South Carolina Employer Withholding Tax Requirements

If you pay wages in South Carolina, you must withhold state income tax and send it to the South Carolina Department of Revenue (SCDOR) whenever an employee’s annual wages are expected to reach $1,000 or more.¹ South Carolina employer withholding tax requirements apply even if your business has no physical location in the state, so long as you have employees working there.² Meeting them means registering a state account, collecting the right paperwork from each employee, calculating withholding on the state’s own formula, depositing on schedule, and filing quarterly returns plus an annual reconciliation.

Register a State Withholding Account

Before you can withhold or remit anything, you need a South Carolina withholding file number.³ You apply through MyDORWAY, the SCDOR’s online portal, as part of the Business Tax Application. Have your Federal Employer Identification Number (FEIN), NAICS code, legal structure, and South Carolina operating locations ready.² If you need to pause, MyDORWAY gives you a confirmation code to resume the draft later.

Once your account is active, the withholding file number goes on every return, every deposit, and every W-2 you submit to the state. Operating without one creates penalties and makes it much harder to clean up compliance later. Withholding is only the SCDOR side of payroll registration; employers paying wages in South Carolina must also register separately with the South Carolina Department of Employment and Workforce for unemployment insurance tax.²

Collect an SC W-4 From Every Employee

South Carolina does not accept the federal W-4 as a substitute. Each employee must complete an SC W-4 for every South Carolina employer they work for, and that form drives your withholding calculation. For regular wages, you must withhold based on the allowances the employee claims on the SC W-4; you cannot substitute a flat percentage or a flat dollar amount.⁴

Employees should update the SC W-4 whenever their personal or financial situation changes. An employee can claim exempt status for 2026 only if they had no South Carolina tax liability for 2025 and expect none for 2026, or if they qualify under the Veterans Auto and Education Improvement Act as a military servicemember or spouse electing to use their domicile state.⁴ Any exemption expires on December 31 of the year it was claimed, so employees must file a new SC W-4 each year to keep it. If an employee claims exempt without meeting the criteria, withhold as if they claimed zero allowances.

Calculate Withholding on the State Formula

South Carolina’s formula begins with gross wages and applies two deductions before running the result through the state’s tax brackets. For 2026, you first reduce the employee’s gross wages by:⁵

A personal allowance of $5,000 per allowance claimed on the SC W-4.
A standard deduction of 10% of gross wages, capped at $7,500.

An employee who claims zero allowances gets neither deduction. You then apply the 2026 annualized withholding brackets to the remainder:⁵

$0 to $3,639: 0%
$3,640 to $18,229: 3%
$18,230 and above: 6%

The 6% top rate reflects a temporary reduction from 6.2% that runs from July 1, 2025 through June 30, 2026 and is scheduled to revert to 6.2% afterward. The SCDOR publishes both a subtraction method and an addition method for the arithmetic; they produce the same tax. Payroll software will handle either, but the formula version you use must be the current one, because the SCDOR revises brackets and allowances when rates change.⁵

Deposit on the Right Schedule

Most employers can deposit state withholding on the same schedule they follow for federal deposits. If you have a federal obligation to deposit withholding taxes, and nearly every employer with W-2 employees does, South Carolina lets you match that cadence.⁶

If you don’t have a federal deposit obligation, the SCDOR’s own rules apply. When your withholding for a month reaches $500 or more, you must remit within 15 days after the month ends. If quarterly withholding stays under $500, payment is due by the last day of the month following the quarter’s close.³

Electronic filing is mandatory for employers who withhold $15,000 or more per quarter or who make 24 or more withholding payments in a year; those employers must file and pay through MyDORWAY.⁷ The SCDOR encourages every employer to use MyDORWAY regardless of volume.

File Quarterly Returns and the Annual Reconciliation

No matter how often you deposit, you report on a quarterly cycle. South Carolina uses two return forms:³

Form WH-1605 for the first three quarters of the year.
Form WH-1606 for the fourth quarter, which doubles as the annual reconciliation.

Quarterly due dates are April 30, July 31, October 31, and January 31 for the fourth quarter and annual reconciliation combined.⁸

You may also see Form WH-1601. That is a payment coupon that accompanies a deposit, not a return.⁹ The actual reporting happens on the WH-1605 and WH-1606. The WH-1606 must reconcile with the totals on the W-2s you issue for the year, so if those numbers don’t match, expect the SCDOR to ask questions.

Furnish and File W-2s by January 31

Every employer must give employees a W-2 showing South Carolina wages and state tax withheld by January 31 of the following year.¹⁰ Copies of every W-2 also go to the SCDOR by the same January 31 deadline.¹¹

If you file 10 or more W-2 or 1099 forms in a year, you must submit them electronically through the W-2 portal on MyDORWAY.¹¹ Employers filing fewer than 10 can send paper forms with Form WH-1612 as the transmittal cover sheet.³ The SCDOR uses these submissions to verify that what you remitted matches the credits employees claim on their own returns.

Withholding on Nonresident Contractors

If you hire a nonresident to perform temporary services in South Carolina and the state portion of the contract exceeds $10,000 (or could reasonably be expected to), you must withhold 2% of each payment.¹² This covers contractors and other non-employee service providers.

A nonresident who registers with the SCDOR or the South Carolina Secretary of State can give you an affidavit confirming that registration, and if they do, you don’t have to withhold.¹² Keep that affidavit on file as your record of the exemption.

Separate withholding rules apply to other payments to nonresidents, including royalties, prizes and winnings, and rent paid to nonresidents who own five or more residential units or commercial property in the state. Rates and reporting vary by category, so check the SCDOR’s current guidance if any of those apply.³

Penalties for Filing or Paying Late

South Carolina charges separate penalties for late filing and late payment, and the rates are very different. A return filed after its due date carries a penalty of 5% of the unpaid tax for each month or partial month it’s late, capped at 25%. Tax paid after the due date carries 0.5% per month, also capped at 25%.¹³ Interest accrues on top of both.

W-2 failures have their own fixed penalties. Failing to furnish a withholding statement to an employee on time runs from $100 to $1,000 per violation. Failing to file the W-2 copies with the SCDOR runs from $100 to $2,000 per violation, and each missing form is a separate violation.¹⁴ For an employer with 50 employees, a missed January 31 filing can add up quickly.

Closing a Withholding Account

When you stop paying employees in South Carolina, close the withholding account formally. You do it on Form WH-1606, which has a checkbox to close the account and a field for the date operations ceased.¹⁵ File the WH-1606 for the final period, submit any outstanding W-2s, and make sure your last deposit has cleared. An account left open after wages stop will start generating delinquent-return notices.

1
South Carolina Legislature. South Carolina Code Title 12 Chapter 8 – Income Tax Withholding
2
South Carolina Department of Revenue. Apply for a Business Tax Account
3
South Carolina Department of Revenue. South Carolina Withholding Tax Information Guide
4
South Carolina Department of Revenue. 2026 South Carolina Employee’s Withholding Allowance Certificate
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South Carolina Department of Revenue. South Carolina Withholding Tax Formula
6
South Carolina Department of Revenue. Withholding Tax Deposits
7
South Carolina Department of Revenue. South Carolina Employer Withholding Requirements
8
South Carolina Business One Stop. Tax Due Dates
9
South Carolina Department of Revenue. Withholding Forms
10
South Carolina Legislature. South Carolina Code 12-8-1540 – Agents Shall Furnish Withholding Statement to Employees
11
South Carolina Department of Revenue. W-2 and 1099 Filing Instructions and Specifications
12
South Carolina Legislature. South Carolina Code 12-8-550 – Withholding for Nonresident Temporarily Conducting Business or Performing Personal Services
13
South Carolina Legislature. South Carolina Code 12-54-43 – Civil Penalties and Damages Applicable to Every Tax or Revenue Law Requiring Return or Statement Filing With Department
14
South Carolina Legislature. South Carolina Code Title 12 Chapter 54 – Uniform Method of Collection and Enforcement of Taxes
15
South Carolina Department of Revenue. SC Withholding Fourth Quarter and Annual Reconciliation Return