As a Maine employer, there are two taxes you must know inside and out:
- State Income Tax: Ranges from 5.8% to 7.15%
- Unemployment Insurance Tax: Starts at 2.32% for new employers
Remember, these are just the state payroll taxes. Federal taxes are a whole ‘nother can of worms.
So what do you need to know about these two state payroll taxes? We’ll cover everything you need to know below.
Maine State Income Tax
Ever since 2016, Maine has levied an income tax rate between 5.8 to 7.15% of a person’s taxable income. This tax applies to anyone who earns income in Maine, whether they live there or not.
Here’s what the schedule looks like for individual filers:
- Those with a taxable income that’s under $24,500 pay a rate of 5.8%
- For anyone with a taxable income between $24,501 and $58,049, the tax rate is $1,421 plus 6.75% of any income over $24,500
- For everyone who makes $58,050 or more, the rate is $3,686 plus 7.15% of any income over $58,050
You can take a look at the tax schedule for all the different filing statuses—and we recommend keeping a copy close at hand as you set up your payroll software. (More on that in a moment.)
But knowing the general tax schedules isn’t quite enough to know how much to withhold from each employee’s paycheck. That’s why employees must fill out Form W4-ME, the Maine Employee’s Withholding Allowance Certificate.
Maine law requires employees to fill out and return the Form W4-ME at the same time as they fill out and return the federal Form W-4. Make sure you provide a copy of the W4-ME when you onboard a new employee.
You’ll need to keep these records on file for at least four years.
In most cases, you won’t need to submit the W4-ME to the Maine Revenue Services. They’re there to make sure you withhold the correct amount of money from each paycheck. The two situations when you’d need to submit the W4-ME are:
- If you, the employer, have been asked by the IRS to submit a federal Form W-4
- If the employee is performing services in Maine but submits a W4-ME with no Maine address and claims to be exempt from Maine taxes
The full instructions for this are on the Form W4-ME itself, so make sure you read them carefully.
Also, the IRS requires employers to request a new W-4 from employees each year on December 1. Do the same for the Form W4-ME.
When Are Maine Taxes and Reports Due?
When you’re a new employer, you’ll send all withheld taxes to the Maine Revenue Services on a quarterly schedule. This means you need to send your return and payment on the last day of the month following the end of the quarter you’re paying for.
So if for Q1, which ends on March 31, everything for that quarter is due by the end of April.
This only applies to the first year, though, which serves as a lookback period. After the first year, you’ll “look back” over the 12-month period. If you reported Maine income tax withholding of $18,000 or more, you’ll need to switch to a semi-weekly payment schedule.
A semi-weekly return and remittance routine means taxes are due according to this schedule:
- For wages paid out on Wednesday, Thursday, or Friday: send the withholding payment on or before the next Wednesday
- For wages paid on Saturday, Sunday, Monday, or Tuesday, send the withholding payment on or before the next Friday
Maine Unemployment Insurance Tax
The Pine Tree State requires all new employers to pay unemployment insurance tax at a rate of 2.32% on the taxable wage base for each employee—$12,000.
After your first year, the rate will vary based on several different factors. The state uses a complex formula that takes annual taxable wages, contributions, and benefit charges into account.
Each year, your business will receive a notice explaining your annual SUTA rate with a detailed breakdown of how it was calculated.
To pay your SUTA taxes, create an account with ReEmployME, Maine’s portal for all things unemployment insurance.
With a ReEmployME account, you can:
- See how much you’ll be paying in unemployment insurance tax
- E-file your quarterly reports
- Pay your SUTA taxes
One more thing before we move on: it’s crucial to avoid misclassifying employees as independent contractors in Maine. The state has rigid criteria on what counts as an employee when it comes to unemployment insurance.
You’ll want to read the Maine Employment Standard word for word. You can find it in the downloadable Employer’s Guide to the Maine Unemployment Security Law.
Misclassifying a single employee can result in a $10,000 fine. So take the time to do this part correctly.
The Employer’s Guide to Maine Unemployment Security Law also covers which seasonal employees may qualify for SUTA, too. Along with 40 pages of information you can’t afford not to know.
So make sure you read it, understand it, and consult your legal team if you have any questions.
How to Submit Your Maine Payroll Taxes
Using your ReEmployME account is the easiest way to submit unemployment insurance premiums.
But what about regular income tax?
To pay those, you’ll create an account on the Maine Tax Portal (MTP). You can use this portal to register your business with Maine Revenue Services. Once you’re all set up, you’ll be able to pay withheld taxes and file returns.
Registering your business is easy. Just click the Register a Business link on the MTP home page. The system will ask you to collect all the information you’ll need to register—things like:
- Federal Employer ID Number (FEIN) or Social Security Number (SSN), if you’re a sole proprietorship
- The legal name of your business
- Activity start date for your business
- Contact information
- Physical and mailing addresses
- Activity start dates and filing frequencies for income tax and other business-related taxes you’re registering for
Businesses that aren’t sole proprietorships also need to submit:
- Official articles of incorporation or organization
- Form SS-4 (IRS determination letter)
If you already have a corporate income tax return with the business owner’s information on it, you can use that instead.
You can’t save your progress once you start the MTP registration process. So make sure you’ve got everything ready to go before you begin. The Department of Revenue recommends setting aside half an hour or more to complete the registration.
The Official Resources for Maine Payroll Taxes
Dig deeper into Maine’s payroll tax laws and procedures with these official Maine resources:
- Employer Withholding Forms
- Income Tax Withholding FAQ
- Employer’s Guide to the Maine Unemployment Security Law
- MDOL Employer Services
- MDOL Employer FAQ
- MDOL Unemployment Insurance
- Maine Business Taxes
- Maine Tax Portal Help
- Maine Revenue Services FAQ
How to Get Maine Payroll Taxes Done in Your Sleep
Remember how we said that all the information you’ll read in this guide only covers Maine’s state taxes? In addition to SUTA and income taxes, you’ll have to deal with federal taxes as well.
You could try to do it yourself—and risk paying steep fines if you make mistakes, as humans so often do. Mistakes are especially easy to make when you face mountains of paperwork, critical deadlines, and a whole business to run.
Another option? You could hire an entire payroll department to do the work for you—if you can afford to pay all those salaries, benefits, and taxes.
Luckily, there’s one more option. It’s the one we recommend to all first-time employers and small businesses: get yourself a payroll software service.
Payroll software takes the speedy accuracy of computers and applies it to all things payroll. You’ll need to do a bit of legwork at the beginning to tell your chosen software service a few things, like which state(s) you’re paying taxes in, what benefits you provide your employees, and so on.
But after that, all you have to do is oversee the payroll software’s operations and watch as it:
- Automatically files your state and federal payroll taxes
- Keeps track of health insurance, benefits, and wages for each employee
- Monitors state tax laws and automatically updates the software so you’re always compliant
- Securely stores and organizes all your tax forms
It sounds too good to be true, but it isn’t. Many of the best payroll software platforms offer trial runs so you can test them out and find your favorite one. Start your journey to easy Maine payroll tax management with our guide to the best payroll software.