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- Tax Rates and Withholding
- Maine has state income tax rates ranging from 5.8% to 7.15%.
- Non-wage payments in Maine are subject to a 5% flat rate withholding.
- Use Form 940 to report annual Federal Unemployment Tax Act (FUTA) tax.
- To obtain a tax withholding number, contact the IRS.
- Maine collects sales tax on out-of-state purchases.
- Make estimated tax payments to the IRS before year-end to avoid underpayment penalties.
- Adjust pension withholding by submitting a new Form W-4P.
- Adjust withholding allowances on Form W-4 between 0 to 3 based on eligibility.
- Recent Updates and Procedures
- Maine has increased the annual exemption per allowance from $4,450 to $4,700.
- Updated standard deduction tables and withholding tables for Single and Married individuals in Maine.
- Employees need to complete Form W-4ME for accurate tax withholding.
- Military spouses may be eligible for exemption.
- Employers may need to submit Forms W-4ME to Maine Revenue Services accordingly.
- Different withholding rules apply to supplemental wages like bonuses.
- Electronic filing of returns and reconciliations can be done through the Maine Tax Portal.
- Tax Filing and Requirements
- Facsimile signatures are accepted on taxpayer and preparer filed returns.
- Failure to furnish W-2/1099 forms will prevent taxpayers from filing returns.
- Nonresident owners of pass-through entities use Form 1099ME for withholding.
- Maine’s marginal tax brackets range from 5.8% to 7.15%, depending on the filing type.
- Various state taxes are applicable to small businesses.
- Corporation tax rates in Maine are based on income levels.
- Estimated payments are mandatory for pass-through entity withholding.
- Maine does not have a pass-through election option.
- Sales tax is applicable to all sellers.
- Other Considerations
- Maine’s tax burden is relatively higher due to lower average incomes.
- Nonresidents are required to pay taxes on Maine income.
- Income tax forms are for income earned in previous years.
- Property tax rates in Maine exceed the national average, requiring attention.
- For individuals living in Maine and working in New Hampshire, filing only a Maine return is necessary.
