South Carolina Payroll Tax Nonpayment Emergency
Checklist
Introduction
The South Carolina payroll tax nonpayment issues discussed in this guide center on the income tax that employers withhold, report, and remit to the South Carolina Department of Revenue
(SCDOR). South Carolina law treats amounts withheld under its income tax withholding laws as
trust funds held for the State, and it can impose personal liability on a withholding agent who fails to withhold or pay the required amounts.
This guide does not treat federal income tax withholding or Social Security and Medicare taxes as South Carolina Department of Revenue obligations, because employers remit those federal employment taxes under federal rules rather than through SCDOR. This guide also separates
South Carolina unemployment insurance tax from SCDOR withholding because the South
Carolina Department of Employment and Workforce (DEW) administers unemployment tax programs and employer wage reporting through its systems.
What This Issue Means In South Carolina
A South Carolina withholding issue arises when a withholding agent fails to remit South Carolina income tax withholding or to file required withholding returns for the periods at issue. South
Carolina law defines “withholding agent”.
It provides that a withholding agent who fails to withhold or pay required amounts is personally and individually liable for the amount not withheld or paid. The law also imposes a duty on certain officers or employees to act under the withholding agent concept.
South Carolina law also provides that an amount withheld under the withholding chapter must be held in trust for the State and is a lien against all property of the withholding agent, with lien effectiveness tied to proper recording. You should treat this trust concept as a South Carolina statutory rule governing withholding of income tax in South Carolina, rather than as a generic statement that applies identically to every “payroll tax” category.
Filing And Payment Schedules You Must Confirm
SCDOR publishes specific filing due dates for withholding returns, and the published schedule places quarterly due dates at the end of the month following each quarter. Withholding returns
are due by April 30 for the first quarter, July 31 for the second quarter, October 31 for the third quarter, and January 31 for the fourth quarter and annual period.
SCDOR distinguishes payment timing by withholding agent type and ties the payment frequency of resident withholding agents to the federal payment frequency. Resident withholding agents pay with the same frequency as federal payments. In contrast, nonresident withholding agents pay quarterly if total withholding remains below $500 per quarter and monthly once withholding exceeds $500 during a quarter, with specific remittance due dates.
Taxes are withheld when wages are paid, which means the paycheck date determines the withholding payment quarter. You should reconcile the quarter assignment using paycheck dates, because misapplied payments can trigger notices even when funds were remitted.
What Can Happen If You Ignore It
South Carolina law provides a collection framework for taxes administered by SCDOR. The framework includes tax liens that attach to a person’s property and rights to property when the person neglects or refuses to pay after demand. The lien is effective on the date of assessment and authorizes seizure, levy, and sale of property for payment of the amount due. The lien continues for ten years from the date of filing.
SCDOR may issue a levy against 25% of an individual's gross wages for an unpaid assessment or tax lien. SCDOR may also levy bank accounts, certain investment accounts, contract payments, and future payments up to the total amount due.
SCDOR states it will mail a notice to the taxpayer’s address before issuing a wage levy. You should treat this mailing step as agency practice rather than a guarantee that you will always see a notice in time.
License Actions Require Careful Wording
South Carolina law gives SCDOR the authority, in its discretion, to refuse to issue a license and to revoke one or more licenses held by a taxpayer when the taxpayer fails, neglects, violates, or refuses to comply with laws or regulations administered by the department. This authority applies to licenses administered under SCDOR’s jurisdiction and does not automatically apply to every professional or driver license.
Checklist: What To Do After Receiving A Payroll
Withholding Notice
Step 1: Locate And Review All Notices
Collect every letter, notice, and document from SCDOR that references withholding tax, a proposed assessment, an assessment, or collection actions. Confirm the notice type and number when it appears, such as a Proposed Assessment (C-332) or an Assessment (C-133).
Document notice dates, tax periods, and stated deadlines. Keep copies of envelopes and mailing labels when postmarks are visible. Treat the notice as an account-specific civil matter rather than as an automatic criminal action.
Step 2: Gather Withholding And Payment Records
Gather payroll records, withholding calculations, filed withholding returns, payment confirmations, and bank statements for each period identified. Verify whether your withholding account remained open during those periods, because quarterly returns are required while the account remains open, even during zero-withholding quarters.
Match payments to quarters using paycheck dates. Save electronic submission confirmations, because they support requests for payment credit corrections.
Step 3: Verify The Amount Owed And Identify The Cause
Compare SCDOR’s claimed balance to your records and identify whether the issue involves missing returns, missing payments, or misapplied payments. Confirm whether the notice is a proposed assessment or a final assessment, because response options differ. Identify penalties and interest included in the balance. Interest accrues from the date the tax was due until paid, and civil penalties can apply for failure to file and failure to pay.
Step 4: Contact SCDOR And Request An Itemized Account View
Contact SCDOR using the contact information on your notice and request an itemized account statement showing tax, penalty, and interest by period. Record the representative’s name and guidance provided. Ask how payments were applied by quarter and date. Provide proof for payments not credited correctly. Confirm your address on file to reduce the risk of missed mail.
Step 5: Request Corrections Or Amend When The Facts Support It
Request a correction when you can prove a payment was made but misapplied. Follow withholding refund rules when an overpayment results from math errors or payments exceeding withheld amounts.
Do not file an amended withholding return solely because you issued a W-2c that reduced state withholding. In those cases, refunds are handled through the employee’s individual income tax return.
Step 6: Decide Whether To Pay In Full Or Use A Payment Plan
Evaluate whether you can pay the balance immediately and maintain ongoing compliance.
Ongoing filing and payment compliance is required during any payment plan.
Confirm whether electronic filing and payment rules apply. Taxpayers who withhold $15,000 or more per quarter or make 24 or more withholding payments in a year must file and pay electronically.
Step 7: Set Up A Payment Plan Agreement When Eligible
Confirm there are no active levies or garnishments before requesting a payment plan. Plan for the non-refundable $45 setup fee. Allow bank drafts if required. If you do not accept bank drafts, a 20% down payment may be required.
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
Step 8: Monitor For Collection Deadlines And Your Rights
South Carolina law limits collection actions to ten years after assessment unless extended or suspended. Treat this as a statutory rule, not an estimate. SCDOR maintains an appeals process with strict deadlines. Act promptly, because delays reduce options while penalties and interest continue to accrue.
Frequently Asked Questions
Does payroll tax nonpayment automatically mean I am personally liable?
South Carolina law provides that a withholding agent who fails to withhold or pay required amounts may be personally liable. Liability depends on statutory role and duty to act, not ownership title alone.
Will SCDOR levy my wages or bank accounts without warning?
SCDOR states it mails a notice before issuing a wage levy. You should still keep your address current and respond promptly, because missed mail can occur.
Can I set up a payment plan without paying anything up front?
Payment plans generally require bank drafts. If bank drafts are not allowed, a 20% down payment may be required, along with a non-refundable fee.
How long does the State have to collect South Carolina taxes?
South Carolina law generally limits collection actions to ten years after assessment unless the period is extended or suspended.
Closing
South Carolina payroll withholding issues rarely resolve on their own, and delays often increase risk because withheld state income tax is treated as trust funds tied directly to employee wages and taxable wages. When filings or payments fall behind, SCDOR may assess liability based on the wage base, applicable tax rates, and reported taxable income, regardless of whether errors stem from minimum wage adjustments, payroll timing, or misapplied credits.
The safest approach is to treat every notice as a tax compliance deadline. Confirm each period, reconcile payments by paycheck date, and review how state income tax, federal unemployment tax, and tax brackets were applied. Acting early preserves options to reduce avoidable penalties, align filings with tax laws, and prevent levy activity. If SCDOR’s figures do not match your records, or enforcement language appears, professional assistance can help protect both the business and responsible individuals.
Facing State Tax Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement and aren’t sure how to respond, our team can help you understand your options and next steps.
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