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Withholding Tax FAQs

Q. How do I open a withholding account with the State of Delaware?
A.  To open a withholding account:

Register online using the One Stop Business Licensing and Registration system

Q. How do I close my withholding tax account?
A.  If you would like to close your withholding tax account, you must first file a final year-end Withholding Tax Reconciliation form, and then complete the process by filing a Request for Change form indicating your account as closed. If you should have any further questions, please contact our withholding tax unit at (302) 577-8779.

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. Forms will no longer be sent out. Please use https://tax.delaware.gov/ to file your taxes online.

NOTE: In order to reduce printing and mailing costs, the Delaware Division of Revenue will no longer mail paper booklets to Withholding taxpayers who file their Delaware State Withholding tax electronically. File or pay Withholding Tax online using https://tax.delaware.gov/ or Electronic Funds Transfer.

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.  The annual form, accompanied by copies of Forms W-2, is due on or before the last day of January of the following year or on or before the 30th day from the date on which the last payment of wages was made.

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 via One Stop

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.

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.

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)

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