The California State Disability Insurance (SDI) program provides short-term Disability Insurance (DI) and Paid Family Leave (PFL) wage replacement benefits. These taxes are also called SDI contributions. Example.California State Disability Insurance (CA SDI) is a workerfunded program that provides partial wage replacement when a worker needs to take time off work. STD benefits are taxed as ordinary income in the year they are received. Consequently, State and Federal withholdings are deducted. Benefits begin to accrue after you complete a six-month Waiting Period. Submit a request to pay taxes on your Social Security benefit throughout the year instead of paying a large bill at tax time. Monday to Friday 8 a.m. If the number of allowances changes for the following tax year, ask employees to fill out a new W-4 form. If the number of allowances changes for the following tax year, ask employees to fill out a new W-4 form.