Withholding Income Tax

If you have employees working at your business, you’ll need to collect withholding taxes. These are state and county taxes that are withheld from your employees’ wages.

Registration for withholding tax is necessary if the business has:

• Employees
• Non-resident shareholders
• Non-resident partners
• Beneficiaries for distributions of income.

If you previously registered to file withholding tax, you must still file Forms WH-1 and WH-3 for each period even if no tax is due or to report no employees for that time period. Late filed returns are subject to a penalty of up to 20%, and a minimum penalty of $5. Late filed WH-3’s are subject to a penalty of $10 per withholding document (W-2, 1099, K-1).

As of 2023, if you file a paper version of Form WH-3, you must also complete the new Schedule IN-WH3. Schedule IN-WH3 will also be required for prior year returns.

How to Register for Withholding Tax

For questions about registering for Withholding tax, visit INBIZ.

To register for withholding in Indiana, the business must have an Employer Identification Number (EIN) from the federal government. In addition, the employer should review Departmental Notice #1 which details the withholding rates for each of Indiana’s 92 counties.

What is a WH-3

The WH-3 (Annual Withholding Reconciliation Form) is a reconciliation form for the amount of state and county income taxes withheld throughout the year. All employers must file the WH-3 by Jan. 31 each year. If you previously registered to file withholding tax, you must still file Forms WH-1 and WH-3 for each period even if no tax is due or to report no employees for that time period. Late filed WH-1 returns are subject to a penalty of up to 20%, and a minimum penalty of $5. Late filed WH-3s are subject to a penalty of $10 per withholding document (W-2, 1099, K-1).

Electronic Filing of Withholding Taxes

Any business who files more than 25 W-2, W-2G, or 1099-R statements must file them electronically (per Indiana Code 6-3-4-16.5).

A list of electronic methods and options for filing Withholding is available.

Bulk upload files are created offline and then submitted to DOR for processing. The files are processed sequentially within a couple of hours. During high-volume processing, the delay can be longer. When the process is complete, an acknowledgment email is sent to the authorized representative with the results of the submission.

Customers can electronically submit withholding files with DOR via one of the following options: