaded and printed at the following sites:

IRS - www.irs.ustreas.gov/formspubs/index.html

EDD - www.edd.cahwnet.gov/formpub.htm

PLEASE REMEMBER to notify Vicki St. Martin of any email or address changes to keep the data base current!!