Figuring out if you need to pay employment development department (EDD) taxes can be confusing.
It’s not easy to figure out whether or not you need to pay EDD taxes, and even if you do, it can be hard to know how much you owe.
Is EDD taxable? Yes, EDD is taxable. EDD payments must be reported on your federal tax return as taxable income, but they are not subject to California state income tax.
We’re here to help make things easier for you. Our comprehensive guide will take you through everything you need to know about EDD taxes, including when and how to file.
Is EDD Taxable?
These payments are not subject to state income tax in California, but they must be reported as taxable revenue on your federal tax return.
Unemployment compensation that is considered taxable includes:
- Unemployment Insurance (UI) benefits, including:
- Federal Extensions (FED-ED)
- Pandemic Additional Compensation (PAC), also known as Federal Pandemic Unemployment Compensation (FPUC)
- Pandemic Emergency Unemployment Compensation (PEUC)
- Mixed Earner Unemployment Compensation (MEUC)
- Lost Wages Assistance (LWA)
- Pandemic Unemployment Assistance (PUA) benefits
- Disability Insurance (DI) benefits received as a substitute for UI benefits
- Disaster Unemployment Assistance (DUA) benefits
- Paid Family Leave (PFL) benefits
Calculating Taxes on EDD
Determine Taxable Wages
Unemployment Insurance (UI) tax and Employment Training Tax (ETT) are calculated up to the UI taxable wage limit of each employee’s wages per year and are paid by the employer.
The State Disability Insurance (SDI) tax is calculated up to the SDI taxable wage limit of each employee’s wages and is withheld from the employee’s wages. Calculated amounts are for computing the contribution amounts to be paid or withheld for reporting to the EDD. The UI tax and the ETT are calculated up to the UI taxable wage limit for each employee’s yearly wages, which are paid by the employer.
The employee’s State Disability Insurance (SDI) tax is calculated up to the SDI taxable wage limit of his or her wages, and it is taken from their earnings. The contribution amounts to be paid or withheld for reporting to the EDD are based on these amounts.
Calculate Unemployment Insurance and Employment Training Tax
The employer is responsible for the UI tax and ETT, which are calculated based on each employee’s taxable wages up to the UI taxable wage limit each year.
Calculate State Disability Insurance Tax
The SDI tax is calculated up to the employee’s taxable wage limit and withheld from his or her pay. Calculated amounts are used to compute contribution amounts that must be submitted to the EDD.
How To File EDD On Your Federal Taxes?
The Form 1099G is used to report the entire taxable income EDD gives you in a calendar year to the IRS. These payments must be recorded on your federal tax return, although they are exempt from California state income tax.
What is a Form 1099G?
The Form 1099G is a summary of all unemployment compensation paid out during a year to recipients who received it from the EDD.
• California unemployment compensation, including Paid Family Leave benefits.
• Compensation through federal unemployment programs, including additional payments on federal unemployment assistance provided during the pandemic.
The Internal Revenue Service (IRS) requires you to submit annual unemployment compensation information. The Form 1099G is delivered to those who received unemployment benefits from the EDD so that they may include it as income on their federal tax return. Unemployment payment in California is not subject to state income taxes.
State Taxes On EDD?
California has four state payroll taxes to manage.
Employers contribute to:
- Unemployment Insurance (UI)
- Employment Training Tax (ETT)
Employers are taxed at a UI rate, and they pay UI taxes based on that rate. Some uncommon employer sorts have varying payroll tax demands:
- Nonprofit and public sector employers who choose a different approach are referred to as reimbursable employers.
- Schools may choose whether or not to participate in the School Employees Fund, a special reimbursable financing method.
The following payroll taxes are paid by employees through wage deductions:
- State Disability Insurance (SDI)
- Personal Income Tax (PIT)
Note: Wages are generally subject to all four payroll taxes. However, some types of employment are not subject to payroll taxes and PIT withholding.
Although EDD payments are taxable, they are not subject to California state income tax. This makes them a valuable source of additional income for many taxpayers in our state. If you receive EDD payments, be sure to report them on your federal tax return as taxable income. Thanks for reading!