How to Calculate the Taxes to Be Withheld in Maryland

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The state of Maryland charges state and local income tax to employees. Maryland employers are required to withhold both taxes from employees’ wages. The Comptroller of Maryland administrates state income tax withholding laws and also provides employers with the procedures for local income withholding. Employers are also required to withhold federal income tax, Social Security tax and Medicare tax from Maryland employees’ wages. To ensure compliance, apply the appropriate calculation when figuring withholding taxes in Maryland.

Calculate state and local income tax. The employee’s state income tax withholding depends on her filing status, number of exemptions (as stated on her Maryland Withholding Exemption Certificate — MW 507 form) and the Maryland withholding tax tables. The Comptroller simplifies the calculation process by including the state income tax and local income tax percentage in the withholding tax tables. Use the table that corresponds with the employee’s locality.

Do not withhold Maryland income tax if the employee claims exempt on her MW507. The employee is exempt if last year he had a right to a full refund of all Maryland income tax withheld because he did not owe any tax and if in the present year he expects a full refund of income taxes withheld because he does not anticipate owing any Maryland income tax.

Do not withhold Maryland income tax if the employee lives in Washington D.C., Pennsylvania, Virginia or West Virginia but works in Maryland. Maryland residents who work in these four states are required to file their state income tax with Maryland. Delaware employees who live in Maryland are required to file their tax return in both states.

Use the IRS Circular E’s withholding tax tables and the employee’s filing status and allowances, as shown on his W-4 form, to figure federal income tax. The employee is excluded from federal income tax if he claims “exempt” on his W-4 and meets the following conditions: in the last year he was entitled to a full refund because he did not owe any federal income tax, and in the present year he expects a full refund because he does not foresee owing any federal income tax.

Figure Social Security tax at 6.2 percent of gross wages, up to the annual wage maximum of $106,800; and Medicare tax at 1.45 percent of all gross compensation.

Tips

  • File withholding reports and pay income tax withholding to the Comptroller of Maryland according to the schedule it dictates. File federal tax withholding reports and pay federal withholding to the IRS according to the schedule it mandates.

References

About the Author

Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.

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