Maryland Salary Paycheck Calculator
Getting your new Maryland business up and running is exciting! But what happens when it’s time to hire your first employee? Thinking about payroll taxes and paycheck laws doesn’t sound exciting. You’d rather be doing something other than sorting through the deadlines, tax forms, and tax rates. And that’s why we compiled these answers to your most common questions around Maryland payroll taxes.
Maryland state payroll taxes
How does Maryland collect withholding tax?
Like most states, Maryland requires taxpayers to pay their tax bill throughout the year. And for employers, that means you’ll withhold Maryland income tax from employees’ paychecks.
How much you’ll take out depends on the information your employees provide you on Form MW507, Employee’s Maryland Withholding Exemption Certificate. All employees should complete this form when they begin working for you and update it anytime their tax situation changes.
Things like tax filing status, residency location, and the number of exemptions impact how much tax you’ll withhold. Employees residing in Virginia, West Virginia, Pennsylvania, and the District of Columbia are generally exempt from having Maryland withholding tax taken out of their paychecks.
The frequency that you’ll pay this tax to the state depends on how much you withhold. Frequencies are:
- Accelerated. Within three business days of payday
And regardless of how often you pay, everyone needs to complete an annual reconciliation on Form MW508, Annual Employer Withholding Reconciliation Return.
How does Maryland collect unemployment tax?
Maryland’s unemployment tax is charged on the first $8,500 of each employee’s salary each year.
New employers will pay a 2.3% tax rate, and established employers pay rates between 2.2% and 13.5%.
You’ll have to file quarterly wage reports and pay your unemployment tax each quarter. You’ll need to file your report online or by calling the Maryland Department of Labor. Mailing paper reports is not an option. You can find more information in Maryland’s helpful employer guide.
What’s the minimum salary threshold in Maryland?
Because Maryland doesn’t have its own minimum salary threshold, the state adheres to the federal salary threshold, which is now $684 per week (equivalent to $35,568 per year for a full-year worker). The Department of Labor permits employers to count some bonuses, commissions, and other incentive payments toward meeting the standard salary level (up to 10%). Employees who earn at least $107,432 per year may qualify as “highly compensated.” See this Department of Labor fact sheet for details.
When are new hires to be reported to the state?
Employers have 20 days to report new or rehired employees to the state.
When is Workers’ Compensation insurance required in Maryland?
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.
Does Maryland require employers to provide time off to employees?
There are three types of time off that Maryland employers need to provide to employees.
When are final paychecks due to former employees?
You have until the next regularly scheduled payday to pay final wages to employees regardless of whether they were terminated or resigned.
Federal payroll taxes in Maryland
Is there a federal unemployment tax?
Yes. 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 most employers only have to pay 0.6% each year.
Many employers will pay the federal unemployment tax annually in January using Form 940, Annual Federal Unemployment (FUTA) Tax Return. But if you owe more than $500, you’ll need to make quarterly payments.
How much federal withholding do I need to take out of workers’ pay?
Unless an employee is exempt from withholding, all workers need to have federal income tax taken out of each paycheck. The amount withheld varies depending on several factors.
Have each employee complete Form W-4, Employee’s Withholding Certificate, when they start working for you. This form will tell you the number of dependents the employee has and their tax filing status—both of these bits of information factor into how much tax to take out.
With this information, the worker’s pay amount, and the federal tax tables, you have all the pieces to the puzzle to figure out the amount of tax to withhold. If that sounds daunting, don’t worry. Payroll software can eliminate the need to flip through tax tables. With just a few clicks, it can spit out the tax amounts for you.
Depending on how much you withhold, you’ll need to send the tax to the IRS either semi-weekly or monthly. And all employers need to send in a quarterly payroll tax return using Form 941, Employer’s Quarterly Federal Tax Return.
What is FICA tax, and how’s it calculated?
The 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.
You’ll send in both portions of the tax when you send in your federal income tax withholding. And you’ll report FICA on Form 941 too.
What’s the Additional Medicare tax?
The Additional Medicare tax came into effect in 2013 with the passage of the Affordable Care Act. If you have employees earning more than $200,000 a year, you’ll need to withhold the Additional Medicare tax from their pay. The rate is 0.9% on wages above $200,000.
If you collect this tax from any employees, you’ll send it off to the IRS when you send in your FICA and federal income tax withholding. And just like those other two taxes, you’ll need to include the Additional Medicare tax on your Form 941.
We hope these FAQs and answers were helpful and answer any questions you have about Maryland payroll taxes. And if you’d prefer to leave payroll to the pros, Gusto is here to help.