Payroll tax in Indiana: What employers need to know [Updated 2024]

When it comes to paying taxes, businesses have a lot to keep track of. There’s withholding their employees’ federal income tax, plus paying federal unemployment tax (FUTA) and US FICA taxes, like social security and Medicare tax.

But on top of federal taxes, businesses also need to stay on top of state payroll taxes, which vary from state to state. Depending on where your business is located (and where your employees live), you’re responsible for withholding and paying different state taxes to different agencies—at different times.

Indiana taxes its residents on a flat rate, so at first glance, the tax system in the Hoosier State seems simple. But Indiana also has reciprocal tax agreements with a number of states that can make things more complicated for employers if their employees work in Indiana, but live across state lines. So whether you have a small business or a large corporation, if you have employees in Indiana, it’s up to you to learn your way around the state’s different types of payroll taxes so you know who owes what, how much to pay, and when. Let’s dive in.

The 2 Indiana payroll taxes

In Indiana state payroll taxes are administered by the Indiana Department of Revenue. The state requires businesses to register for tax withholding if they have:

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

Businesses can register for Indiana state tax via the Secretary of State’s InBiz portal.

You must also register as a new employer on the State of Indiana Department of Workforce Development website.

Indiana has two types of payroll taxes. Below we’ll cover what they are, who is responsible for paying them, and the maximum amount you may have to pay each year.

Unemployment insurance tax

Indiana’s state unemployment insurance (SUI) provides temporary payments to Indiana residents who are unemployed due to a situation outside of their control (like layoffs). The Department of Workforce Development determines the state unemployment tax rates and taxable wage base each year. New employers currently pay 2.5%.

Personal income tax

Personal income tax (PIT) is used to fund things like education, health and human services, public safety, and other important resources and needs in Indiana. While state income tax is paid by Indiana residents, it’s up to their employers to withhold the tax from their paychecks and remit it to the Indiana State Department of Revenue on their behalf.

The Indiana income tax rate is a flat 3.05% for all residents in 2024, but that doesn’t mean income tax withholding is simple for employers—they also need to calculate local income taxes assessed at the county level.

Indiana Department of Revenue Departmental Notice #1 explains how to compute withholding for state and county income tax, based on employee wages, filing status, dependent exemptions, and deductions.

Navigating payroll tax laws and calculating withholding can be complex and overwhelming, especially for business owners who already have a lot on their plate. That’s why you need Rippling’s payroll software. Rippling automatically calculates your taxes (without you having to do any of the math yourself). It also submits tax forms and payments on your behalf, on time, and to the right agencies, so you’re always in compliance with state and local laws. Rippling’s PEO can even register and maintain your state tax accounts for you, taking one more chore off your tax to-do list.

Payroll tax due dates in Indiana

Payroll tax due dates are different for the two kinds of payroll tax in Indiana.

Personal income tax withholding due dates for Indiana employers are based on the average tax they withhold each month. Every year, the system reevaluates your withholding from the prior year, and you’ll receive a letter alerting you of your filing status for the upcoming year.

State unemployment taxes are due quarterly, on the last day of the calendar month immediately following the last day of the calendar quarter.

It’s important to know your due dates and stay on top of them because late payments carry steep penalties: up to 20% of the tax due for late income tax payments, 10% penalties, and 1% interest for late unemployment tax payments.

How to submit payroll taxes in Indiana

Before you can submit payroll taxes in Indiana, you need to take a few steps:

• Obtain an employer identification number (EIN) from the IRS.
• Collect tax forms from your employees. For each employee, you’ll need a Form W-4 for their federal income tax, and a Form WH-4 for their Indiana income tax.

When it’s time to actually file taxes, you have a few options.

File and pay online

Most employers in Indiana are required to file and pay both their withholding tax and unemployment tax online, via electronic filing. This is also the fastest, easiest, and most secure way to file and pay.

Once you’ve registered with the Indiana Department of Revenue to pay taxes as a business, simply go online to IN Time to file and pay withholding taxes before each of your deadlines. You can make payments via an online transfer from your bank (no fee) or a credit card (fee).

State unemployment taxes can be paid via the Department of Workforce Development’s Employer Self Service portal. Once you’ve created your business account, you can make payments by e-check or credit card.

Pay by mail

Withholding tax forms can be found at the Indiana Department of Revenue’s website, which you can download, print, and fill out to return by mail. If you aren’t required to file and pay your returns electronically, you can pay by check. Return the correct forms and payment to:

Indiana Department of Revenue

P.O. Box 7224

Indianapolis, IN 46207-7224

Rippling’s full-service payroll software

Is this all sounding a little complicated? There’s an easier way to file and pay: Rippling. Rippling’s payroll software automates all of your compliance work—in fact, it practically runs itself. You run your business, Rippling files your federal, state, and local taxes at the right times, with the right agencies.

FAQs about Indiana payroll taxes

What if an employee works in Indiana but lives in another state?

Indiana has reciprocal agreements with five other states: Kentucky, Pennsylvania, Michigan, Ohio, and Wisconsin. That means if you have a nonresident employee—someone who works for you in Indiana but lives in one of those five states—you’ll need to calculate and withhold income tax for their home state, not Indiana.

Are there local tax laws in Indiana?

Yes. In addition to state income tax, Indiana counties have local income taxes. Employers need to calculate and withhold the correct amounts based on where their employees live—see the Department of Revenue’s instructions for more details on exactly how to calculate tax withholding by county.

Can your tax returns be audited in Indiana?

Yes. The Department of Revenue audits both individuals and businesses in the state to ensure tax compliance. Withholding tax is one of the areas the agency may investigate.

Are nonprofit organizations subject to payroll taxes in Indiana?

Yes. If a nonprofit organization in Indiana has employees, it’s subject to payroll taxes.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for, tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.