Maryland Form 515: Filing and Payment Instructions
A guide for payors on the requirements and procedures for remitting Maryland's nonresident income tax withholding using Form 515.
When a business or individual pays a nonresident for services performed in Maryland, they are required to withhold state income tax. These withheld funds are remitted to the state using Form MW506, the Employer’s Return of Income Tax Withheld. This guide outlines the payor’s responsibilities for withholding and submitting the tax payment correctly.
Determining Your Filing Requirement
A payor is any business or individual making payments to a nonresident for services performed or income earned within Maryland. A nonresident individual is someone who does not reside in Maryland, while a nonresident entity is a business that is not organized or does not have its principal place of business in the state.
The requirement to withhold and file Form MW506 is triggered by specific types of income sourced from within Maryland. This includes payments for personal services rendered in the state, rental income from Maryland real estate, and prizes or awards won in Maryland. If you make these types of payments to a nonresident, you are required to withhold Maryland income tax.
An exemption from withholding may apply in certain situations. For instance, a nonresident employee who lives in a reciprocal state like Pennsylvania, Virginia, West Virginia, or Washington D.C. can claim an exemption. An exemption may also be claimed if the employee had no Maryland tax liability in the prior year and expects none in the current year. To claim an exemption, the employee must provide the employer with a properly completed exemption certificate.
Calculating and Reporting Withholding
The amount of tax to withhold is calculated based on Maryland’s standard graduated tax tables. In addition, nonresidents are subject to a special nonresident tax rate, which is set at the lowest county tax rate of 2.25%. These rates are applied to the gross amount of the Maryland-source income before any deductions.
On Form MW506, you will enter your business name, address, and Federal Employer Identification Number (FEIN). If you are an individual payor, you will use your Social Security Number (SSN) instead of a FEIN. The form also requires information about the nonresident who received the payment, including their full name, address, and SSN or FEIN.
This information is necessary for the state to properly credit the withheld tax to the nonresident’s future Maryland tax liability. You will report the total amount of income paid to the nonresident and the corresponding amount of Maryland tax you have withheld. Accuracy in these fields is important for ensuring the payment is processed correctly.
Submitting Withholding and Payments
The due date for filing and remitting the tax depends on the employer’s filing frequency, which is determined by the amount of tax withheld. Filing can be required on an accelerated, monthly, or annual basis. Monthly returns and payments are due by the 15th day of the month after the wages were paid, while annual returns are due by January 31 of the next year.
For those filing by mail, the payment should be a check or money order made payable to “Comptroller of Maryland.” It is a good practice to include your FEIN or SSN on the check to ensure proper application of the funds. Maryland also offers an electronic filing and payment option through its bFile system.
After submitting the form and payment, you will not typically receive a confirmation notice from the state. Therefore, it is important to retain a copy of the completed Form MW506 and proof of payment, such as a canceled check or electronic payment receipt, for your business records.