Payroll taxes in the United States of America differ in states, and these taxes are deducted from employee salaries. Most states collect these taxes with Maine being one of them. Payroll tax deductions appear on the employee's payslip, and state governments levy payroll taxes to maintain local infrastructure and services.
George, who recently moved to Maine, was quite confused looking at the deduction from his payslip, which stated payroll taxes. He had no idea that such taxes are levied by the employer and didn’t know that these are a pre-requisite for earning an income specific to Maine.
You must learn about the payroll taxes that are applied as a payroll tax system.
Table of Contents
- A step-by-step guide to payroll taxes in Maine
- Maine salary laws, taxes, and regulations
- Maine payroll taxes
- State income tax
- Worker Compensation Insurance
- Health insurance coverage of $ 5,000 or more
- Maine Minimum Wage Act
- Maine overtime regulations
- Various payment methods for employees
- Maine Payroll Method
- Minimum Payment Frequency
- Withdrawal rules
- Final salary method
- Maine HR Act
- Payslip form
- Other Maine salary and tax forms
- Maine Payroll Tax Resources / Sources
- Key Takeaways
Understanding state payroll is imperative for payroll processing in Maine, specifically for seasonal operations. The state collects income tax of 5.8% to 7.15%, and unemployment insurance tax ranges from 0.49% to 5.81%, with special regulations applied to seasonal workers and minors.
A step-by-step guide to payroll taxes in Maine
Step 1: Set up your company as an employer
The first step is for the employer to enroll his organization at the federal level. You would need an Employer Identification Number (EIN) and an Electronic Federal Taxation System account EFTPS. The IRS issued the EIN, which is required primarily for federal taxes.
Step 2: Register with the Maine Revenue Department
States such as Maine issue individual state tax identification numbers. You must set up a Maine withholding tax account at the Maine Revenue Service (MRS). Register your company with MRS and set up an account. Using the Maine Tax Administration and Ministry of Labor tax registration applications, you can register online or on paper. There is no charge to register your company with MRS.
Step 3: Ask new employees to fill out a state tax form
All new employees of the company must complete both the Federal W4 Form, the associated Maine W4ME Form, and the Employee Tax Withholding Allowance Certificate. You can download the blank W4ME form from the Tax Form section of the MRS website. The completed form should be kept by the company and updated as needed.
Step 4: Make a planned withholding tax payment
In Maine, you need to adhere to the payment schedules, either half a week or a quarter. When the business is registered with Maine Revenue Services, you need to provide information about which schedule to use. Whether you currently need to file a quarterly or semi-weekly tax return during the current calendar year. It entirely depends on the amount of Maine income tax withholding reported during the 12 months that ended in the previous June. If the amount is less than a certain amount (recently in the lower five digits), submit it quarterly. If the amount is more than the stated amount, it must be submitted every six months. The exact amount thresholds for various payment plans and other rules can change over time, so you must keep a strict check on DOR annually for the latest information. The due dates are as follows:
- Quarterly: Due date arrives by the last day of the month
- Semi-weekly: For wages paid on Wednesday, Thursday, or Friday, withholding tax will be paid before the following Wednesday
- For wages paid on Saturday, Sunday, Monday, or Tuesday, the due date will be paid before the following Friday
- If the payment deadline is Saturdays, Sundays, and holidays, it will be the next business day.
After 2015, if the annual payment to MRS with all taxes exceeds a certain relatively low amount, you will need to pay electronically
As a result, if you need to submit it on paper, you can download the Form900ME, Maine Income Tax Withholding Payment Voucher from the MRS website. You can make online payments using the Maine EZ Pay or wire transfer.
Step 5: Submit the planned withholding tax return
In addition to the scheduled tax payments, the company must also file a quarterly withholding tax return. Tax returns match the taxes paid in the quarter with the quarterly taxes withheld. From 2015, this declaration must be submitted electronically. You can apply online from the Electronic Services page on the MRS website.
Step 6: Make annual adjustments
You will need to submit an annual adjustment with MRS that conveys the employee tax withheld that year. Annual adjustments are made to provide each employee with a federal form W2 that summarizes the employee's annual deductions. Starting in 2015, you will need to submit your yearly comparison electronically.
Step 7: Independent contractor is not an employee
This rule is intended for employees only, not independent contractors. As a general rule, other tax laws apply to self-employed entrepreneurs.
Step 8: Set up the payroll process
When creating a payment date setting schedule that occurs at least twice a month, you need to be aware of choosing the payment period covered by each payment date. You need to take the time to get the appropriate approvals and decide how to collect pay slips, how to pay employees, and so on.
Step 9: Collect employee payslips
These payroll forms contain W4, I9, direct deposit information, and W4ME specifically for Maine employees. There is also a withholding allowance variance certificate if you want to claim more personal allowances than W4ME allows.
Step 10: Collect, review and approve timesheets
To keep up with payroll processing, you must have a robust system for collecting approved timesheets for hourly and other non-exempt employees. There are many payroll processes that employees, top performers, tax authorities, etc., need to complete to ensure proper payment. You can calculate your payroll using payroll software, a calculator, or Excel.
Step 11: File a payroll tax with the federal and state governments of Maine
Maine offers several ways to apply for and pay income tax withholding. Small businesses will find IFile the most useful. Large companies and payroll companies can use the Maine employer's electronic tax filing system. Payments are made using Main EZ Pay or Wire Transfer. If your annual amount exceeds $ 10,000 per year, you must pay electronically. If you have spent more than $ 18,000 in taxes in the last 12 months until June 30, you will have to pay semi-weekly.
State Unemployment Insurance (SUTA) Tax: Pay SUTA from your ReEmploy ME account according to the schedule below.
Step 12: Document and save your payslip
In Maine, employees' payslips must be retained for 3 years. The information should include contact information, working hours, and wages earned. You must submit Federal Form W2 (for employees) and 1099 (for contractors). You will also need to submit a W3ME annual income tax withholding adjustment.
Maine salary laws, taxes, and regulations
Regardless of which state you are in, you must comply with federal income tax, social security, Medicare, and Federal Unemployment Insurance (FUTA) laws. 6.2% and 1.45% of each employee's salary should be withheld for social security.
Maine payroll taxes
If you withhold an employee's federal income tax, you must also withhold state tax. This includes withholding taxes on farm employees and resident and non-resident workers. Maine collects state income tax on the tier system.
State income tax
Income tax in Maine ranges from 5.8% to 7.15%. The personal deduction is $ 4,300 per tax withholding. There are two ways to calculate withholding tax, one is to use the percentage calculation and the other is to look at the withholding tax table. Withholding tax must be paid quarterly or semi-weekly, depending on the tax paid.
Unemployment insurance SUTA will be responsible for any work done in any part of the day during the 20 weeks of the calendar year if you pay more than $1,500 in total wages in the calendar quarter. Maine charges SUTA up to the first $12,000 each employee earns. There are 20 layers based on user experience ratings, including SUTA, Competitive Skills Scholarship Program (CSSP) contributions, and Unemployment Program Management Fund (UPAF) contributions.
- Seasonal work: Seasonal workers can only claim an unemployment allowance if they lose their jobs during the working season. A list of seasonal jobs and seasonal dates can be found in the Maine UI Employer Guide.
- Farmers are responsible for paying total wages over $ 20,000 for hiring at least ten people on the calendar. Non-profits must employ four employees on the same day for at least 20 weeks in a calendar year. Domestic employers are responsible for paying a total wage of $ 1,000 or more in the calendar quarter.
Pay SUTA and get up to 5.4% off FUTA tax. Note that FUTA is usually 6% of each employee's revenue up to the first $ 7,000.
Worker Compensation Insurance
Maine requires all employers to have worker compensation insurance or self-insurance, with the following exceptions:
Health insurance coverage of $ 5,000 or more
Employers of up to 6 as farm or aquaculture workers. However, if the employer multiplies the employer liability insurance of $ 100,000 or more by the number of full-time employees and maintains the coverage of health insurance of $ 5,000 or more
- Employers of domestic workers in individual households
- An individual employer with no employees
- A non-profit organization or certain family-owned officers waive any compensation covered by employee benefits. You can take out disability insurance with a commercial insurance company. If you can afford to cover all workers' compensation losses, you can apply for self-insurance. This option is typically only for large companies. There is also a provision to partner with other companies in the self-insurance cooperative.
Maine Minimum Wage Act
The minimum wage in Maine is $ 12.15 per hour. Employees with tips who earn more than $ 30 a month can pay only $ 6.06 if the tip reaches the minimum wage during the payment period. The minimum wage in Portland, Maine is $ 18 per hour. Exceptions are farmworkers, seasonal warehouse workers, taxi drivers, fishermen, and close relatives working in the family business.
The exceptions to the Maine minimum wage law are agricultural workers, seasonal workers, full-time and vocational students, and specific in certain circumstances, strictly by those outlined in the Fair Labor Standards Act. Workers under the age of 20 can receive $ 4.25 during the first 90 days of employment training program hours.
Maine overtime regulations
You have to pay more than 40 hours of overtime per week, 1.5 times the normal wages of workers. You cannot force employees to work overtime. You also cannot "pay" for overtime. You cannot force an employee to work overtime for more than 80 hours in two weeks. Exceptions to overtime regulations apply to:
- Managers or Fair Labor Standards Act employees in managers who earn at least $ 700.97 a week
- Work carried out in response to a state of emergency declared by the Governor
- Basic public services
- Officers whose regular wages exceed the federal minimum wage of 3,000 times the hourly wage
- Seasonal workers
- Medical interns or residents
- Employees working overtime during shutdown due to annual maintenance
Various payment methods for employees
In Maine, employers can pay by cash, check, direct deposit, pay card, or other wire transfer, provided the employee can take out the full amount at no additional cost.
Maine Payroll Method
You must submit a payslip detailing the date and payment period, working hours, detailed deductions, and earned wages on each payday. Failure to submit a payslip can result in penalties, and even court hearings if you are not careful. If you are not using the payslip service, you will need to create your payslip.
Minimum Payment Frequency
You must pay your employees every 16 days. This means a semi-weekly, bi-weekly, or weekly payment system. Workers must be paid within 8 days of the end of the payment period.
In Maine, you can deduct taxes, court orders, insurance premiums, pension funds, loans, or down payments to employees as payments for goods purchased by your employer or rents for company-owned buildings. Cash shortages, damages, customer strikes, and credit card mistakes cannot be deducted.
Final salary method
Employees who are retired, dismissed, or terminated must pay the full amount by the next payday or within two weeks, whichever comes first. This includes paid or accumulated vacation time.
Maine HR Act
The Salaries Employment laws in Maine are slightly stricter than in other states. For example, you must report your hire within 7 days of hiring instead of the usual 20 days, and a lunch break is mandatory.
Most Maine employment tax forms must be submitted electronically, and can also be mailed. Maine W4 Form is the Maine tax withholding tax exemption form which is W4ME. Maine also has an additional form of personal withholding allowance variance certificate. This form can be filled out when an employee applies for additional benefits.
Other Maine salary and tax forms
- Form 900ME: Maine Income Tax Withholding Payment Receipt (biweekly). This is not required if payment is electronic
- Form 941ME: Employer's Statement on Income Tax Withholding in Maine (Quarterly)
- W3ME: Annual adjustment form submitted electronically with all required payments at the end of the year
- MEUC1ME: Submission of unemployment insurance contributions by the Ministry of Labor
- MEUC1PV: Quarterly Receipt of Maine Unemployment Allowance Additional state salary forms can be found on the Maine Revenue Administration website
Federal salary forms
- W4 Form: Helps employers calculate tax withholding from employee salaries
- W2 Form: Total annual income report (one for each employee)
- W3 Form: Report total wages and taxes for all employees
- Form 940: Report and calculate unemployment tax by the IRS
- Form 941: Declaration of quarterly income and FICA tax withheld from salary
- Form 944: Report of annual income withheld from salary and FICA tax
- Form 1099: Provides information on non-employee wages to help the IRS collect taxes on contract work
Maine Payroll Tax Resources / Sources
- Maine Department of Labor website: For labor laws, FAQs, etc
- Maine Employment Rules: Guidelines detailing the main laws related to wages and holidays
- Title 26, Labor and Industry: Rules for Employment, Labor, Working Hours, etc
- Maine Department of Labor Employment of Minors Website: All-State Child Labor Laws and Restrictions
- Department of Health and Human Services Employer Page: All information needed to report new employees and submit decorations for child support
If you run your business in Maine, you will need to pay state income tax withholding, unemployment insurance, and workers' accident compensation insurance. State unemployment insurance includes scholarships and administration fees in addition to SUTA. Some rules in Maine are stricter than in others. This includes only the essential elements of tax withholding for employees in Maine. Under state law, owners and individuals who control a company's finances may be liable for unpaid withholding taxes. Avoid potential errors penalties by checking the latest information on the IRS and MRS websites.
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- Maine Payroll taxes are extracted from every employee's salary by the employer and submitted to the government.
- Maine Payroll taxes are different and could be challenging to comprehend as the rules and reporting are vast and quite complicated compared to other states in the U.S.
- Different states follow a different pattern of payroll taxes applied by the government and are an integral part of the government's general fund.