Payroll tax in South Carolina: What employers need to know [2024]

Taxes are an inevitable part of life; getting them right is vital to avoid penalties. Tax laws differ among states, so it's essential to understand the regulations in the states where your employees reside. In South Carolina, companies must pay state payroll taxes in addition to US FICA taxes, such as Medicare and Social Security, at a federal level. 

Processing payroll in South Carolina is straightforward but requires knowledge of specific state laws and tax regulations. The state income tax system in South Carolina has a simplified income tax structure, meaning your state income tax liability is determined based on your federal taxable income.

Businesses of all sizes need to understand and comply with the various taxes, rates, and obligations for employees in South Carolina as mandated by the South Carolina Department of Revenue and the IRS. Keep reading to learn more.

The 2 South Carolina payroll taxes

As an employer or withholding agent with an employee earning wages in South Carolina, you must file a return or deposit with the SCDOR for any state taxes withheld if required to file or deposit with the IRS.

The employee's earnings are subject to taxation in the state where they earned them. If they're employed in South Carolina, their income earned from work in the state will be taxed by South Carolina, regardless of their residence. If you are a resident of South Carolina and earn wages in a state that does not have a state income tax, the withholding should be for South Carolina.

Learn more about South Carolina's two types of payroll taxes, who pays them, and the maximum liability.

Unemployment insurance tax

In addition to deducting federal taxes like Medicare and Social Security, you must withhold and remit specific South Carolina state taxes from your employee's payroll. Unemployment insurance is one of the mandatory payroll taxes, part of the US Department of Labor program under the Social Security Act.

New employers pay 0.41% of their liability for a full calendar year. After 12 months, their tax rate is computed based on their history at the next rate computation. Employers can manage their South Carolina unemployment insurance through the South Carolina Department of Employment and Workforce.

South Carolina employers must pay both state and federal unemployment taxes under the Federal Unemployment Tax Act (FUTA).

Personal income tax

Employers must deduct personal income tax from employee's wages per pay period, also known as individual income tax or South Carolina state income tax. Your employee's federal taxable income is the starting point in determining their state income tax liability.

When employees receive their wages, a certain amount is taken out as withholding tax. This contribution goes towards your total yearly income tax liability. The individual income tax rates range from 0% to a maximum rate of 6.3% on your taxable income. The tax brackets are adjusted annually for inflation.

As an employer in South Carolina, it's essential to withhold and pay income taxes to the Department of Revenue regularly and on time. You must remit that amount to the state once you've deducted the tax from your employee's paycheck. You can conveniently file and pay your withholding taxes online through MyDORWAY.

The SCDOR oversees the reporting, collection, and enforcement of personal income taxes. Calculations are based on the information provided on employees' form W-4 for federal income tax and state SC W-4 for state withholding.

Managing payroll taxes can be daunting when you’re doing so in different states. Fortunately, Rippling offers payroll compliance software that simplifies the process. With Rippling, you don't have to worry about calculating your taxes or submitting tax forms and payments. It keeps track of federal and South Carolina state tax laws to ensure complete compliance. Furthermore, Rippling’s PEO can register and manage your state taxes for you, creating a seamless payroll tax process.

Payroll tax due dates in South Carolina

South Carolina employers must submit and remit payroll taxes withheld from employee wages. The frequency of payments depends on the amount withheld.

• If the total withholding amount is less than $500 per quarter, payments are due quarterly by the last day of the month following the end of the quarter.
• If the total withholding amount exceeds $500 per quarter, monthly payments are due by the 15th of the following month.

The due dates for each quarter are the final day of the following month or the next business day if it falls on a weekend or holiday.

• First quarter (January-March): Due April 30
• Second quarter (April-June): Due July 31
• Third quarter (July-September): Due October 31
• Fourth quarter (October-December): Due January 31

You can submit your returns and payments by mail or electronically using MyDORWAY. You will be penalized 5% of the unpaid tax every month, with a maximum cap of 25%, for late filing.

How to submit payroll taxes in South Carolina

Now that you know what types of payroll taxes and deadlines South Carolina has, let’s talk more about actually filing taxes. 

File electronically

As an employer, if you're seeking a fast, easy, and secure method to handle payroll taxes, MyDORWAY is an ideal option. You can use it to upload W2s, file taxes, make electronic tax payments, and check your filing status. Remember, you must file and pay electronically if you withhold $15,000 or more each quarter or make 24 or more withholding payments in a year.

The SCDOR's ​MyDORWAY website provides instructions for enrolling in e-Services and managing payroll tax accounts for small businesses and third-party representatives.

File with a third-party software

For your South Carolina corporate e-file, you can electronically file both federal and state returns using approved tax preparation software. Check the list of approved software providers.

File by mail

To file your tax withholding return by paper, download and complete the form below for the corresponding quarter:

• WH-1605 for quarters one, two, and three
• WH-1606 for the fourth quarter/annual return

If there’s a balance or tax payment due, you can mail your completed return to this address:

South Carolina Department of Revenue
Withholding
PO Box 100161
Columbia, SC 29202​

If there’s no balance due, you can mail your completed return to this address:

South Carolina Department of Revenue
Withholding
PO Box 125
Columbia, SC 29214

Rippling’s full-service payroll software

With Rippling's efficient payroll software, you can automate compliance tasks for quarterly taxes—no more worries about filing the correct federal and South Carolina state payroll taxes on time. Rippling makes paying your employees and staying compliant easy.

FAQs about South Carolina payroll taxes

Are there local tax laws in South Carolina?

South Carolina has no local or city taxes, so you only need to worry about state withholding when filing payroll taxes.

Can your tax returns be audited in South Carolina?

Yes, your tax returns can be audited in South Carolina. The South Carolina Department of Revenue can audit tax returns to verify accuracy and ensure all taxes are paid.

The U.S. Department of Labor mandates the South Carolina Department of Employment and Workforce to conduct random audits on a certain percentage of employers in the state every year. These audits are done to check payroll information and ensure that there is no misclassification of workers for unemployment insurance tax accounts.

Are nonprofit organizations subject to payroll taxes in South Carolina?

South Carolina makes an exemption for 501(c)(3) nonprofit organizations. They are exempt from paying payroll taxes, including state unemployment insurance taxes, under the South Carolina Unemployment Insurance Act (SUIA). 

Are you required to purchase workers’ compensation coverage in the state of South Carolina?

Yes, but only after you have four or more employees.

Worker's compensation insurance offers coverage for medical expenses and wages of employees who are injured while on the job. To find a reputable commercial carrier in South Carolina, you can access the state's helpful resources. Employers must ensure their workers' compensation insurance adheres to the state's regulations for this type of coverage, so add it to your new hire budget.

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.