How Tax Catch-up Works in California for Household Employers

When household employers catch-up on back wages, there are certain tax rules that need to be applied that both the IRS and the state of California require.

Rule 1: Any employee's taxes you paid for the catch-up period will be reported as income on your employee's W-2 to Box 1, as required by the IRS. You will pay your employee’s portion of social security and medicare tax and the CA SDI employee tax because you didn’t withhold these taxes. That additional amount gets added to Box 1. However, that added amount is not considered to be social security or medicare wages, so that is why Box 3 and 5 do not match box 1 and will be lower. (SDI is calculated differently than the social sec and medicare, it's not a straight addition, as required by CA).

Household employers are not required to withhold any income tax, that remains solely the responsibility of the employee. That is why the state withheld income tax was originally left empty. However you should have received an updated W-2 inside the app a few days ago with the CA EDD# on it, and just in case we are attaching it here. It shows the CA wages, same as federal wages box 1, with zero withheld.