October 12, 2016    |    By

As a business owner, compliance is your top priority.

So, it should be no surprise that when 2017 rolls in, you will have a few items to add to your compliance checklist. Most importantly, you will need to implement the rules and regulations created by Assembly Bill (AB) 1245.

AB 1245 requires all employers to now electronically file employment tax returns, reports, and all related payments to California’s Employment Development Department starting on January 1, 2017.

The bill was authored by Assembly Member Ken Cooley and sponsored by Small Business California. The program was initially announced in the fourth quarter of 2015; therefore, you have had adequate time to prepare for this change over slowly.

Does This New Bill Affect You?

According to the EDD, employers that have 10 or more employees are subject to AB 1245 starting on January 1, 2017. Those with less than ten employees will not be subject to AB 1245 until January 1, 2018.

If you are required to file in 2017, you can sign up with the EDD’s e-Services for Business to file your necessary returns and documents electronically.

The goal of AB 1245 is to create more accurate reporting for companies, and the system is available 24 hours per day, seven days per week so that you can file when it is convenient for you.

The bill was originally going to go into effect in 2016. However, it was edited to reflect 2017; giving you and other California employers time to prepare for electronic filing.

In 2016, you should have received a notification from the EDD stating if you were required to use the E-file and E-pay system by 2017. Three instances would trigger a notification, including:

  • If you reported 10 or more employees during any quarter in 2016 to the State.
  • If you reported nine employees at any time in 2016, and then hired an additional employee in 2017.
  • If you reported ten employees during 2016, but you have fewer than ten starting in 2017.

6 Documents Will You File Electronically

  1. Quarterly Contribution Return  and Report of Wages
  2. Payroll Tax Deposit
  3. Quarterly Contribution Return
  4. Quarterly Contribution Return and Report of Wages
  5. Employer of Household Worker(s) Annual Payroll Tax Return
  6. Household Worker(s) Quarterly Report of Wages and Withholdings

Penalties For Non-Compliance

According to AB 1245, companies that do not pay timely contributions will face a 15 percent penalty and the state will impose a $20 penalty for every unreported wage item. Therefore, it is imperative that you cooperate with the new bill and report as well as pay your contributions promptly. Also, for every tax return you fail to file, you may encounter a $50 fine.

There Are Benefits To Electronic Filling

While it may seem like a hassle, this could be a good thing for employers. Not only will it reduce the amount of paper shuffling you have to send off to the state each year, but it may improve accuracy overall, according to the EDD’s information sheet.

More importantly, it eliminates the potential for someone intercepting these forms in the mail; which contain private information for your employees. Also, the system itself is encrypted.

Lastly, the process is expedited. Your returns are submitted faster, payments are made and received promptly, and you are no longer at risk for late fees or penalties because your returns were lost in the mail.

If You Cannot Do It, You Have Options

If you cannot file electronically, there is a waiver provision.

Now, this is not for those who do not want to comply. Instead, it is for those who cannot file electronically.

You will be required to submit a waiver request to the EDD starting in July 2016, but you should submit it before the commencement of the mandate (to avoid penalties). If your waiver is approved, you can skip the electronic filing. If not, at least you will have time to prepare.

Outsource Your Payroll And Take The Task Off Your To-Do List

Keeping up with the constant changes from the state of California as well as the IRS can be daunting.

If you do not have the time or you just cannot handle your payroll any longer, you can outsource.

Today’s HR outsourcing services can meet the demands of the latest assembly bills as well as the IRS; ensuring compliance and preventing unnecessary penalties.

Make a great first impression at your next job interview.

This blog post is intended for informational purposes only and does not constitute legal advice. No attorney-client relationship is created between the author and reader of this blog post, and its content should not be relied upon as legal advice. Readers are urged to consult legal counsel when seeking legal advice.