Deadline Alert: California Small Businesses and the CalSavers Mandate

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If you are a California small business owner, especially one who manages your own corporation or LLC, you need to mark December 31, 2025 on your calendar. This is the final deadline for companies with 1–4 employees to comply with the state-mandated CalSavers Retirement Savings Program.

Ignoring this law is not an option, as non-compliance can lead to financial penalties.

Here is your clear, step-by-step guide on what CalSavers is, what it requires of you, and the critical action you must take by the end of the year.

1. What is the CalSavers Retirement Savings Program?

The California state law requires that all eligible employers who do not currently offer a qualified, private-market retirement plan (like a 401(k), SEP IRA, or SIMPLE IRA) must do one of two things:

  1. Facilitate the state-run CalSavers Retirement Savings Program for their employees, OR
  2. Report an exemption because they already offer a qualified private-market plan or meet other specific criteria.

The law’s primary goal is to address the over 7 million private-sector workers in California who lack access to any workplace retirement savings option.

2. The Critical Distinction: Sole Owner vs. One Employee

This is the most crucial part for the smallest businesses. Your compliance action depends entirely on your status:

Your StatusCompliance RequirementAction Needed
Sole Owner/Employee (You are the only W-2 employee, and you own the business)EXEMPT from participation.You MUST register and formally Report Your Exemption on the CalSavers website.
One or More W-2 Employees (Other than the owner/owner’s spouse)MANDATED to comply.You MUST either facilitate CalSavers or establish a qualified private-market plan.

The bottom line: Even if you are a sole owner and are exempt from setting up the payroll deduction system, the state requires you to register and officially report that exemption to avoid compliance notices and potential fines.

3. Your Required Action Steps

To avoid penalties of up to $750 per eligible employee, you must take action before the December 31, 2025, deadline.

Step 1: Gather Your Credentials

Before you visit the website, you will need:

  • Your Federal Employer Identification Number (FEIN) or Tax Identification Number (TIN).
  • Your California Payroll Tax ID (from the Employment Development Department, or EDD).
  • Any CalSavers Access Code you may have received in the mail.

Step 2: Go to the CalSavers Employer Portal

You must navigate to the official CalSavers employer website.

Step 3: Register or Report Your Exemption

Follow the on-screen prompts. You will be guided to either:

  • Register to begin facilitating the program for your employees, OR
  • Report Your Exemption and select the reason (e.g., “Company has no employees other than the owner(s) or the owner’s spouse”).

Policy Insight: Is This Mandatory Saving?

Many small business owners question the ethics or policy behind a state-mandated retirement program. While it may feel like government overreach, it’s important to understand the structure:

  • It’s Not Forced Participation: CalSavers is voluntary for employees. Any employee can opt out at any time. The employer’s role is strictly administrative—simply facilitating the option.
  • It’s Not a State Investment Fund: The contributions are automatically deposited into an Individual Retirement Account (IRA)—either a Roth IRA or Traditional IRA—that is owned and controlled by the employee. The state is only requiring access to a savings vehicle, not mandating a specific investment or propping up the market.
  • The Goal is Social Wellness: The program is designed to reduce future reliance on state public assistance by ensuring more Californians have a basic retirement nest egg.

The final takeaway is this: The law is a compromise. It mandates access, but respects individual choice (the opt-out feature).

Secure Your Compliance

The December deadline is firm. If you are unsure about your exact exemption status or need assistance in establishing a compliant private retirement plan (like a SEP IRA) to bypass the CalSavers mandate entirely, we can help.

Don’t risk penalties. Contact us today for a quick review of your small business status to ensure you meet the compliance requirements for 2025.

Schedule Consultation

About Mr. Smart Tax

Mr. Smart Tax is your helpful, accessible, “Retail Expert” resource for all things related to tax compliance. We provide clear, tactical, and educational content on “How-to” guides, standard deductions, corporate minutes, filing tips, and small business tax requirements. Our goal is to give small business owners and individuals the specific, step-by-step answers they need to navigate the tax landscape confidently.

IRS 2023 Mileage rates

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Per IR-2022-234, December 29, 2022

WASHINGTON — The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.
These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 2023-03PDF contains the optional 2023 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2023 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

California Health Department Reopening Guidelines For Restaurants, Retail and Manufacturing

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While a lot of business owners are taking a wait-and-see approach, The California Department of Public Health and Department of Industrial Relations recently released industry specific guidance to help employers reopeing their businesses during the Covid-19 pandemic.

These new instructional documents provide businesses with some important information from employee training to customer safety and other tips for a safe workplace. You can view these documents and other employer resources at the California state government’s website https://covid19.ca.gov/

Here are some notable parts from the government guidance if you are planning on curbside service, take-out or dining-in at your local Restaurant or Bar:

  • Prioritize outdoor seating and curbside pickup to minimize cross flow of customers in enclosed environments. Restaurants can expand their outdoor seating, and alcohol offerings. Guests are encouraged to order ahead of their arrival, even if dinining-in.
  • Limit the number of patrons at a single table to a household unit or patrons who have asked to be seated together. People in the same party seated at the same table do not have to be six feet apart. All members of the party must be present before seating and hosts must bring the entire party to the table at one time.
  • Licensed restaurants may sell “to-go” alcoholic beverages, prepared drinks, and pre-mixed cocktails provided they are sold and delivered to customers in conjunction with the sale and delivery of a meal/meals.
  • Discontinued tableside food preparation and presentation such as food item selection carts and conveyor belts, guacamole preparation, etc.

If you have questions about this article or want to talk more your business, please contact us at (949) 877-3143 (local) or (800) 425-0570 (toll free) or info@mrarrachecpa.com

Quicklinks to the Documents

guidance-dine-in-restaurantsDownload
guidance-retailDownload
guidance-manufacturingDownload

Rent vs Buy Your Home

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Should you buy or rent your home?

http://tinyurl.com/q7lda3e

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