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Payroll Setup for Small Businesses in Los Angeles (2026)
Short answer: In the Los Angeles area you can set up payroll yourself through EFTPS and the EDD, use an online or full-service payroll provider, or have your bookkeeper or tax firm run it. All State Tax Resolution, a Los Angeles firm led by an Enrolled Agent (a tax professional licensed by the IRS), sets payroll up and runs it on Gusto for a flat written fee.
Who can set up payroll for a small business in the Los Angeles area
You can register with the IRS and the Employment Development Department (EDD) and run payroll yourself, or hand it to a payroll provider, a bookkeeper or a tax firm. The right choice depends mainly on two things: how many people you will pay, and whether the owner is an S corporation employee.
One owner paying only themselves is the simplest case: one paycheck, but still the same deposits, quarterly returns and year-end forms any employer files. Each added employee brings new-hire forms and reporting, workers' compensation, and the question of whether a worker is an employee at all.
Your options in Los Angeles
Here are the kinds of setups, without ranking any of them.
Do it yourself. Enroll in the IRS's Electronic Federal Tax Payment System (EFTPS) for federal deposits, register with the EDD and file the DE 9 and DE 9C electronically each quarter. It is allowed and costs only your time, but you own every deposit and filing date.
Self-service payroll software. You enter pay each period and the software calculates withholding and prepares the forms. It suits a small, steady payroll if you want to stay hands-on.
A full-service payroll provider. The provider runs payroll, makes the tax deposits and files the returns for you. It suits owners who do not want to track deadlines.
Your bookkeeper, CPA or Enrolled Agent. Payroll runs alongside the books or returns, so one team sees all the numbers. Ask which platform they use and who files the quarterly returns.
Free government help. The EDD answers payroll tax questions at 1-888-745-3886 and has employment tax offices at 6150 Van Nuys Boulevard, Room 210, Van Nuys, and 10330 Pioneer Boulevard, Suite 150, Santa Fe Springs. IRS Taxpayer Assistance Centers (Los Angeles, El Monte, Van Nuys, Long Beach) answer account questions and take payments by appointment at 844-545-5640, and the Taxpayer Advocate Service, (213) 576-3140, helps when normal IRS channels have failed. Los Angeles County's Department of Consumer and Business Affairs publishes free tax help resources for residents. None of them runs your payroll.
Which setup fits your situation
An S corporation paying only its owner — What tends to fit: A simple setup, run by you in payroll software or by a bookkeeper or tax firm; the key task is putting reasonable wages through payroll
A few employees on regular pay — What tends to fit: A full-service provider, or your bookkeeper or tax firm, so deposits and quarterly returns are handled for you
Workers you treat as contractors — What tends to fit: Settle their classification under the ABC test first, then choose a setup
Payroll taxes already behind — What tends to fit: Fix the missed deposits and returns first, then set up going forward
A payroll setup checklist for a Los Angeles employer
Get an EIN from the IRS. Employers need one.
Enroll in EFTPS. Federal payroll tax deposits go through it.
Register with the EDD within 15 days of paying more than $100 in wages in a calendar quarter.
Collect new-hire forms. Form W-4 for federal withholding, DE 4 for California withholding and Form I-9 for eligibility to work.
Report each new hire to the EDD within 20 days.
Buy workers' compensation insurance. California requires it of every employer.
Set the pay schedule and load wages, withholding and employer taxes into your payroll system.
Make the first deposits on time (federal through EFTPS) and calendar the quarterly returns.
The filings, who gets them and how often
Form 941 — Who gets it: IRS; How often: Every quarter
Form 940 — Who gets it: IRS; How often: Once a year
Form W-2 — Who gets it: Each employee, with a copy filed with the government; How often: Once a year, by January 31
DE 9 — Who gets it: EDD; How often: Every quarter, filed electronically
DE 9C — Who gets it: EDD; How often: Every quarter, filed electronically
California rates and rules that add to the federal ones
Federally, the employer and the employee each pay 7.65% for Social Security and Medicare, and the 2026 Social Security wage base is $184,500. California adds the following.
Unemployment insurance (UI) — Who pays: Employer; Detail: 3.4% on the first $7,000 of each employee's wages for new employers in their first years
Employment Training Tax (ETT) — Who pays: Employer; Detail: 0.1% on the same $7,000
State Disability Insurance (SDI) — Who pays: Employee, withheld by you; Detail: Withheld on all wages, with no wage cap since 2024; the rate is set each year, so check the EDD
Personal income tax — Who pays: Employee, withheld by you; Detail: Withheld using the DE 4
The S corporation owner on payroll
If you own an S corporation and work in it, you are its employee. The corporation must pay you reasonable wages through payroll before it makes distributions, and the IRS can reclassify distributions as wages when pay looks artificially low. There is no fixed percentage; the test is what the work is worth. A local example is the loan-out corporation set up for an actor, writer, director or crew member: one that skipped payroll or fell behind on deposits invites examination. Set payroll up before the first distribution, not after. Our S corporation reasonable compensation guide explains how pay is judged.
Employees or contractors: California's ABC test
California tests contractor status with the ABC test, which is stricter than the federal test. A worker you can treat as a contractor under federal rules may still be an employee in California, and the EDD audits worker classification and payroll from your books.
What goes wrong
Late or missed deposits and returns. They draw penalties and interest.
Trust fund taxes. The income tax and Social Security and Medicare tax you withhold from pay is held for the government. Unpaid trust fund taxes can become a personal liability of owners and officers (the Trust Fund Recovery Penalty).
Skipped paperwork. Missing new-hire reports, missing W-4 and DE 4 forms, or paying an owner only through distributions all create problems later.
Already behind? First-Time Abate can cover failure-to-deposit penalties for one period when the prior three years are clean, all required returns are filed and the tax is paid or in a payment plan.
How to check whoever you hire
Credential. Ask whether the person is an Enrolled Agent, CPA, attorney or none of these, and who will answer an IRS or EDD notice. You can verify any Enrolled Agent's status with the IRS, through its public directory of credentialed preparers or its Office of Enrollment.
Fee. Ask for a flat fee in writing that says what is included: setup, each payroll run, deposits and the quarterly and year-end filings.
Who does the work. Ask who personally sets up and reviews your payroll and who files the quarterly returns.
Promises. Be cautious of anyone who promises to reduce your payroll taxes or penalties before seeing your records.
What we do and how we work with Los Angeles clients
I'm Sabih Shafi, an Enrolled Agent licensed by the IRS under Treasury Circular 230, and the founder of All State Tax Resolution in Los Angeles. We set payroll up and run it on Gusto, and we use the checklist above so nothing is missed. Disclosure: we take part in Gusto's partner program for accountants and may receive compensation when a client signs up through us. For an S corporation, we set payroll up so the owner's wages run through it before distributions. If a payroll tax problem already exists (Forms 941 and 940, or EDD DE 9 and DE 9C), we handle that too.
The fee is flat and quoted in writing before any work starts. We work by phone, video and a secure client portal, so you do not need to visit an office. We serve Los Angeles, West Hollywood, the San Fernando Valley, Long Beach and the rest of Southern California remotely from our Los Angeles base, and you can reach us at (323) 900-0305.
Frequently Asked Questions
Who can set up payroll for a small business in the Los Angeles area?
You can do it yourself with EFTPS and the EDD, or hand it to an online payroll provider, a full-service payroll provider, your bookkeeper or a tax firm. Which one fits depends on how many people you will pay and whether the owner is an S corporation employee. We set payroll up and run it on Gusto for Los Angeles small businesses, remotely by phone, video and secure portal.
What are the best payroll setup services in the Los Angeles area?
No single setup is right for every business, so any list that does not ask about your headcount first is only a rough guide. The main kinds are self-service payroll software, full-service providers that deposit taxes and file returns for you, a bookkeeper or tax firm that runs payroll with your books, and doing it yourself through EFTPS and the EDD. Whichever you consider, ask who files the quarterly returns, who answers EDD and IRS notices, and what the fee is in writing.
When do I have to register with the EDD as an employer in California?
Within 15 days of paying more than $100 in wages in a calendar quarter. After that you file the DE 9 and DE 9C electronically every quarter and report each new hire within 20 days. New employers pay unemployment insurance at 3.4% on the first $7,000 of each employee's wages for their first years, plus the 0.1% Employment Training Tax on the same base.
Do I have to put myself on payroll if I own an S corporation?
If you work in the business, yes: an S corporation must pay its owner-employees reasonable wages through payroll before it takes distributions. The IRS can reclassify distributions as wages if pay looks artificially low, and no fixed percentage makes a salary safe. The right wage depends on the work you do and what it is worth.
How do I know whether a worker is an employee or a contractor in California?
California uses the ABC test, which is stricter than the federal test. A worker who passes a federal test can still be an employee in California, and the EDD audits worker classification and payroll from your books. If you are unsure, get the classification reviewed before the first payment.
Last reviewed: October 2026 by Sabih Shafi, EA
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This article is general information, not individual tax advice. If you want to talk through your own IRS or state balance, book a free 15-minute review or call or text us directly.
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