The Employment Development Department (EDD) administers the withholding tax provisions applicable to all resident and nonresident employees. The California Employer’s Guide published by EDD provides detailed guidance. Wages paid to California residents for services performed both within and outside the state are subject to state income tax withholding. Wages paid to nonresidents of California for services performed inside the state are subject to withholding for state income tax; only wages paid to nonresidents of California for services performed outside the state are exempt from withholding. California does not distinguish between U.S. citizens, U.S. residents, and nonresident aliens with respect to state income tax withholding.
- Withholding Allowances
Although EDD Form DE-4 (http://www.edd.ca.gov/pdf_pub_ctr/de4.pdf) (PDF Format, 147KB)* is not required, an employee may use the form to request additional state tax to be withheld each pay period or to request additional allowances for estimated deductions. Employees may modify their withholding status at any time during the year by filing a new Form DE-4 (PDF Format, 147KB)* or W-4 (PDF Format, 100KB)*.
- No-Tax-Liability Exemption from Withholding
In order to claim exemption from state income tax withholding, employees must submit a W-4 (PDF Format, 100KB)*. or DE-4 (PDF Format, 147KB)* certifying that they did not have any federal tax liability for the preceding year and that they do not anticipate any tax liability for the current taxable year. The exempt status claim must be renewed each calendar year by February 15, or the employee’s withholding status reverts to “single with no allowances” on all earnings paid after February 15th or until a new W-4 or DE-4 is prepared by the employee. If an employee expects to have a tax liability the following year, the employee is required by law to file a new Form W-4 (PDF Format, 100KB)*. or DE-4 (PDF Format, 147KB)* by December 1.
- Withholding Method
SDSU Research Foundation uses the percentage method for withholding state income tax for the computerized payroll computation. Supplemental wage payments such as commissions, retroactive wage increases, special payments, etc. are combined with regular wages in a single payment and taxed accordingly.
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