A California contractor has quarterly payroll of $85,000. What is the State Disability Insurance (SDI) withholding amount if the current SDI rate is 0.9% and the wage base limit is $153,164 annually?
Correct Answer
A) $765.00
SDI withholding = $85,000 × 0.9% = $765.00. Since quarterly wages ($85,000) are below the annual limit when annualized, full SDI applies.
Why This Is the Correct Answer
Option A is correct because SDI withholding is calculated by multiplying the quarterly payroll by the SDI rate: $85,000 × 0.9% = $765.00. Since the quarterly wages of $85,000, when annualized ($340,000), exceed the annual wage base limit of $153,164, only the proportional amount subject to SDI tax applies. However, for this quarter alone, the full amount is subject to SDI withholding.
Why the Other Options Are Wrong
Option B: $850.00
Option B incorrectly calculates $850.00, which appears to use a 1.0% rate instead of the correct 0.9% SDI rate. This suggests confusion with other payroll tax rates or a simple calculation error in applying the wrong percentage to the quarterly payroll amount.
Option C: $595.00
Option C shows $595.00, which doesn't correspond to any logical calculation using the given figures. This amount suggests either an incorrect rate application or confusion about which wages are subject to SDI withholding under California law.
Option D: $680.00
Option D shows $680.00, which appears to use an incorrect rate of approximately 0.8%. This suggests confusion about the current SDI rate or possibly mixing up SDI with other state disability insurance rates from different time periods.
Memory Technique
Remember 'SDI 9-tenths' - California SDI is 0.9%, so multiply wages by 9 and move decimal point 3 places left.
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