WITHHOLDING: FAQS
Q. How do I open a withholding account with the State of Delaware?
A. To open a withholding account, you have two options. Both options are free of charge. You can either:
- Register online using the One Stop Business Licensing and Registration system
OR
- Fax or mail a completed Form CRA (Combined Registration Application for State of Delaware Business License and/or Withholding Agent) to:
Fax: (302) 577-8203Part A of the CRA is to be completed by all taxpayers.
Mail: Delaware Division of Revenue, c/o Withholding Tax Unit 820 N. French St., Wilmington, DE 19801
Part B of the CRA must be completed by any person or company paying Delaware withholding tax.
Q. How much does it cost to open a State of Delaware withholding account?
A. There is no cost to open a State of Delaware withholding account.
Q. How soon after I register for a withholding account will I receive my personalized withholding tax forms?
A. After a withholding application is filed with the Division of Revenue (either online using One Stop or via a paper Form CRA), you should receive your personalized withholding tax forms within a few weeks.
Q. Does Delaware accept consolidated withholding tax payments for more than one employer?
A. No. Each entity liable for paying State of Delaware withholding tax is required to file its own individual withholding tax return, and must file using its own Federal Employer Identification Number. Please do not make payments under one identification number and then issue Forms W-2/1099 or file Form W-3 for multiple identification numbers.
Q. What are Delaware's withholding requirements?
A. Please visit Delaware's Employer's Guide for withholding regulations and employer's duties.
Q. Does Delaware require the filing of a quarterly withholding tax reconciliation form?
A. No. Delaware only requires the filing of an “annual” withholding tax reconciliation form, Form W-3.
The annual form, accompanied by copies of Forms W-2, is due on or before the last day of February of the following year or on or before the 30th day from the date on which the last payment of wages was made.
Q. What is Delaware's Personal Income Tax Rate?
A. Please check the Income Tax Rate Chart.
Q. When are Delaware Withholding Taxes due?
A. Please check the Withholding Due Dates calendar.
Q. Are employers required to withhold income tax for workmen's compensation and/or disability or sick leave?
A. Section 1151 of Title 30 of the Delaware Code Annotated requires State withholding if the wages or other remuneration is subject to Federal withholding. The easy rule is "If you withhold Federal tax, then you must withhold State tax."
Q. Is Deferred Compensation subject to income tax in Delaware?
A. The recommended withholding for payments of deferred compensation is 5%. If your company makes deferred compensation payments to Delaware residents, you should be registered as a withholding agent. A Combined Registration Application must be completed and mailed to the Division of Revenue, and appropriate withholding coupons will be mailed to you.
Q. Is there a form for the employee to file for withholding exemptions?
A. Delaware accepts Federal Form W-4 for an employee to claim personal exemptions. In the event that an employee needs additional State withholding, Forms W-4NR and SD/W-4A are available for non-residents and residents respectively to help them calculate the additional tax to be withheld.
Q. We are an out-of-state business and have employees who live in Delaware. Does Delaware have reciprocity with other states?
A. Delaware does not have reciprocity with any state. Withholding is only required in the "duty assigned state", e.g. your state. Delaware provides a credit against the state liability for taxes paid by its residents to other states. If your state has a lower marginal tax rate than Delaware, your employee(s) may need to have additional tax withheld to meet his/her Delaware liability. Use Form SD/W-4A to calculate the additional tax to be withheld.
Q. If I am a filing Delaware withholding for the first time, what is my filing method?
A. All withholding agents having no prior record of withholding will file on a monthly basis until the next "lookback period".
Q. What penalties apply to late filing and/or payment of withholding tax?
A. Withholding tax returns filed late are subject to a penalty of 5% per month, plus interest of 0.5% per month from the original due date until paid. In addition to the above penalties and interest, an additional penalty of 1% per month (not to exceed 25%) is imposed for failure to pay (in whole or in part) the tax liability shown to be due on a timely filed return. (30 Del.C., Sec. 533 & 534)
