Wage Threshold Changes Under Federal Tax Law

For 2012, the domestic employee wage threshold under Federal law for paying Social Security taxes will rise to $1,800. Earnings below this amount will not be subject to Social Security taxes. This limit is up from $1,700 in 2011.

Under California law, the thresholds will stay at $750 and $1000. Specifically: You must register with the Employment Development Department (EDD) as a household employer for California payroll tax purposes when you have paid cash wages totaling $750 or more in one calendar quarter to one or more people who work as employees in or around your home. The amount of wages you pay in a calendar quarter will determine the payroll taxes you are required to withhold and pay. If you pay …

– $750 to $999, then you have to withhold State Disability Insurance (SDI).
– $1,000 or more, then you have to withhold SDI, PLUS pay Unemployment Insurance (UI) and Employment Training Tax (ETT).

Thus, if you, as an employer, pay more than $750 in a quarter or $1,800 in a year, you will have some tax reporting requirements.