Missing the mandatory composite return for nonresident shareholders. Indiana assesses a flat $500 penalty on any S corporation whose composite return omits a nonresident shareholder, and owners with a single out-of-state co-owner routinely never file one at all. A very close second, and permanently uncorrectable: assuming the IT-20S is due March 15 like the federal 1120-S. Indiana's deadline is the 15th day of the 4th month (April 15), and because the PTET election can never be added by amending a filed return, an owner who realizes late that PTET would have helped has lost it for that year with no remedy.
Recognized automaticallyPTET available
S-corp election in Indiana
In short
No general entity-level income tax, but Indiana AGI tax reaches federally taxed built-in gains and passive income, and a composite return for nonresident shareholders is mandatory.
Does Indiana recognize the federal S election?
Indiana automatically follows the federal S election. Per the official IT-20S booklet, 'Qualifications under Indiana law for filing S corporation returns are essentially the same as in the IRC,' and there is no separate Indiana election form. The corporation must file Form IT-20S and must meet the withholding requirements for nonresident shareholders under IC 6-3-4-13. The booklet also warns that 'S corporation elections cannot be made retroactively.'
Tax the entity still owes
Indiana imposes no franchise tax, no net-worth tax, and no minimum entity tax. However, any passive income and built-in gains of an S corporation that are subject to tax under the IRC are subject to Indiana adjusted gross income tax (computed on IT-20S Schedule B). The individual AGI tax rate is 3.00% for 2025, 2.95% for 2026, and 2.90% for 2027; county income taxes apply on top based on the individual's county. Estimated payments are not required if annual unpaid liability is under $2,500. Critically, an S corporation that has nonresident shareholders MUST file a composite return covering all of them, and a $500 penalty is assessed against any S corporation that fails to file a composite return including all nonresident shareholders.
Registering for payroll
Register with the Indiana Department of Revenue through INTIME for a withholding account. Indiana withholding is TWO-PART — state AND county — and the employee's Form WH-4 designates county of residence and county of principal work, which drives the county rate. Withholding is remitted on Form WH-1 with an annual Form WH-3 reconciliation. Register with the Indiana Department of Workforce Development (DWD) through Uplink for unemployment insurance, with quarterly wage and contribution reports.
Annual filings
Form IT-20S is due the 15th day of the 4th month following the close of the S corporation's tax year — APRIL 15 for a calendar-year filer, NOT March 15. Indiana accepts the federal Form 7004 extension, and returns postmarked within one month after the federal extended date are considered timely. Schedule IN K-1 must go to each shareholder by the same date. A composite return for all nonresident shareholders is mandatory. Form IN-PTET or the IT-20S PTET checkbox plus Schedule PTET if electing. Form WH-1 withholding remittances and the annual WH-3 reconciliation. Quarterly DWD unemployment reports. Business Entity Report with the Indiana Secretary of State.
Pass-through entity tax
Yes — Indiana PTET. The rate equals the individual income tax rate for the tax year, determined on the last day of the pass-through entity's tax year: 3.00% for 2025 and, applying that rule, 2.95% for 2026. For 2023 and later tax years the election may be made at any time during the taxable year or on the entity's timely filed return including extensions, either by filing Form IN-PTET or simply by checking the PTET box on page 1 of Form IT-20S with Schedule PTET completed using computation code 01-06. CRITICAL AND IRREVERSIBLE: per DOR, 'You cannot make a PTET election after you have filed your original return. You are not able to amend your return to elect PTET.' Indiana DOR's FAQ states no expiration tied to the federal SALT cap.
The mistake owners make most often in Indiana
Filing your federal Form 2553
Businesses operating in Indiana send Form 2553 to the IRS Kansas City service center — fax 855-887-7734. Full address and filing checklist for Indiana.
Frequently asked questions
Does Indiana require a separate S-corporation election?
No. Indiana does not require a separate state election. Indiana automatically follows the federal S election. Per the official IT-20S booklet, 'Qualifications under Indiana law for filing S corporation returns are essentially the same as in the IRC,' and there is no separate Indiana election form.
What tax does an S corporation pay in Indiana?
No general entity-level income tax, but Indiana AGI tax reaches federally taxed built-in gains and passive income, and a composite return for nonresident shareholders is mandatory.
Where do I file Form 2553 from Indiana?
With the IRS Kansas City service center. Fax 855-887-7734, or mail to Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999.
What is the most common S-corp mistake in Indiana?
Missing the mandatory composite return for nonresident shareholders. Indiana assesses a flat $500 penalty on any S corporation whose composite return omits a nonresident shareholder, and owners with a single out-of-state co-owner routinely never file one at all. A very close second, and permanently uncorrectable: assuming the IT-20S is due March 15 like the federal 1120-S. Indiana's deadline is the 15th day of the 4th month (April 15), and because the PTET election can never be added by amending a filed return, an owner who realizes late that PTET would have helped has lost it for that year with no remedy.
Compare with other states: Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland.
Sources
File your Form 2553 correctly
Scorply completes your federal election and includes a Indiana guide in your packet, so you know exactly what else you owe here.
Start my Form 2553Researched from official Indiana sources and verified July 30, 2026. State tax rules change. This is general information, not tax advice — confirm with the state or a CPA before you rely on it.