Maryland Hourly Paycheck and Payroll Calculator

Maryland Hourly Paycheck Calculator

Maryland has a rich history of small business development thanks in part to its proximity to the nation’s capital. While starting your new business in Maryland, you may wonder what payroll taxes you’ll need to pay and collect from your employees. When the time comes to hire your first worker, we’ve got you covered. You’ll find everything you need to know about Maryland’s payroll taxes and paycheck rules here.

Maryland state payroll taxes

Maryland withholding tax

Maryland uses a pay-as-you-go system for the collection of Maryland income tax via paycheck withholding. To figure out how much tax to take out of employees’ paychecks, you’ll need to have employees complete Form MW507, Employee’s Maryland Withholding Exemption Certificate, when they start working for you. 

Along with personal information like name and address, your employees will indicate their tax filing status (e.g., single, married), the number of exemptions they’re claiming, and whether they may be exempt from Maryland withholding tax. Employees residing in the following areas are generally exempt from Maryland withholding tax:

• Virginia,
• West Virginia,
• Pennsylvania, and
• District of Columbia 

Using information from Form MW507, you’ll use Maryland’s tax tables to determine the correct amount of withholding. An easier option is to use payroll software to make the calculations for you automatically. 

How often you’ll pay the withholding tax depends on how much tax you withhold. Payment frequency can be:

• Accelerated. Within three business days of payday
• Monthly
• Quarterly
• Seasonally
• Annually

Maryland encourages employers to file and pay their withholding taxes online.  
Each January, employers need to file an annual reconciliation using Form MW508, Annual Employer Withholding Reconciliation Return.

Maryland unemployment tax

Maryland changes employers a tax to provide benefits to unemployed workers. This unemployment tax is charged on the first $8,500 of each employees’ wages each year. New employers pay a 2.3% tax rate, while established employers pay tax rates ranging from 1% to 10.5%. 

You’ll pay Maryland’s unemployment tax quarterly and quarterly contribution and employment reports are by the last day of the month following the end of the calendar quarter. You must file your quarterly report online or by calling the Maryland Department of Labor. Mailing paper reports is not an option.  
Check out Maryland’s thorough employer guide covering unemployment insurance for more details.

Other Maryland payroll rules and laws

Minimum wage: Maryland’s minimum wage* is determined by the number of employees. Larger employers must pay a higher minimum wage.

*Different minimum wage laws apply for employers in Montgomery County.

Overtime: Generally, overtime of at least 1 ½ times the usual hourly rate is required for employees working more than 40 hours a week. 

Final paychecks: Pay employees their final wages no later than the next regularly scheduled payday.

Leave laws: 

• Deployment leave allows certain employees to take leave on the day an immediate family member is leaving for or returning from active duty assignment outside the U.S.
•  Sick and safe leave
  • Employers with 15 or more employees must provide at least one hour of paid sick leave for every 30 hours worked.
  • Employers with less than 15 employees must provide at least one hour of unpaid sick leave for every 30 hours worked.
• Voting leave
  • Employers must provide up to two hours of paid leave to allow employees to vote. 

Workers’ Compensation insurance: Requirements to obtain Workers’ Compensation vary by state, this table outlines some of these requirements. If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit—head to this article and click the workers’ comp audit reports dropdown for more information. New hires: Employers need to report newly hired or rehired employees to the state within 20 days of starting work.

Federal payroll taxes in Maryland

Don’t forget about federal payroll taxes. Some are paid by the employer, some are paid by the employee, and some are jointly paid.

Employer-paid federal payroll taxes

FUTA – Federal unemployment tax

Like the state, the federal government also has an unemployment tax. It’s called FUTA and it’s an annual tax employers pay on the first $7,000 of each employee’s wages. The FUTA rate for 2022 is 6%, but many employers only have to pay 0.6% each year.

Employee-paid federal payroll taxes

FIT – Federal income tax withholding

Workers need to pay their federal income taxes throughout the year via payroll deductions. How much tax that gets taken out depends on a few factors, including their pay, tax filing status, and the number of dependents.

You’ll start by collecting Form W-4, Employee’s Withholding Certificate, from each employee when they start work. Information on this form is the foundation for the tax withholding calculation.

Using Form W-4’s information and the employee’s pay amount, you’ll use the federal withholding tax tables or payroll software to calculate how much tax to take out. 

Keep the completed Form W-4 in your payroll files. There’s no need to send it to the IRS unless they ask for it.

Additional Medicare tax

Some of your employees may need to pay the Additional Medicare tax. For employees earning more than $200,000 per year, you’ll need to withhold 0.9% on the excess wages.

Jointly-paid federal payroll taxes

FICA – Federal Insurance Contributions Act

The Federal Insurance Contributions Act, or FICA tax, is made up of the Medicare tax and the Social Security tax. In 2022, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $147,000. The Medicare tax requires each to contribute 1.45% of all wages. See the IRS webpage for details, like maximum thresholds.

Paying federal payroll taxes

FIT, FICA, and Additional Medicare tax are usually paid monthly or semi-weekly, depending on how much tax you owe. Some employers with large dollar payrolls may need to make next-day payments.

Regardless of your payment frequency, you’ll need to send the IRS quarterly payroll tax returns on Form 941, Employer’s Quarterly Federal Tax Return. These returns are due even if you had no wages or taxes due for the quarter.

FUTA is generally paid annually. But some employers may need to pay quarterly if they owe more than $500. Each time you make a payment, whether annually or quarterly, you’ll need to file Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.
While paying your employees on time and correctly is critical, so is paying the payroll taxes and filing your reports. Most payroll providers take care of all this so you’ll never miss a deadline.