In California, if you are an officer and sole shareholder of a corporation, you can stop the California State Disability Insurance (SDI) withholding from your wages by making an exclusion election with the CA Employment Development Department (EDD). Depending on your wages, you can save up to $1,601.60 in 2022.
For 2022 CA SDI withholding purposes, the taxable wage limit is $145,600 for each employee at 1.10%. Therefore, the maximum saving would be $1,601.60, if you qualify for this election. You can make the election by filing Form DE 459 (Sole Shareholder/Corporate Officer Exclusion Statement) with CA EDD.
Here is the link to the election form: https://lnkd.in/gGdK9JG
Please note that by electing to be excluded from SDI, you will not be eligible for state disability benefits, including Paid Family Leave (PFL) benefits. Therefore, consider the expected value of any potential benefits before making the election. This would make sense for shareholder/officers who already have private disability insurance in place.
In addition, if the shareholder/officer’s spouse is also a shareholder and officer, either or both may file for the exclusion. The spouse must be a legally appointed officer to qualify for the exclusion.
The exclusion will be effective in the calendar quarter filed. Therefore, it is recommended that the election statement be filed with CA EDD as soon as possible. Your payroll administrator should be notified as well.
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