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slgriff
Level 1

QuickBooks Payroll Issue – CA SDI Without CA Income Tax?

Hello QuickBooks community,

I don’t use QuickBooks personally, but my employer does (not sure what software or version), and I’m running into a payroll issue.

Background:

  • I live and work in Maine, but my company is based in California.

  • I want to pay into CA SDI (State Disability Insurance) and not CA income tax, which is possible (confirmed from the CA EDD directly).

  • Last year, my HR team added CA SDI to my withholdings, but CA income tax was mistakenly deducted too.

  • They contacted QuickBooks last year and were able to stop CA income tax withholding while keeping CA SDI contributions active.

The Issue:

  • Now, doing my 2024 taxes, CA income is reported on my W-2, making it look like I owe thousands to CA.

  • I asked for a corrected W-2 (W-2C) to reflect $0 CA income, but HR said QuickBooks requires my work address to match my home address (both in Maine).

  • They are reissuing my W-2C, but it will remove my CA SDI contributions, and I will be refunded what I paid last year, meaning I lose eligibility for CA SDI.

My Question:

According to CA EDD and a tax professional, I should be able to pay CA SDI without paying CA income tax. Is this a limitation of QuickBooks payroll, or is there a workaround? Am I out of luck?

2 Comments 2
MirriamM
Moderator

QuickBooks Payroll Issue – CA SDI Without CA Income Tax?

Thank you for sharing such comprehensive details, slgriff. I understand you're dealing with a complex payroll issue regarding your CA SDI contributions and CA income tax reporting on your W-2. Let's work together to resolve this.

 

In QuickBooks, the state payroll taxes applicable to both you and your employer are determined by where employees live and work. These taxes can include State Withholding, State Unemployment Insurance, local taxes, State Disability Insurance, or Paid Family Leave. Since the W-2C removes your SDI contributions, I recommend discussing with your employer how they are managing these contributions.

 

For insights into how your employer has set up your payroll preferences in QuickBooks, you can check this article: Set up employees and payroll taxes in a new state.

 

If you want to access your paystubs online, you can ask your employer to invite you to use QuickBooks Workforce. For more details, feel free to share this article with them: Invite your employees to QuickBooks Workforce to see pay stubs and W-2s if you use QuickBooks Deskto....

 

Furthermore, should you wish to enhance the efficiency of your payroll operations, consider exploring QuickBooks Payroll.

 

Managing state taxes can be a complex task, but remember, you're not alone in this. Never hesitate to swing back at your convenience if you have any payroll-related questions.

slgriff
Level 1

QuickBooks Payroll Issue – CA SDI Without CA Income Tax?

Hi MirriamM, thanks so much for replying.

 

I think the crux of the issue is a limitation with QuickBooks. My HR person is telling me that "There is not a way (through QuickBooks) to have your residence in ME and the business headquarters in CA to properly report wages. Since you live and work in ME, the information both locations should have been listed as your home address."

It seems that while what we have been trying to do, while technically allowed through CA EDD, is not technically possible due to the limitations of QuickBooks. Are you able to confirm?

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