Paying and filing payroll taxes for a California S-Corporation with only a few employees involves several steps to ensure compliance with state and federal regulations, but can be done without help of outside software or assistance:

1. Calculate Wages and Withholdings:

   • Determine the gross wages of the employee.

   • Withhold federal income tax, Social Security tax (6.2% up to a wage base limit), and Medicare tax (1.45%) from the employee's wages based on IRS guidelines.

   • Calculate California state income tax withholding based on state tax tables.

2. Employer Contributions:

   • As an employer, match the amount of Social Security (6.2%) and Medicare (1.45%) taxes withheld from the employee's wages. Additionally, pay Federal Unemployment Tax Act (FUTA) taxes and California state unemployment taxes.

3. Report Employee and Employer Taxes:

   • Quarterly, file Form 941 with the IRS to report federal income tax withheld, Social Security and Medicare taxes, and employer's share of these taxes.

   • Annually, file Form 940 with the IRS to report FUTA taxes.

   • File California DE 9 and DE 9C forms quarterly with the California Employment Development Department (EDD) to report wages, withholdings, and employer contributions for state unemployment insurance.

4. Payment of Taxes:

   • Pay federal payroll taxes (income tax withholding, Social Security, Medicare, and FUTA) either semi-weekly or monthly depending on the size of your tax liability, as determined by the IRS.

   • Pay California payroll taxes (state income tax withholding and unemployment taxes) quarterly to the EDD.

5. Other Considerations:

   • Ensure timely payments and filings to avoid penalties and interest.

   • Keep accurate payroll records and documentation of all tax payments.

6. Consultation:

   • Consider consulting with a tax advisor or accountant familiar with California and federal payroll tax regulations to ensure compliance and accuracy in filings and payments.

Here's a more detailed step-by-step process for paying and filing payroll taxes for a California S-Corporation with one employee:

1. Calculate Wages and Withholdings

• Gross Wages Calculation:

  • Determine the employee's gross wages, including regular pay, bonuses, commissions, and any other taxable compensation.

• Federal Income Tax Withholding:

  • Use the IRS Publication 15 (Circular E) and the employee's Form W-4 to calculate federal income tax withholding. The withholding amount depends on the employee's filing status, allowances, and wages.

• Social Security and Medicare Taxes:

  • For Social Security tax, withhold 6.2% of the employee's wages up to the Social Security wage base limit ($147,000 in 2022).

  • For Medicare tax, withhold 1.45% of all wages; an additional 0.9% Medicare tax may apply to wages over $200,000.

• California State Income Tax Withholding:

  • Use California's withholding schedules and the employee's Form DE 4 to calculate state income tax withholding. California has its own tax brackets and rates.

2. Employer Contributions

• Matching Social Security and Medicare Taxes:

  • As an employer, match the amount of Social Security (6.2%) and Medicare (1.45%) taxes withheld from the employee's wages.

• Federal Unemployment Tax Act (FUTA):

  • Pay FUTA taxes at a rate of 6.0% on the first $7,000 of each employee's wages. However, you may receive a credit up to 5.4% if you pay state unemployment taxes timely.

• California State Unemployment Taxes:

  • Pay California state unemployment insurance (SUI) taxes based on your SUTA (State Unemployment Tax Act) rate, which varies depending on your business's history of unemployment claims.

3. Report Employee and Employer Taxes

• Federal Reporting:

  • File Form 941 (Employer's Quarterly Federal Tax Return) with the IRS quarterly to report federal income tax withheld, Social Security and Medicare taxes (both employee and employer portions), and any adjustments.

• Federal Annual Reporting:

  • File Form 940 (Employer's Annual Federal Unemployment Tax Return) with the IRS annually to report FUTA taxes.

• California Reporting:

  • File Form DE 9 (Quarterly Contribution Return and Report of Wages) and Form DE 9C (Employer's Quarterly Contribution and Wage Report) with the California Employment Development Department (EDD) quarterly.

  • DE 9C details employee wages, withholdings, and employer contributions for state unemployment insurance.

4. Payment of Taxes

• Federal Payments:

  • Pay federal payroll taxes (income tax withholding, Social Security, Medicare, and FUTA) either semi-weekly or monthly based on your tax liability, as determined by the IRS.

• California Payments:

  • Pay California payroll taxes (state income tax withholding and unemployment taxes) quarterly to the EDD. The due dates are typically the last day of the month following the end of each calendar quarter.

5. Other Considerations

• Timely Filing and Payments:

  • Ensure all filings and payments are made on time to avoid penalties and interest. Late payments can result in penalties, and late filings can lead to compliance issues.

• Record Keeping:

  • Maintain accurate payroll records, including employee earnings, tax withholdings, and employer contributions. Keep these records for at least four years.

• Consultation:

  • Consider consulting with a qualified tax professional or accountant who understands both federal and California payroll tax regulations to ensure compliance and accuracy in all filings and payments.

Following these detailed steps will help ensure that your California S-Corporation meets its payroll tax obligations accurately and on time.