Maine Withholding Requirements for Employers
Understand the complete process for managing Maine employee income tax withholding to ensure accurate and timely compliance with state law.
Employers in Maine are responsible for collecting state income tax from their employees’ wages through a process known as withholding. This involves setting aside a portion of each employee’s pay and remitting it to Maine Revenue Services (MRS). The system helps employees meet their state income tax obligations throughout the year, preventing a large bill when they file their annual returns. This is a requirement for nearly every business that pays wages for services performed within the state.
Employer Registration and Employee Setup
Before withholding income tax, an employer must register with Maine Revenue Services to obtain a withholding account number. This registration can be completed electronically through the Maine Tax Portal, the recommended method, or by submitting a paper application. This account number is used for all subsequent filing and payment activities.
Once registered, the employer must gather tax information from each employee using two forms. Every employee must complete the federal Form W-4, “Employee’s Withholding Certificate,” and Maine’s Form W-4ME, “Employee’s Withholding Allowance Certificate.” This state-specific form allows employees to declare their filing status, the number of withholding allowances they wish to claim, and any additional amount they want withheld from each paycheck.
The information provided on Form W-4ME is used to determine the amount of state income tax to withhold. Employees calculate their available allowances based on a worksheet that considers personal exemptions for themselves, their spouse, and any dependents. It is the employer’s responsibility to retain these completed forms for their records and apply the information correctly when running payroll.
Calculating the Withholding Amount
Employers must calculate and withhold funds for both state income tax and Maine’s Paid Family and Medical Leave (PFML) program. Beginning in 2025, employers must withhold and contribute to the PFML program, with up to 0.5% of an employee’s wages deducted for this purpose. For income tax, Maine Revenue Services provides two calculation methods: the Wage Bracket Tables and the Percentage Method. For supplemental wages like bonuses paid separately, a flat withholding rate of 5% can be applied.
Wage Bracket Method
The Wage Bracket method is often used for manual payroll. An employer uses the table corresponding to the employee’s pay period and filing status from their Form W-4ME. The employer then finds the row for the employee’s gross wage range and the column for the number of allowances claimed to find the exact withholding amount.
Percentage Method
The Percentage Method uses a direct calculation. First, the employee’s gross wages are annualized, and then the employer subtracts the total value of the employee’s claimed allowances and the applicable standard deduction. For 2025, the personal exemption is $5,150 per allowance, and the standard deduction for a single taxpayer is $11,750 (for annualized wages of $97,150 or less) or $26,350 for a married taxpayer (for annualized wages of $194,300 or less). The resulting figure is used with state tax rate schedules to compute the annual tax, which is then divided by the number of pay periods to find the per-paycheck withholding.
Filing and Paying Withheld Taxes
Employers must remit withheld funds to Maine Revenue Services. The payment frequency is determined by the total withholding liability during a 12-month lookback period ending on June 30 of the prior year. Employers who reported $18,000 or more in total withholding during the lookback period are designated as semi-weekly filers. For this group, payments for wages paid on a Wednesday, Thursday, or Friday are due by the following Wednesday. Payments for wages paid on a Saturday, Sunday, Monday, or Tuesday are due by the following Friday.
Employers with a total withholding liability of less than $18,000 during the lookback period are required to file and pay on a quarterly basis. For these employers, both the return and the payment are due on the last day of the month following the end of the calendar quarter. All employers, regardless of their payment schedule, must file Form 941ME each quarter. Maine requires this form and all associated payments to be made electronically through the Maine Tax Portal.
Annual Reconciliation Requirements
At the conclusion of the calendar year, employers must reconcile the total taxes they paid with the amounts withheld from employee wages. This process involves preparing and distributing federal Form W-2, “Wage and Tax Statement,” to each employee. This form details the employee’s total annual earnings and the total federal and state income tax withheld, and it must be furnished to employees by January 31 of the following year.
For tax years beginning on or after January 1, 2024, Maine Revenue Services no longer requires employers to file Form W-3ME, which previously summarized W-2 totals. Despite this change, employers are still required to submit copies of their employee W-2s to Maine Revenue Services by January 31. The state mandates that employers who file 10 or more information returns in aggregate must submit them electronically using the Maine Tax Portal.