Payroll for Apartment Managers

published October, 2013

In California, if you have an apartment building with more than 15 units, you are required to have a “responsible person” residing on the premises. If you have an apartment manager who is receiving reduced rent as “compensation” for keeping track of your building, can they file for unemployment or disability?

As we say in our payroll classes, anyone can FILE for unemployment or disability, but not everyone is eligible.

The IRS and California’s EDD say if “lodging” is furnished on the employer’s premises, for the employer’s convenience, and as a condition of employment, it is not subject to income tax nor income tax withholding, not Medicare nor Social Security (IRS Publication 15A, page 15)—which is ALMOST all the taxes. The three that are missing are CA Unemployment Insurance, CA Employment Training Tax and CA State Disability Insurance (DE-44, page 32, and DE-231TP). The value of lodging is not “income wages” but it is “subject wages.”—a fine distinction.The 2013 rate for SDI in California is 1%, but the SDI is normally withheld from the paycheck—and the employer is making this payment in addition to the value of the lodging— SO, to figure out the “wage base” to calculate the SDI tax, we have to add the tax paid to the value of the lodging. Mathematically, we take the lodging value/0.99 to get the wage base for SDI, UI and ETT (calculation found at DE-231Q). UI and ETT are taxes with rates that change per employer, and these two are limited to the first $7,000 of wages for each employee in 2013. SDI tax is limited to the first $100,880 paid to each employee for 2013.

How do you figure out the value of the rent reduction? Ideally the cash value of the rent reduction would be stated in an employment contract. You may have an idea based on the other 15 units in the building. The CA EDD also provides a minimum of $39.90 per week, or a maximum of $1,224 per month as an alternate method of determining value, or 2/3 of ordinary rental value (DE-44, page 11).

There are also minimum wage laws in California, but I’m just not going to get into that here! You might want to have them keep track of their hours and submit a timecard, and you should keep a copy.

The upshot of this complicated system is that it would appear apartment mangers ARE potentially eligible for Unemployment or State Disability, and as the apartment owner, you are responsible to report your employees and pay California employment tax for them, even though they have no “wages.”