Employment Tax - Changes to Your Business

Changes to Your Business

The forms and publications listed in the sections below may be downloaded or ordered.

Name, Address, and Ownership Changes

You must report any change in your business status (for example: business name or address change, incorporation of your business, and addition of a partner) to EDD. Complete and send any one of the following forms to EDD:

Registration Form (DE 1)
Notification of Change of Employer Account Information (DE 24)
Change of Address/Address Correction and Final Report Form (in your DE 88 coupon booklet)

Employment Development Department
Account Services Group, MIC 28
PO Box 826880
Sacramento CA 94280-0001

Fax: (916) 654-9211

When the type of ownership changes but one or more owners of the business remain, the new entity keeps the same account number and continues to make deposits and file reports as though nothing changed. Although a new account number is not required for most ownership changes, you still need to notify EDD of any change. For additional information on whether a new account number is necessary, contact the Account Services Group at the above address or call (916) 654-7041.

The EDD actively pursues and prosecutes employers who participate in SUTA dumping and UI rate manipulation.

Note: If you pay your taxes by electronic funds transfer (EFT) and you receive a new EDD employer account number or you will no longer submit EFT payments, please notify the EFT Unit:

If You No Longer Have Employees

Business: If you will not be reporting wages in any future quarter (even if you are not closing your business), you must send EDD a final:

Payroll Tax Deposit (DE 88) coupon with payment,
Quarterly Wage and Withholding Report (DE 6), and
Annual Reconciliation Statement (DE 7).

Be sure to check Box D "Out of Business/Final Report" on the DE 6 and Box B "Out of Business/Final Statement" on the DE 7.

If you no longer have employees because you are using a temporary services or employee leasing agency, please see our Information Sheet: Temporary Services and Employee Leasing Industries (DE 231F) or call our Taxpayer Assistance Center at 1-888-745-3886 to determine if this change in employee status is valid.

Household Employers: If you pay state payroll taxes quarterly, follow the business instructions above. If you pay state payroll taxes annually, you must send EDD a final:

Quarterly Report of Wages and Withholdings for Employers of Household Workers (DE 3BHW)
Annual Payroll Tax Return for Employer of Household Workers (DE3HW) with payment. Be sure to check the "Final Return" box.

Selling Your Business

You must send final forms and payment to EDD within 10 days of quitting business, regardless of the normal due date. The final forms due are:

Payroll Tax Deposit (DE 88) coupon and payment for any state payroll taxes due.
Quarterly Wage and Withholding Report (DE 6).
Annual Reconciliation Statement (DE 7).

Be sure to check Box D "Out of Business/Final Report" on the DE 6 and Box B "Out of Business/Final Statement" on the DE 7.

The buyer should ask you for a Certificate of Release of Buyer (DE 2220). See our Requirements for Obtaining Certificate of Release of Buyer When a Business Is Sold (DE 3409A), and complete a Release of Buyer Request Form (DE 2220R) to receive the DE 2220. Until the DE 2220 is issued, the buyer must hold in escrow an amount sufficient to cover all amounts that you owe to EDD, up to the purchase price of the business. The DE 2220 will be issued to you after you pay EDD in full. Payment must be made by cash, cashier's check, money order, or escrow check.

The buyer may ask EDD to transfer your business�s reserve account to the new ownership by completing an Application for Transfer of Reserve Account (DE 4453). If you are selling only a portion of your business, the buyer may apply for a partial reserve account transfer. For more information about reserve account transfers, as well as the disposition of reserve accounts that are not transferred, refer to Information Sheet: California System of Experience Rating (DE 231Z) or contact the Contribution Rate Group at (916) 653-7795.

The EDD actively pursues and prosecutes employers who participate in SUTA dumping and UI rate manipulation.

Purchasing a Business With Employees

If you purchase a business with employees (or that previously had employees), you may be held liable for the previous owner�s EDD liability if a Certificate of Release of Buyer (DE 2220) is not obtained. See Selling Your Business for information on obtaining the DE 2220. For your protection, escrow funds should not be disbursed until the DE 2220 has been issued. The DE 2220 is issued after the seller pays all amounts owed to EDD. Once the DE 2220 is issued, you cannot be held liable for any of the seller's unpaid state payroll taxes.

If you acquire all or part of another employer�s business, you may receive all or part of the seller's reserve account balance by completing an Application for Transfer of Reserve Account (DE 4453). The transfer may immediately reduce or increase your unemployment insurance tax rate. For more information on reserve account transfers, refer to Information Sheet: California System of Experience Rating (DE 231Z) or contact our Contribution Rate Group at (916) 653-7795. (There are time limits to qualify for a reserve account transfer � apply for the transfer immediately after you purchase a business.)

The EDD actively pursues and prosecutes employers who participate in SUTA dumping and UI rate manipulation.

If you acquire an ongoing business and employ any of the former owner�s workers, these employees are considered new hires and should be reported to the New Employee Registry. However, if immediately after the acquisition you employ any of the former owner�s workers, the wages paid to these employees during the same calendar year are considered as having been paid by you. Therefore, wages paid by the former owner in the current calendar year are applied to the taxable wage limits for Unemployment Insurance (UI), Employment Training Tax (ETT), and State Disability Insurance (SDI).

Example: Employees A and B worked for the former owner, and you continued to employ them when you purchased the business.
Employee A:	The former owner paid $6,000 in wages during the current calendar year. For the rest of the year, pay UI and ETT on Employee A’s next $1,000 in wages ($6,000 + $1,000 = $7,000 UI taxable wage limit) and withhold SDI on the next $80,698 in wages ($6,000 + $80,698 = $86,698 SDI taxable wage limit).
Employee B:	The former owner paid $45,000 in wages during the current calendar year. You do not owe UI and ETT because Employee B has reached the $7,000 UI taxable wage limit. For the rest of the year, withhold SDI on Employee B’s next $41,698 in wages ($45,000 + $41,698 = $86,698 SDI taxable wage limit).

See Obtaining Tax Forms and Publications to get any forms you may need.

For assistance, call our toll-free number 888-745-3886 or visit your local Employment Tax Office.

Other EDD Payroll Tax Information

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