Indiana Employer Registration: Withholding, Unemployment Insurance and New Hire Reporting
Indiana Employer Registration: Withholding, Unemployment Insurance and New Hire Reporting
Once you hire your first W-2 employee in Indiana, three state obligations start at about the same time: reporting the new hire, registering for unemployment insurance with the Indiana Department of Workforce Development (DWD), and withholding state and county income tax through the Indiana Department of Revenue (DOR). Each has its own agency, deadline, and rate rules. This guide covers what you have to do, which figures to use, and where to confirm them before your first payroll.
Informational only. This article is general information, not legal or tax advice. Payroll rules and rates change every year. Confirm anything tied to your payroll with the named agency, and talk with a qualified CPA or employment attorney about your situation.
Who Has to Register
Indiana does not issue one comprehensive business license that covers payroll. Your obligations come from several separate sources, and most of them start the moment you pay someone W-2 wages. Before anything else, your business entity should be on file with the Indiana Secretary of State, Business Services Division. You can search existing entity names on the public business search and find filing details at in.gov/sos/business. Filing for a new LLC costs $95, and the Articles of Organization are completed and paid for in a single online session through INBiz.
Your state payroll accounts then fall into three groups: new hire reporting, unemployment insurance (UI) registration with DWD, and income tax withholding with DOR. You also need a federal employer identification number (EIN) from the IRS, which the federal side of payroll requires before any of the state accounts can be tied to your business.
New Hire Reporting: 20 Days, No Exceptions
Indiana Code 22-4-10-8 and federal law require employers to report each new or rehired employee to the state new hire directory within 20 days of the hire or rehire date. Reports are filed electronically at in-newhire.com. The clock starts on the hire date, not on the first payday, so an employee who starts on the 1st and is paid on the 15th of the following month still has to be reported by the 20th day.
DWD states that the penalty for an unreported employee is a fine of $25 per employee. If the failure is part of a conspiracy with the employee to avoid reporting, the fine can rise to as much as $500. Because the per-employee charge adds up quickly during a busy hiring season, build the new hire report into your onboarding routine rather than batching it at month end.
The new hire report is not optional, including for seasonal workers. Rehires count too, so a former employee who returns after a gap also has to be reported within the same 20 days.
Unemployment Insurance: The Wage Base and Your Rate
Indiana unemployment insurance is funded by employer contributions, which are calculated on a taxable wage base. DWD's Employer Handbook table sets that base at the first $9,500 of wages paid to each employee in each calendar year for the years 2011 through 2025. We did not confirm a 2026 figure, so confirm with DWD that the $9,500 base is unchanged for 2026 before you set your payroll accruals. Any wages above the base for a given employee in a given year do not generate UI contributions for that year.
Your UI rate is the number most owners mean when they search for an indiana sui rate or indiana unemployment tax rate. A new employer's rate depends on the employer type:
| Employer type | Rate under DWD's rules |
|---|---|
| Most new employers | 2.5% for their first four calendar years |
| New construction employers | The lesser of 4.0% or the average rate for all construction companies |
| Government entities | 1.6%, unless the entity is a reimbursing employer |
| Experienced employers in good standing | Set from account experience, within DWD's table range of 0.50% to 7.40% |
DWD sets rates as of June 30 for the following calendar year, according to its New Employer Premium Rate page. We did not find the 2026 rate notice in our research, so do not budget from a rate you found in an article or a forum post. Rely on the rate notice DWD issues to your account, and check it against the table above so you know which bracket applies to your business.
State and County Withholding Through DOR
Income tax withholding is handled by the Indiana Department of Revenue at in.gov/dor. Register for withholding with DOR before your first payroll run. DOR's online portal, INTIME, is where you manage the account. We could not confirm the exact registration route for a new withholding account from DOR's current withholding page, so confirm the steps there before you rely on any particular path.
Indiana's flat individual adjusted gross income tax rate is 2.95% for 2026, and it is scheduled to fall to 2.90% in 2027. Withholding is also tied to county income tax. Each county sets its own local income tax rate, and employers withhold the county tax that applies to the employee. The county is determined by the employee's county of residence or principal place of employment as of January 1. A mid-year move does not change the county until the next January 1, which is the rule DOR describes in its withholding guidance and on Form WH-4. DOR's Departmental Notice #1 lists the county rates, and those rates should be checked every year.
Nonresident Employees Working in Indiana
Out-of-state workers create a separate question. For 2024 and later, an employee who lives outside Indiana and works in Indiana for 30 days or fewer in the calendar year is not subject to Indiana income tax on those wages. The employer does not have to withhold in that case if it keeps a time-and-location record system, or if the employee files Form WH-4AFF.
The exemption has firm limits:
- It does not apply to Indiana residents.
- It does not apply to certain athletes and entertainers.
- It does not apply to self-employment income.
- If the employee works in Indiana for more than 30 days, all wages become taxable from the first day, not just the days above 30.
That last rule is the one that causes trouble. A traveling crew member who works 31 days in Indiana owes Indiana tax on every day, and the employer may have to correct its withholding. Count days from the first day the employee works in Indiana, and keep the time records that support your position.
Payroll Setup Checklist
- Confirm your entity is on file with the Secretary of State and that the name matches your filing.
- Obtain a federal EIN from the IRS.
- Register for withholding with DOR before your first payroll, and confirm the route on DOR's withholding page.
- Register your business for unemployment insurance with DWD, and confirm the registration steps on the DWD site.
- Report each new or rehired employee at in-newhire.com within 20 days of the hire date.
- Calculate UI contributions on the first $9,500 of each employee's wages per calendar year, after confirming the 2026 figure with DWD.
- Withhold county income tax based on the employee's county as of January 1.
- Track the days each out-of-state employee works in Indiana, and collect Form WH-4AFF where it applies.
- Keep your DWD rate notice on file and use it for budgeting, not a published average.
Common Mistakes to Avoid
- Starting the new hire clock on the first paycheck. The 20 days run from the hire date.
- Treating the UI rate as fixed. Rates are reset each year, and your experience rate can change.
- Withholding county tax from the current address after a mid-year move. The county follows the January 1 rule.
- Skipping the nonresident day count. Going over 30 days makes all Indiana wages taxable from the first day.
- Assuming a general business license covers payroll. Indiana has no single comprehensive license, so each account has to be set up separately.
Where to Confirm Each Figure
Do not rely on this article as your final source for any number. Use the official pages for each figure:
- New hire reporting: in-newhire.com, plus DWD's new hire page for the penalty rules.
- UI wage base and rates: DWD's Employer Handbook table and New Employer Premium Rate page, and the rate notice DWD sends to your account.
- Withholding and county rates: the Department of Revenue, including Form WH-4, Form WH-4AFF, and Departmental Notice #1.
- Entity filings: the Secretary of State's business services page.
If you need help with setup, the Indiana Small Business Development Center can point you to resources. For payroll questions that involve more than one state, owner-employee wages, or the line between contractors and employees, consult a qualified CPA or employment attorney. Errors in withholding and UI reporting can be expensive to correct, so an hour of professional review at setup is usually cheaper than fixing a year of payroll.