Fill Out Your De459 Form

Filling out the DE459 form can seem straightforward, but there are common mistakes that can cause issues down the line. One frequent error is not checking the eligibility box properly. When declaring your status as a sole shareholder or the only shareholder aside from a spouse, it’s essential to select only one of the provided options. Failing to do so might lead to confusion and potential disqualification of the exemption.

Another mistake is submitting the form without a valid employer payroll tax account number. It’s critical to have this number before filing. Without it, your submission could be rejected, delaying your exclusion from State Disability Insurance (SDI) coverage. Always make sure to register for an employer payroll tax account online through e-Services for Business prior to completing the form.

People often overlook the deadline for filing. The DE459 form must be filed during the quarter in which you want the exemption to begin. If it is filed late, the exemption will take effect only in the next calendar quarter. This can impact financial planning if you expected immediate relief from SDI coverage.

It's also important to ensure all required personal information is filled out correctly. Submitting the form with missing or incorrect names, Social Security numbers, or other personal details can lead to processing delays. Taking time to double-check all entries can save a lot of hassle later.

Another common issue arises from misunderstanding the implications of the exemption. Many believe that opting out of SDI will also exempt them from other state or federal payroll taxes. In reality, this exclusion only applies to SDI taxes in California, and all other taxes, such as Unemployment Insurance (UI), must still be reported and paid. Being aware of this distinction is vital for compliance and avoiding penalties.

Finally, individuals sometimes forget to retain a copy of the DE459 form for their records. Keeping a signed original is not just a good practice; it’s necessary for future reference and verification. By maintaining organized records, you can easily address any discrepancies or questions that may arise later on.

The DE 459 form, which is used by sole shareholders and corporate officers in California to elect exclusion from State Disability Insurance (SDI) coverage, often coexists with several other important documents. Each of these documents serves distinct purposes, yet they collectively facilitate compliance with state tax regulations and support proper payroll management. Below are a few key forms that are typically associated with the DE 459.

• DE 9 - Quarterly Contribution Return and Report of Wages: This document is essential for employers, as it summarizes wage information and tax contributions for all employees, including those who have elected exclusion through the DE 459. It must be filed quarterly.
• DE 9C - Quarterly Contribution Return and Report of Wages Continuation: For those with an approved waiver to file by paper, this return includes additional wage details. If the sole shareholder or spouse is excluded, a separate DE 9C must be filed to accurately report their wages.
• DE 231D - Information Sheet: Multistate Employment: Employers with multistate operations may use this information sheet to determine tax obligations. It helps clarify whether services performed are subject to California's employment taxes and regulations.
• Employer Payroll Tax Account Registration: Before submitting the DE 459 form, corporations must obtain an employer payroll tax account number. This registration process ensures compliance with California's payroll tax requirements.

These documents provide a critical framework for corporate officers and shareholders to navigate their obligations under California tax law. By ensuring that all relevant paperwork is completed and submitted on time, businesses can avoid potential penalties and ensure a smoother financial operation.

The DE459 form, known as the Sole Shareholder/Corporate Officer Exclusion Statement, has similarities with several other documents related to corporate tax and employment reporting. Here’s a list of ten documents that share similar purposes or processes:

• DE 9: This is the Quarterly Contribution Return and Report of Wages. Like the DE459, it requires detailed reporting of wages and provides a mechanism for reporting and paying employee taxes, including those of sole shareholders.
• DE 9C: The Quarterly Contribution Return and Report of Wages (Continuation) allows corporations to report additional information if the primary DE 9 does not cover all employees. It is similar in that it pertains to payroll reporting.
• DE 231D: The Multistate Employment Information Sheet helps determine which services are subject to California employment taxes. Similar to the DE459, it provides guidance on tax obligations for businesses.
• FUTA Form 940: This annual form is used to report and pay federal unemployment taxes. It works alongside the DE459 for companies exempt from state taxes, highlighting the interplay between state and federal tax obligations.
• W-2 Form: The W-2 details annual wages and tax withholding for employees. It aligns with the DE459 by delineating how wages are reported based on shareholder status.
• W-4 Form: Used by employees to withhold the correct federal income tax, the W-4 is important for managing exempt status similar to that indicated in the DE459.
• Form 941: This quarterly federal tax return reports income taxes, social security tax, and Medicare tax withheld from employee's paychecks. It's similar as it involves payroll reporting.
• Form 1099-MISC: Used for reporting income paid to independent contractors. Although distinct from employees, it shares the purpose of reporting remuneration associated with corporate structures.
• State Disability Insurance (SDI) Claims Form: Employees use this form to apply for benefits. Similar to the DE459, it highlights the exclusion of certain individuals from benefits eligibility.
• Employment Development Department (EDD) Registration Form: This document allows businesses to register for employer payroll tax accounts. It connects to the DE459 as it is a prerequisite for filing.

Understanding these documents can help clarify the tax responsibilities and eligibility for various exemptions, much like what the DE459 establishes for sole shareholders in California.

Do's when filling out the DE459 form:

• Ensure all information is accurate and complete before submission.
• Use legible print or type for clarity.
• Sign and date the form where indicated.
• File the form during the calendar quarter you intend for the exemption to begin.
• Keep a copy of the completed form for your payroll records.

Don'ts when filling out the DE459 form:

• Do not submit the form without an employer payroll tax account number.
• Avoid filing this form as an attachment to any other EDD forms.
• Do not delay filing, as it may affect the exemption start date.
• Do not forget to check only one election statement option.
• Do not leave any required fields blank; ensure all necessary information is filled out.

• The DE 459 form excludes from all benefits. This statement is incorrect. The DE 459 form only allows for exclusion from State Disability Insurance (SDI) benefits, not from other benefits such as Unemployment Insurance (UI).
• Filing the DE 459 is optional for sole shareholders. This is a misconception. If a sole shareholder seeks exclusion from SDI benefits, they must file this form. Failing to do so means they will remain subject to SDI contributions.
• The exemption takes effect immediately upon filing. Actually, the exemption becomes effective on the first day of the calendar quarter in which the form is filed. Timing matters.
• Only the sole shareholder can file the DE 459. This is not accurate. The sole shareholder’s spouse, if they are both corporate officers, can also elect to be excluded by signing the form.
• The DE 459 form can be filed at any time. In reality, it's important to file the form during the specific calendar quarter when the exemption is desired. Late filings may delay the exemption to the next quarter.
• The exclusion from SDI is permanent. This isn't true. Changes in ownership or corporate officer status can terminate the exemption at any time. Additionally, the exclusion can be voluntarily terminated after two complete calendar years.
• Filing the DE 459 cancels all tax responsibilities. This is misleading. While the form allows for SDI exclusion, corporations must still report wages and pay contributions for Unemployment Insurance and Employment Training Tax unless they are specifically exempt under federal law.

Here are key takeaways about filling out and using the DE 459 form:

• The DE 459 form allows sole shareholders and corporate officers in a private corporation to opt-out of State Disability Insurance (SDI) coverage.
• You can file your exclusion request online through e-Services for Business by logging into your account.
• Be precise while filling out the form; check only one option regarding your status as a sole shareholder or spouse.
• Retain a copy of the completed form with your payroll records for future reference.
• Submit the completed form immediately by mail or fax to ensure timely processing.
• Your exclusion is effective from the first day of the calendar quarter in which the statement is filed.
• Remember, this exclusion only pertains to SDI taxes and does not affect federal Unemployment Insurance (UI) taxes.
• If your ownership or corporate officer status changes, the exemption may terminate automatically.
• To intentionally end your exclusion after two calendar years, a written request must be submitted to the Employment Development Department (EDD).