Getting your payroll set up correctly is a crucial part of running a successful child care business in California. This guide will walk you through all the key steps and components you'll need to consider, from setting up your payroll tax account to understanding your tax rates. By following these steps, you can ensure that your payroll processes run smoothly and stay in compliance with state regulations.

To get set up with payroll in California, you must provide the following:

• California Unemployment Employer Payroll Tax Account Number (also known as Employment Development Department Number)

• California Withholding Employer Payroll Tax Account Number

• California Employment Training Tax Rate

• California Unemployment Tax Rate

• California Power of Attorney (POA) Declaration

Do I need a payroll tax account?

If you operate a business and employ one or more employees, you need to sign up as an employer and set up an EDD payroll tax account within 15 days of paying more than $100 in wages within a calendar quarter. Your EDD payroll tax account enables you to report and pay any payroll taxes you may owe.

Your employer registration is based on the type of business you operate. You can register your business and submit any supporting documents through e-services for Business.

California Unemployment Employer Payroll Tax Account Number (aka Employment Development Department [EDD] Number)

Your EDD Number is an eight-digit number in either of the following formats:

• XXX-XXXX-X

• XXXXXXXX

🛝 Note: California Withholding Tax, Unemployment Insurance (UI), Employment Training Tax (ETT), and State Disability Insurance (SDI) typically share a single account number.

How to find your EDD Number

There are three ways to find your EDD number:

• You can find your EDD number on previously filed quarterly tax forms, such as DE-9 or DE-9c.

• You can also find your EDD number by logging in to your EDD e-Services website.

• If you’ve already registered for a payroll tax account, but have yet to file a state payroll tax return, you can get your EDD number by calling 888-745-3886

Don’t Have an EDD Number?

You can get an EDD number by enrolling online with the EDD’s E-Services for Business Portal. If you’re prompted to enter a payroll agent, choose “No”. You should register for your EDD number as though you do not have a payroll agent. Upon successful enrollment, you’ll receive an EDD number for your child care business.

You can also call the EDD at 888-745-3886 anytime Monday-Friday from 8am to 5pm Pacific Time to speak with a staff member.

California Withholding Employer Payroll Tax Account Number

Your California Withholding Employer Payroll Tax Account Number is the same as your California Unemployment Employer Payroll Tax Account Number (aka Employment Development Department [EDD] Number). Please see the above to locate or acquire your EDD number.

California Employment Training Tax Rate

What is it?

The California Employment Training Tax (ETT) Rate provides funds to train employees in targeted industries in order to make California businesses more competitive. This is an employer-paid tax. This funds:

• Promotion of a healthy labor market

• Assists businesses with investing in a skilled and productive workforce

• Skill Development of workers that produce or deliver goods and services (like child care)

What is my California ETT Rate?

For employers with a positive Unemployment Insurance (UI) reserve account balance of zero or greater, you have an Employment Training Tax Rate (ETT) or 0.1% Employers with a negative UI reserve account balance do not pay ETT, which is shown as 0.0% on the notice. The ETT rate cannot be protested.

The ETT taxable wage limit is $7,000 per employee per calendar year.

California State Unemployment Insurance (SUI) Tax Rate

What is it?

The UI Program is a part of a national program administered by the US Department of Labor under the Social Security Act. UI provides temporary payments to unemployed individuals who became unemployed through no fault of their own.

This is paid by the employer. New employers receive a 3.4% UI rate for two to three years. Afterward, your contribution tax rate will vary, depending on how much you’ve paid in UI benefits. UI rate schedule and taxable wage amounts are determined annually. For 2024, the UI rate schedule is Schedule F+, which is Schedule F plus a 15% emergency surcharge, which is rounded to the nearest tenth.

Schedule F+ provides for UI contribution rates ranging from 1.5-6.2%. The taxable wage limit is $7,000 per employee, per calendar year.

Government and certain nonprofit employers can choose the reimbursable method of financing UI. They reimburse the UI Fund on a dollar-for-dollar basis for all benefits paid to their former employees.

How do I get my UI Rate?

You can get your UI rate by visiting Get My UI Rate and entering your employer payroll tax account number, then selecting Get My UI Rate. If you have issues accessing Get My UI Rate, please contact the Taxpayer Assistance Center at 888-745-3886.

California Power of Attorney (POA) Declaration (DE 48)

For child care businesses delegating their payroll processing to a payroll software like Playground Payroll, they need to fill out a California Power of Attorney Declaration (POA)(DE 48), which is written authorization for an individual or other entity to act on your business’s behalf in terms of tax and reporting matters to the Employment Development Department (EDD). A POA will remain in effect until it is revoked or a new one is received.

Playground Payroll users can fill out DE 48 during setup after filling out tax information. You can also complete DE 48 online using e-Services for Business or by mail.

Further Reading

https://edd.ca.gov/en/payroll_taxes/rates_and_withholding/

https://edd.ca.gov/en/payroll_taxes/tax-rated-employers/

https://edd.ca.gov/siteassets/files/pdf_pub_ctr/de48.pdf