If you pay wages to anyone working in South Carolina, you have to register as a withholding agent with the South Carolina Department of Revenue, deduct state income tax from each paycheck using the current SCDOR formula, remit those funds on the schedule that applies to your business, and reconcile the year with W-2s and Form WH-1612. Those are the core South Carolina withholding tax requirements for employers, and they apply from the first paycheck forward. Separate rules pull in payments to nonresident contractors and distributions to nonresident owners, which is where a lot of businesses find out too late that they owed something.
Register With the SCDOR Before the First Paycheck
Every employer with even one worker earning wages in South Carolina must register with the SCDOR before issuing the first paycheck.1South Carolina Department of Revenue. Withholding You need a federal Employer Identification Number first. If you don’t have one, apply through the IRS online tool or Form SS-4; the online application issues an EIN immediately.2Internal Revenue Service. Get an Employer Identification Number
Once you have the EIN, open a withholding account through MyDORWAY using the Business Tax Application, Form SCDOR-111. It asks for your legal structure, EIN, and the date you begin paying South Carolina wages.3South Carolina Department of Revenue. Apply for a Business Tax Account After approval, the SCDOR assigns a South Carolina Withholding File Number that goes on every return, payment, and letter afterward.
Collect an SC W-4 From Every Employee
Before you can calculate anything, you need a completed SC W-4 from each employee.4South Carolina Department of Revenue. Withholding Forms It resembles the federal W-4 but handles state-level allowances separately. Employees use it to declare filing status, allowances, and any extra amount they want withheld each pay period.
If an employee doesn’t give you one, withhold at single with zero allowances. That produces the highest withholding and shields you from an underpayment claim later.
Calculate the Withholding
South Carolina gives you two methods: the Wage Bracket Method, which is a table lookup by pay range and allowances, and the Percentage Method, a formula calculation. Both should produce the same result. Payroll software generally uses the percentage version because it handles any wage level.
For 2026, the SCDOR formula uses a $5,000 personal allowance for each allowance the employee claims on the SC W-4. The standard deduction is zero if the employee claims no allowances, or 10% of gross wages up to $7,500 if one or more allowances are claimed.5South Carolina Department of Revenue. WH-1603F 2026 Withholding Tax Formula The formula subtracts those amounts from gross wages, then applies South Carolina’s graduated brackets.
The SCDOR publishes updated tables and formulas each year, and you have to use the current year’s version. South Carolina has been phasing down its top individual rate through recent legislation, so the brackets move.6South Carolina Legislature. South Carolina Code 12-6-510 – Tax Rates for Individuals, Estates, and Trusts An out-of-date table means you’re over- or under-withholding on every check.
File Returns and Send in the Money
How often you file and pay depends on where your business is based.
Resident Employers
If your business is based in South Carolina, follow the same deposit schedule you use for federal payroll taxes, no matter how much state tax was withheld.7South Carolina Department of Revenue. South Carolina Withholding Tax Information Guide Monthly federal depositor, monthly state. Semi-weekly federal, semi-weekly state.
Nonresident Employers
If you’re based outside South Carolina, the schedule turns on how much you withhold. Under $500 per quarter, you pay quarterly, by the last day of the month after the quarter closes. At $500 or more per quarter, you move to monthly, due by the 15th of the following month.1South Carolina Department of Revenue. Withholding
Which Return to File
Form WH-1605 covers the first three quarters:8South Carolina Department of Revenue. WH-1605 Withholding Tax Returns
- First quarter (January–March): due April 30
- Second quarter (April–June): due July 31
- Third quarter (July–September): due October 31
The fourth quarter uses Form WH-1606, due January 31 of the following year. File a return for every period even when you withheld nothing, or delinquent notices will start arriving.
Electronic Filing Threshold
Employers who withhold $15,000 or more in a quarter, or who make 24 or more withholding payments in a year, must file and pay electronically through MyDORWAY.1South Carolina Department of Revenue. Withholding Below those thresholds, electronic filing is still faster and consolidates returns, payments, and W-2 transmittals in one place.
Withholding on Payments to Nonresidents
Standard payroll is only part of the picture. South Carolina requires withholding on several payments to nonresidents, and the obligation sits with the payer.
Nonresident Contractors
When you pay a nonresident individual or business for services performed in South Carolina and the contract price is more than $10,000, you must withhold state income tax.9South Carolina Legislature. South Carolina Code 12-8-550 – Withholding for Nonresident Temporarily Conducting Business or Performing Personal Services For individuals and non-corporate entities, the rate is the maximum individual income tax rate under Section 12-6-510. For tax year 2025 that rate was 6%, and it is being phased down.10South Carolina Department of Revenue. Individual Income Tax For nonresident corporations, the rate is a flat 5% of the total payment.
Rentals and Royalties
Rental or royalty payments for property used in South Carolina are subject to withholding when the annual total reaches $1,200 or more. The rate matches the maximum individual rate applied to contractor payments, and you report and remit on Form WH-1401.9South Carolina Legislature. South Carolina Code 12-8-550 – Withholding for Nonresident Temporarily Conducting Business or Performing Personal Services
Pass-Through Entity Distributions
Partnerships, S corporations, and LLCs taxed as partnerships must withhold 5% of South Carolina taxable income allocated to nonresident partners, shareholders, or members.11South Carolina Department of Revenue. Partnership Active trade or business income that is already taxed at the entity level is exempt.
How Nonresidents Get Out of Withholding
A nonresident can avoid withholding by giving the payer the right affidavit. Contractors and landlords use Form I-312 (Nonresident Taxpayer Registration Affidavit). Partners and shareholders use Form I-309. Both certify that the nonresident has registered with the SCDOR or the Secretary of State and has agreed to South Carolina’s tax jurisdiction.12South Carolina Department of Revenue. Non-Resident Withholding Scenarios Keep the affidavit on file. Registration itself is not an admission of tax liability.13South Carolina Legislature. South Carolina Code of Laws Title 12 Chapter 8 – Income Tax Withholding
Reconcile at Year-End
After the year closes, tie out what you withheld against what you reported. Provide each employee a Form W-2 and each contractor a Form 1099 showing South Carolina income and state tax withheld. Then file Form WH-1612 with the SCDOR as the transmittal that ties the individual W-2s and 1099s together. The WH-1612 is due January 31.
The SCDOR compares the total you remitted during the year against what shows up on the W-2s and 1099s. Any gap prompts questions. If you file every W-2 and 1099 electronically through MyDORWAY, the system satisfies the WH-1612 transmittal automatically and no separate paper form is needed.
Report Every New Hire Within 20 Days
South Carolina employers must report each new employee to the South Carolina Directory of New Hires within 20 days of the first day of work.14SC New Hire Reporting. SC New Hire Reporting – South Carolina The requirement comes from both federal law and South Carolina Code Section 43-5-598. It applies to anyone who has not previously worked for you, and to former employees returning after a break of 60 or more consecutive days.15The Administration for Children and Families. New Hire Reporting – Answers to Employer Questions
The report includes seven data points: employee name, address, and Social Security number; date of hire; and employer name, address, and federal EIN. The data feeds the National Directory of New Hires, which child support agencies use to locate parents with support obligations.
What Happens if You Get It Wrong
South Carolina does not treat withholding failures as paperwork problems. A withholding agent who fails to withhold or remit is personally and individually liable for the unpaid tax.16South Carolina Legislature. South Carolina Code of Laws Title 12 Chapter 8 – Income Tax Withholding – Section 12-8-2010 The SCDOR can pursue you personally, not just the business.
The civil penalties:
- Late filing: 5% of the tax due for each month or partial month the return is late, capped at 25%.
- Late payment: 0.5% of the unpaid tax for each month the payment is late, capped at 25%.
- Failure to deposit: a separate penalty of $10 to $1,000 for each missed deposit of withheld taxes.
Interest runs from the original due date on top of these penalties.17South Carolina Legislature. South Carolina Code of Laws Title 12 Chapter 54 – Department of Revenue – Section 12-54-43 Willfully failing to collect and pay over withheld taxes is a felony with fines up to $10,000 and imprisonment up to five years. Willfully failing to file a return is a misdemeanor with fines up to $10,000 and up to a year in jail. Money withheld from an employee’s paycheck was never the employer’s to hold.
Keep the Records
Federal law requires payroll records for at least three years, including earnings statements, tax deposit records, and W-2 copies. Wage-computation records, such as time cards, schedules, and documentation of deductions, must be kept for at least two years.18U.S. Department of Labor. Fact Sheet 21 – Recordkeeping Requirements Under the Fair Labor Standards Act Keep SC W-4 forms and nonresident affidavits (I-312 and I-309) at least as long as the associated withholding periods stay open to audit. The SCDOR generally has three years from the filing date or the original due date, whichever is later, to assess additional tax. That window stretches to six years if more than 25% of gross income is omitted from a return. Electronic storage is fine as long as records remain readable and reproducible on request.