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How to Set Up and Remit Payroll Taxes

Step-by-step guide to setting up payroll taxes in California — from getting your EIN and EDD registration to running payroll and making federal and state deposits.

Before you can run payroll in California, you need an IRS Employer Identification Number, an EDD employer account, and a way to calculate and remit the correct taxes. This article walks through the setup and the remittance process.

What You'll Need

  • IRS Employer Identification Number (EIN)
  • California EDD employer account number
  • Employee information: Social Security number, date of birth, address, completed W-4 (federal) and DE 4 (California)
  • Access to payroll software (QBO Payroll, Gusto, or equivalent)
  • IRS EFTPS account (for federal deposits) and EDD e-Services account (for California deposits)

Normal Procedure

Step 1: Get your IRS EIN and register with the California EDD

Federal (IRS EIN):

If you don't already have an EIN, apply at irs.gov/ein. It's free and takes about 10 minutes online. You'll receive your EIN immediately.

California (EDD employer registration):
  1. Go to edd.ca.gov and register as a new employer through the e-Services for Business portal.
  2. You'll be assigned a California employer account number.
  3. Register within 15 days of paying wages over $100 in a calendar quarter, or as soon as you hire your first employee.

Step 2: Collect W-4 and DE 4 forms from each employee

Before running the first payroll, each employee completes two withholding forms:

  • Federal W-4: tells you how much federal income tax to withhold. Employees can use the IRS withholding estimator to fill it out accurately.
  • California DE 4: tells you how much California state income tax to withhold. Similar to the W-4 but uses California's withholding schedules.

Store the completed forms in the employee's file. You don't submit them to the IRS or EDD, you use them to calculate correct withholdings.


Step 3: Set up payroll in your software

In QBO Payroll (or your chosen software):

  1. Go to Payroll > Set up payroll.
  2. Enter your federal EIN and California employer account number.
  3. Add each employee, name, SSN, date of birth, address, start date, pay rate, and pay frequency.
  4. Enter the W-4 and DE 4 information for each employee.
  5. Set your pay schedule (weekly, bi-weekly, semi-monthly, or monthly).
  6. Confirm your deposit schedule (monthly or semi-weekly for federal; quarterly for California).

The software will calculate all federal and California withholdings and employer taxes automatically for each payroll run.


Step 4: Run payroll

  1. In QBO Payroll, go to Run Payroll.
  2. Confirm the pay period end date and payment date.
  3. Enter hours worked for hourly employees or confirm salary amounts.
  4. Review the calculated withholdings and employer taxes for each employee.
  5. Approve and process.

QBO generates pay stubs for each employee and records the payroll journal entry in your books.


Step 5: Deposit federal payroll taxes

Federal payroll taxes (employee federal income tax, employee and employer Social Security, employee and employer Medicare) must be deposited through the IRS's EFTPS system at eftps.gov.

Monthly depositors: Deposit by the 15th of the month following the payroll.

Semi-weekly depositors:

  • Paydays on Wednesday, Thursday, or Friday, deposit by the following Wednesday
  • Paydays on Saturday, Sunday, Monday, or Tuesday, deposit by the following Friday

QBO Payroll can initiate these deposits automatically if set up for e-pay.


Step 6: File Form 941 quarterly

Form 941 (Employer's Quarterly Federal Tax Return) is due four times per year:

  • Q1 (Jan-Mar): April 30
  • Q2 (Apr-Jun): July 31
  • Q3 (Jul-Sep): October 31
  • Q4 (Oct-Dec): January 31

In QBO Payroll, go to Payroll Tax > Quarterly Forms > Form 941 to generate and e-file.


Step 7: File California quarterly returns with the EDD

California payroll taxes are reported quarterly through two forms:

  • Form DE 9 (Quarterly Contribution Return), reports total wages and the taxes owed
  • Form DE 9C (Quarterly Wage and Withholding Report), lists each employee's wages and California PIT withheld

Due dates are the same as Form 941: April 30, July 31, October 31, and January 31.

File and pay through the EDD's e-Services for Business portal, or through QBO Payroll if set up for California e-filing.

Abnormal Procedures

You missed a federal deposit deadline.

Make the deposit immediately through EFTPS. The IRS penalty starts at 2% for deposits 1 to 5 days late and escalates from there. Making the deposit late is better than not making it, interest continues to accrue until paid. Let your NCO advisor know.


You missed a California EDD quarterly deadline.

File and pay through the EDD e-Services portal as soon as possible. The EDD charges a penalty of 10% of the unpaid taxes for late filings. Contact your NCO advisor if the amount is significant.


You have employees in other states in addition to California.

Each state where an employee works requires separate employer registration and follows its own rules for income tax withholding and unemployment insurance. Configure your payroll software for each employee's work state and consult your NCO advisor before running multi-state payroll.


You need to correct a past deposit or filing.

For federal corrections, file Form 941-X (amended return). For California corrections, file an amended DE 9 and DE 9C through the EDD portal. Your NCO team can help determine the correct approach.

FAQ

What is EFTPS and do I have to use it?

EFTPS (Electronic Federal Tax Payment System) is the IRS's required system for depositing federal payroll taxes. Businesses with $2,500 or more in payroll tax liability must deposit electronically, paper checks to the IRS are not an option for most employers. Register at eftps.gov.


Can I calculate withholdings manually instead of using software?

Yes, the IRS publishes Publication 15-T with withholding tables, and the California EDD publishes the DE 44 employer guide. In practice, manual calculation is time-consuming and error-prone. Software is strongly recommended.


What records do I need to keep?

Keep all payroll records, employee W-4s and DE 4s, payroll calculations, pay stubs, tax deposits, and quarterly filings, for a minimum of 4 years for federal purposes. California requires 3 years minimum, but 4 years covers both.


Do I owe SDI and ETT as the employer?

SDI is an employee-only deduction, you withhold it from the employee's check, you don't pay it separately as an employer. ETT (0.1% on the first $7,000 of wages per employee) is employer-only. SUI is also employer-only, at a rate that varies based on your claims history.