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Employment Development Department
Employment Development Department

Year-End Notification Requirements

Wage and Tax Statement (Form W-2)

Employers must provide employees with a federal Wage and Tax Statement (Form W-2) by January 31*, per Section 13050 of the California Unemployment Insurance Code (CUIC). Failure to provide a Form W-2 to each employee, or furnish false or fraudulent statements, are subject to a penalty of fifty dollars ($50) for each such failure under Section 13052 of the CUIC. In addition, failure may result in a penalty as imposed under Section 13052.5 of the CUIC. The penalty is based upon the unreported remuneration for personal services multiplied by the maximum rate as provided under Section 17041 of the Revenue and Taxation Code.

For additional information on Form W-2 reporting requirements or instructions, refer to the Internal Revenue Service (IRS) publications Employer’s Tax Guide (Publication 15, Circular E) and Instructions for Forms W-2 and W-3, respectively. To obtain these publications, access the IRS website or call the IRS at 1-800-829-3676.

For more information on completing the “State” information on Form W-2, refer to your California Employer’s Guide (DE 44) or contact us at 1-888-745-3886. If the employee performs services in more than one state, contact the other state(s) for guidance.

*NOTE: If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day.

Federal Earned Income Tax Credit (EITC)

Effective January 1, 2008, all employers are required to notify all of their employees of the federal Earned Income Tax Credit (EITC).

Assembly Bill 650, Chapter 606 (Lieu and Jones) requires any employer who is subject to, and is required to provide unemployment insurance to employees, to notify all employees that they may be eligible for the EITC. Employers shall give notification within one week before or after, or at the same time, they provide employees with an annual wage summary (IRS Form W-2, 1099).

You must provide notification to your employees by either handing it directly to your employee or mailing it to your employee’s last known address. Posting of this information on an employee bulletin board will not satisfy the notification requirement.

The notification shall include instructions on how to obtain any notices available from the Internal Revenue Service for this purpose, including, but not limited to, the IRS Notice 797 or any successor notice or form, or any notice created by you, as long as it contains substantially the same language as the notice below or in this sample notice. For more information on the EITC, visit the IRS website.

Notice to Employees

“Based on your annual earnings, you may be eligible to receive the earned income tax credit from the federal government. The earned income tax credit is a refundable federal income tax credit for low-income working individuals and families. The earned income tax credit has no effect on certain welfare benefits. In most cases, earned income tax credit payments will not be used to determine eligibility for Medicaid, supplemental security income, food stamps, low-income housing or most temporary assistance for needy families payments. Even if you do not owe federal taxes, you must file a tax return to receive the earned income tax credit. Be sure to fill out the earned income tax credit form in the federal income tax return booklet. For information regarding your eligibility to receive the earned income tax credit, including information on how to obtain the IRS Notice 797 or any other necessary forms and instructions, contact the Internal Revenue Service at 1-800-829-3676 or through its Web site at www.irs.gov.”

California Earned Income Tax Credit (Cal EITC)

California now offers its own Earned Income Tax Credit (EITC) starting with calendar year 2015 tax returns. This credit is offered in addition to the existing federal EITC. For more information on qualifying for the California EITC, visit the California Earned Income Tax Credit (Cal EITC) page.

Information Return (Form 1099)

Individuals, partnerships, corporations, or other organizations engaged in a trade or business in California may have a requirement to report independent contractor payments. If the IRS or FTB requires that you provide an information return (Form 1099) to an independent contractor, failure to provide such form by January 31*, may result in a penalty as imposed under Section 13052.5 of the California Unemployment Insurance Code or 19175 of the Revenue and Taxation Code. The amount of the penalty is determined based upon the unreported remuneration for personal services multiplied by the maximum rate as provided under Section 17041 of the Revenue and Taxation Code.

If you do not use the official IRS Form 1099 to furnish the statement to recipients, see General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, W-2G, and 1042-S, IRS Publication 1179 for specific rules for substitute statements.

To obtain Form 1099 reporting requirements and instructions, access the IRS website, see IRS Publication 1220, or call 1-800-829-3676.

*NOTE: If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day.