South Carolina Payroll Tax Penalties & Interest
Checklist
Introduction
This guide covers South Carolina income tax withholding compliance issues handled by the
South Carolina Department of Revenue (SCDOR), including penalties, interest, notices, and
steps for resolution. South Carolina unemployment insurance tax follows a separate process administered by the South Carolina Department of Employment and Workforce (DEW), so you should not treat it as part of the same SCDOR notice workflow.
When a withholding issue exists, you can reduce risk by reading the notice immediately, confirming the tax period and account details, and resolving missing returns or unpaid balances as directed. You can use MyDORWAY to manage many filing, payment, and correspondence tasks and reduce delays caused by older forms or missing transaction confirmations.
What Penalties And Interest Mean In South Carolina
South Carolina law imposes civil penalties for failure to file and failure to pay, calculated as a percentage of the tax under the statutory rules. South Carolina law also provides that interest is due on unpaid taxes from the date they become due until they are paid in full. It ties the interest rate framework to the Internal Revenue Code underpayment rate methodology.
You should treat the notice as the controlling document for your situation because notices can arise at different stages, and the type of notice affects timing and next steps. The SCDOR explains how to identify the notice title and notice number and directs you to follow the instructions and due dates printed on the notice.
How SCDOR Withholding Filing And Payment Works
You remain responsible for filing withholding returns even when you made payments, because payments alone do not satisfy the withholding return filing requirement. SCDOR withholding returns generally use WH-1605 for the first three quarters and WH-1606 for the fourth quarter and annual reconciliation when the withholding account was open for any part of the year.
Some taxpayers must file and pay electronically through MyDORWAY based on a stated threshold, and you should check whether that requirement applies to your account before you mail anything. SCDOR states that taxpayers who withhold $15,000 or more per quarter or make
24 or more withholding payments in a year must file and pay electronically on MyDORWAY.
Filing Checklist
Step 1: Locate And Review The Official Notice
Start by retrieving the notice and recording its title, number, tax period, and the due date stated on the document. You should use the contact information listed on the notice when it is available, because the issuing division can address your account status and the specific periods cited.
Use scam protection guidance if anything about the notice seems inconsistent with official
SCDOR channels, and follow the official instructions for identity verification only when your notice directs you to do so. The SCDOR provides general notice and guidance and directs taxpayers to call a published number if they believe a notice did not come from SCDOR.
Step 2: Verify Your Filing And Payment Records
Gather payroll and withholding records for the period listed on the notice, and compare them with the return filing history and payment confirmations available to you. You should confirm that you filed the correct return type for the quarter and that you used the correct withholding account number and period assignment when you submitted payments.
Confirm whether your withholding account remained open for the period because open accounts require quarterly filings even when you had no withholding. The WH-1605 form states that you must file even if you withheld no South Carolina income tax during the quarter, and the account filing obligation continues while the account remains open.
Step 3: Break Down The Amounts On The Notice
Separate the base tax from penalties and interest as shown on the notice, and document the period and account for each component. South Carolina law provides statutory failure-to-file and failure-to-pay penalty structures, so the amounts you see should align with those rules as applied to your account and timing.
If you cannot reconcile the notice amounts in your records, request clarification using the official
SCDOR contact channel for your notice. The SCDOR instructs taxpayers to read the notice carefully and contact SCDOR when questions remain after reviewing the notice details and deadlines.
Step 4: Identify The Root Cause
Determine whether the issue arose from a late or missing return, a late or incomplete payment, or a payment that posted to the wrong quarter or account. You should confirm whether you met
electronic filing requirements because mailing a return when electronic filing is required can create avoidable processing issues.
If you withheld but did not file, you should prepare the missing return using the correct withholding form for that quarter and submit it through the appropriate channel. You must file a return for each quarter as long as the withholding account remains open.
Step 5: Contact SCDOR Through Official Channels
Use the notice contact information first, and use MyDORWAY tools when they apply to your account because messages and transactions can link directly to your account history. The
SCDOR provides notice guidance and explains that many issues resolve quickly when you follow the instructions on the notice and contact SCDOR if you need help.
Ask for confirmation of the affected periods, the current balance components, and the specific actions SCDOR needs from you to resolve the notice. If you disagree with the proposed assessment findings, you should evaluate whether the appeals process applies to your matter and track the applicable deadlines.
Step 6: Pay Or Set Up A Payment Plan When Eligible
Pay the amount due by the method allowed for your situation, and keep proof of payment and any confirmation available through your filing method. The SCDOR directs taxpayers to pay online through its payment channels or to mail a payment with the notice voucher to the address listed on the notice.
If you need more time to pay, review the SCDOR Payment Plan Agreement requirements before you request a plan, as eligibility limits apply. The SCDOR states that you cannot have an active levy or garnishment and that you must have received a notice to request a Payment Plan
Agreement.
Step 7: Understand Liens And Levies As Possible Outcomes
A state tax lien is a claim against property and rights to property when a person liable for tax neglects or refuses to pay after demand, and South Carolina law describes the scope and duration of the lien. South Carolina law also states that a lien allows an authorized agent to seize, levy on, and sell property under the lien’s enforcement mechanism.
SCDOR also explains that it issues proposed assessment notices and then a notice of assessment when balances remain unresolved, and it describes how liens appear in the State
Tax Lien Registry. The SCDOR guides what happens before a lien and how to resolve a lien, including the role of paying what you owe, including penalties and interest.
Step 8: Use Appeals When You Dispute The Notice
If you disagree with SCDOR's findings on a proposed assessment, SCDOR states you have 90 days from the date of notice to file a written protest, and the deadline extends to the next business day when the 90th day falls on a weekend or state holiday. SCDOR explains its filing options, including online filing through MyDORWAY.
If you do not file a written protest within the stated period for an unresolved tax matter, SCDOR states it will make its final assessment and begin collection activities. Track all deadlines and keep copies of what you submitted because the appeal path depends on timely filing and clear identification of the notice you dispute.
- 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 9: Maintain Current Compliance While You Resolve The Past
File and pay current withholding obligations on time while you resolve older periods, because unresolved current filings can create additional notices and enforcement risk. Payments alone do not satisfy the filing requirement for withholding returns.
Confirm whether your withholding account should remain open, because open accounts require quarterly returns even when you have no withholding. If you need to close a withholding account, you must file by the closing date.
Frequently Asked Questions
What Does A Notice Mean For My Next Step?
A notice tells you what SCDOR says you need to do and by when; use the notice title, notice number, and due date as your operating timeline. The SCDOR instructs you to read the notice carefully and follow the instructions to resolve most issues.
Can I Request A Payment Plan?
SCDOR offers Payment Plan Agreements to eligible individuals, organizations, and businesses who need more time to pay off tax or GEAR debt. SCDOR states that you cannot have an active levy or garnishment and that you must have received a notice to request a plan.
How Do I Dispute A Proposed Assessment?
SCDOR states you have 90 days from the date of notice to file a written protest for a proposed assessment, and the deadline extends to the next business day when the 90th day falls on a weekend or state holiday. Filing through MyDORWAY is an available option.
Closing
You can manage penalties and interest issues by focusing on the notice details, confirming filing and payment history, and taking the action SCDOR lists for your account and period. Consistent recordkeeping and timely follow-through reduce the risk of liens, levies, or additional enforcement steps tied to unresolved assessments.
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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