Running payroll in California has never been simple. Between federal withholding requirements, California’s own state payroll tax system, the Employment Training Tax, SDI, and a shifting set of wage and hour rules, Fresno employers already deal with one of the most complex payroll compliance environments in the country. Add the federal tax law changes that took effect in 2026, including a newly restructured employer family and medical leave credit, and the stakes for getting payroll right are higher than ever.
Here’s what Central Valley employers need to understand as we move into the second half of the year.
The Employer Family and Medical Leave Credit: Permanently Changed
One of the more underreported provisions of the One Big Beautiful Bill Act is the permanent extension and modification of the employer tax credit for paid family and medical leave.
Previously set to expire at the end of 2025, this credit is now a lasting feature of the tax code, but with a structural change that requires employers to take a fresh look at how their leave programs are set up.
For 2025, the credit was based on 12.5% to 25% of eligible wages paid to qualifying employees during up to 12 weeks of paid family and medical leave. Beginning in 2026, employers can instead claim the credit based on insurance premiums paid for active family and medical leave coverage, not just on wages paid while employees are on leave.
The practical implication: Fresno employers who fund paid leave through an insurance arrangement now have a clear pathway to claim the credit based on premiums paid. This is a meaningful structural shift that requires reviewing your current leave policy and the mechanism through which it’s funded.
Critically, employers cannot claim the credit for both wages and premiums in the same tax year. Determining which approach generates the larger credit requires modeling your actual program costs, another reason this is a conversation to have with your Fresno CPA now rather than at year-end.
California-Specific Payroll Compliance in 2026
California continues to be one of the most demanding payroll compliance environments in the nation. Key items for Fresno employers to keep current on include California minimum wage requirements and any applicable local ordinances that affect hourly workforce planning. SDI rate and benefit structure updates require that payroll systems be calibrated correctly and that employee communications reflect accurate benefit levels.
Worker classification under California’s AB 5 framework remains a live compliance issue for industries that rely on independent contractors, including trucking and logistics. Misclassification carries payroll tax penalties that can accumulate quickly and are difficult to unwind. And California’s pay stub itemization requirements, among the strictest in the country, affect every employer regardless of size or industry.
Updated IRS Mileage Rate
For Fresno businesses with employees who drive for work, medical practices with visiting staff, construction crews moving between job sites, or sales teams covering the Central Valley, the IRS standard mileage rate increased to 72.5 cents per mile in 2026. For businesses that reimburse employees based on the standard rate, or business owners calculating their own vehicle deductions, this update affects both expense tracking and tax projections through year-end.
Payroll as a Financial Control System
At Demera Demera Cameron, we view payroll not just as a compliance obligation but as a financial control system. Accurate payroll records are the foundation of clean financial statements, proper federal and California tax withholding, workers’ compensation audits, and employee benefit plan compliance testing. Errors in payroll data cascade into tax filings, audit exposure, and employee disputes in ways that are time-consuming and expensive to correct.
For Central Valley businesses that have outgrown their current payroll setup, whether that’s a manual process, outdated software, or a provider unfamiliar with California-specific requirements, working with a Fresno CPA firm that integrates payroll and tax services ensures continuity between your payroll data and your business tax returns. What gets reported on your W-2s should align precisely with what gets reported on your tax filings. When it doesn’t, problems follow.
Estimated Tax Payments for the Second Half of 2026
With the mid-year point here, Fresno employers should also verify that 2026 estimated tax payments reflect current-year income and expense projections, including the impact of payroll adjustments, the restructured family leave credit, and any changes in owner compensation. Underpayment carries penalties, and the complexity of 2026’s tax changes means that payments modeled on 2025 income alone may significantly understate your current-year liability.
At DeMera DeMera Cameron, our Fresno accounting team has helped Central Valley employers navigate payroll compliance and tax planning across dozens of industries for over 80 years.
Contact DDC at (559) 226-9200 or visit ddccpa.com for a payroll and tax compliance review tailored to your Fresno-area business.