First Employee in Indiana: INBiz Withholding Registration, County Tax on WH-4, WH-1 and WH-3, and DWD Uplink

2026-10-09 · RKube Services

Hiring your first employee in Indiana: INBiz withholding registration, county tax on the WH-4, WH-1 and WH-3 filings, and DWD Uplink unemployment setup, step by step.

Hiring your first employee in Indiana means signing up with two state agencies, not one, and learning a tax most other states don't have: county income tax that you withhold from every paycheck. The county rate depends on where your employee lived on January 1, not where your shop is. That one rule causes more first-year payroll errors in Indianapolis and Fort Wayne than anything else.

This guide is laid out on a calendar: what to do a few weeks before the hire, the week before day one, on the first payday, and then each month, quarter and January after that. The federal side (EIN, Form 941, W-2s) works the same in every state, and we cover it in our first-employee payroll checklist. Everything here is Indiana-specific.

Three to four weeks before the hire

Register for withholding through INBiz

The Indiana Department of Revenue (DOR) handles state and county income tax withholding. You register through INBiz, the state's business portal, once you have a federal EIN. The DOR's withholding page says registration is required if your business has employees, and also if it has nonresident shareholders or partners, or beneficiaries receiving income distributions.

When the registration goes through, you get a withholding account and a filing frequency for Form WH-1 (the periodic withholding return). Your returns and payments then run through INTIME, the DOR's online tax portal. Note the frequency and due date the DOR assigns. Don't guess it from another state's rules.

Register with DWD for unemployment insurance

Unemployment insurance is a separate agency, the Department of Workforce Development (DWD), and a separate portal, Uplink Employer Self Service. Quarterly reports and payments are filed there electronically.

The rate for a new employer is simple. Most new Indiana employers pay 2.5% for their first four calendar years, according to the DWD new employer rate page. Construction employers also start at 2.5%. Government employers start at 1.6%. If you bought an existing business, you may inherit the seller's rate as a successor.

The rate applies to each employee's wages up to Indiana's taxable wage base. DWD's handbook puts that at the first $9,500 of wages per employee per calendar year (the figure it lists for 2011 through 2025; confirm the 2026 amount in Uplink). At $9,500, a new employer pays up to $237.50 per employee per year at 2.5%. It's an employer cost. You don't withhold it from the paycheck.

Line up workers' compensation

Indiana requires most employers to carry workers' compensation insurance. Get the policy bound before the first day of work, not after.

The week before day one

Collect Form WH-4 (and why it matters more here)

Every new employee fills out the federal W-4 and Indiana Form WH-4. The WH-4 does two jobs.

First, it lists exemptions. Each personal exemption is worth $1,000 a year, each qualifying dependent $1,500, and each adopted child $3,000, per the DOR's Departmental Notice #1. Your payroll system turns those into a per-paycheck deduction before figuring tax.

Second, it records the employee's county of residence and county of principal employment as of January 1. This is the rule that decides county tax for the whole year:

• If the employee lived in an Indiana county on January 1, you withhold at that county's rate, even if they work somewhere else.
• If the employee lived outside Indiana on January 1 but worked mainly in an Indiana county, you use the county where they work.
• If they move counties in March, nothing changes until next January 1.

Here are some 2026 rates from Departmental Notice #1 (effective October 1, 2026):

Rates can change on January 1 and October 1, and the notice flags any county that changed with an asterisk. Check your payroll software's tables against the current notice each time it's reissued.

Report the new hire

Federal law requires every state to collect new-hire reports, and Indiana's are filed with the state's New Hire Reporting Center within 20 days of the start date. Many payroll providers do this for you. Confirm that yours does.

Check the 30-day rule for out-of-state workers

Since January 1, 2024, you don't have to withhold Indiana state or county tax for a nonresident employee who is expected to work in Indiana for 30 days or less in the year, as long as you track their work location. Once they pass 30 days, withholding starts and you catch up on the first 30. An employee can also give you Form WH-4AFF. This doesn't apply to anyone who is or will become an Indiana resident during the year.

The first payday: a worked example

Say a bakery in Indianapolis, IN hires its first employee in October 2026. She lives in Fishers, in Hamilton County, and has lived there since before January 1. She's paid $1,800 every two weeks and claims one personal exemption on her WH-4.

Notice the county. The bakery is in Marion County, where the rate is 2.02%, but she lived in Hamilton County on January 1, so Hamilton's 1.10% applies. If the bakery's payroll system defaulted to the business address, it would over-withhold about $16 a paycheck, and the WH-3 at year end would report county tax to the wrong county.

Now say the bakery opens a Fort Wayne location and hires someone who lives across the line in Ohio. On January 1 they lived outside Indiana and worked mainly in Allen County, so you'd withhold Allen's 1.59% county rate on top of the 2.95% state rate.

Every month or quarter

File WH-1 and pay the withholding

Form WH-1 reports the state and county tax you withheld for the period. The DOR is strict on two points:

• File every period, even with no tax due or no employees. A registered account expects a return.
• Late returns cost money. The penalty for a late WH-1 is up to 20%, with a minimum of $5.

If you've stopped having employees, close the withholding account rather than letting zero-filing lapse.

File the DWD quarterly report in Uplink

Unemployment wage reports and contributions are due each quarter through Uplink, per the DWD due-date page: by April 30, July 31, October 31 and January 31 for the quarters ending March, June, September and December. Keep the gross wages on these reports consistent with your federal Form 941 for the same quarter.

Every January

File WH-3 and the W-2s by January 31

Form WH-3 is the annual reconciliation of the state and county tax you withheld during the year. All employers must file it by January 31, along with the W-2s. For tax year 2026, that's January 31, 2027 (a Sunday, so check the DOR's notice for the business-day rule that year).

A few details trip up first-year employers:

• More than 25 W-2s, W-2Gs or 1099-Rs means you must file electronically, under Indiana Code 6-3-4-16.5.
• Paper WH-3s need Schedule IN-WH3 attached.
• The late penalty is $10 per withholding document, so a 12-person payroll filed late is $120 before interest.

Collect fresh WH-4s if anyone moved

The January 1 county rule resets every year. A short note to employees in December asking anyone who moved counties to submit a new WH-4 keeps the next year's county withholding right.

What a first Indiana employee really costs the business

On top of wages, the employer side of an Indiana first hire usually looks like this:

• Federal Social Security and Medicare match: 7.65% of wages
• Federal unemployment (FUTA): generally $42 per employee per year after the standard credit
• Indiana unemployment: 2.5% of the taxable wage base (up to $237.50 per employee if the base is still $9,500)
• Workers' compensation premium, set by your insurer and class code

State and county income tax aren't on that list because the employee pays them. You're the one who withholds, files and remits them, though, and you're liable if you don't.

Frequently asked questions

Do I need an Indiana withholding account if I only have one part-time employee?

Yes. Registration is required once you have employees, regardless of hours.

Which county rate do I use for a new hire who moved to Indianapolis in June?

The county where they lived on January 1. If that was another Indiana county, use its rate for the rest of the year. If they lived outside Indiana on January 1, use the county where they mainly work.

What's the Indiana state income tax withholding rate for 2026?

2.95%, per Departmental Notice #1. The DOR lists 2.90% for 2027.

Is the Indiana UI rate the same for every new business?

Most new employers pay 2.5% for the first four calendar years. Government employers start at 1.6%, and successor employers can inherit a rate.

Do I still file WH-1 if I didn't run payroll this month?

Yes. Registered employers file every period, even with nothing to report.

Where RKube fits

We run payroll and keep the books for small businesses across the US, including Indiana employers in Indianapolis, Fort Wayne and the rest of the state. For an IN first hire, that means INBiz and Uplink registration set up correctly, WH-4 counties checked against Departmental Notice #1, WH-1 and DWD filings on time, and WH-3 and W-2s done in January. If you'd like a second look before your first payroll, start with a free scoping call and our 30-day bookkeeping trial. Call (984) 234-7030 or visit rkubeservices.com.

General information, not tax or legal advice, for tax year 2026. Rates and rules are from the Indiana Department of Revenue and DWD as of October 2026. Check the current Departmental Notice #1 and your INTIME account before you file.