DOR: Withholding Income

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:

INTIME: If a file size is under 10 MB, manually enter or upload via INTIME.
The Indiana Taxpayer Information Management Engine (INTIME), DOR’s e-services portal at intime.dor.in.gov, enables customers to manage tax obligations in one convenient location, 24/7.
Withholding tax obligations can be submitted and paid directly through INTIME. Also, when filing securely via INTIME, bulk files do not require a file naming convention or encryption.
In order to use INTIME to manage Withholding taxes, customers must create a logon using an Indiana taxpayer identification number (TID) and a Letter ID (located at the top right corner of any letter) provided by DOR. If you do not have one, a “Welcome Letter” can be requested during the INTIME logon registration process.
For more information on filing and paying Withholding tax obligations via INTIME, the following guides are available:
SFTP: If a file size exceeds 10 MB, register for and use SFTP bulk filing.
Register for and use SFTP bulk filing. A file must be rejected by INTIME for exceeding the 10 MB size restriction before it is eligible for submission via SFTP (Secure File Transfer Protocol). Registration for SFTP is then required. When bulk filing via SFTP, it is required to follow the file naming convention and file(s) must be encrypted.
For more information on filing and paying Withholding tax obligations via SFTP, the following guides are available:

Withholding Schemas for WH-1 & WH-3 (prior and current years)

DOR has XML schemas to service WH-1 and WH-3 filings.

As of January 1, 2017, the following schema, IDORWTH2016V1.0, must be used for all filing years. If the SFTP Bulk Filing process is used, the WH-1 must be submitted in XML format.

State Electronic Return Resources

Federal Electronic Return Resources

Withholding FAQs and Common Errors

More information on bulk filing Withholding income tax via INTIME or SFTP, answers to frequently asked questions (FAQs), as well as validation rules and common errors, are now available. *NEW*

Additional Resources

Below you’ll find more information about withholding tax and additional resources including the business tax application, frequently asked questions and county tax rates.

If you have questions about withholding tax, visit INBIZ.