17 January 2017 Maine Revenue Services warns employers about possible 2017 income tax withholding errors Maine Revenue Services (MRS) reports there is some employer confusion over the calculation of 2017 Maine income tax withholding, possibly resulting in unnecessary increases in Maine income tax withholding for some employees. This issue likely arises this year because of how the standard deduction amounts were reflected in withholding calculations. Prior to 2017, MRS included the standard deduction amount in the withholding tax rate schedules. For example, for 2016 there was a 0% bracket for income of less than the standard deduction ($8,750 for single filers and $20,350 for married filers). For 2017, the standard deduction amount is removed from the tax rate schedules and must be subtracted from the annualized income amount to which the tax rate schedules are applied. The standard deduction amount is phased out starting at $70,000 for single filers and $140,000 for married filers and is fully phased out at $145,000 for single filers and $290,000 for married filers. The standard deduction amount that must be subtracted from annualized income falling below the threshold is $8,750 for single filers and $20,350 for married filers. If the annualized income falls in the phase out range, the following equation must be used to calculate the amount of the standard deduction to subtract: According to the MRS, the change was made in order to institute a more transparent method to calculate the Maine withholding according to taxpayer and software developer feedback. With certain exceptions, the agency notes that the 2017 withholding amounts for low and middle income employees are substantially the same as the 2016 withholding amounts. As we previously reported, the withholding tables are adjusted to reflect a 10.15% maximum income tax rate that included the voter-approved 3% surcharge on high-income earners. As a result, income tax withholding for these taxpayers will likely be higher as compared to 2016. . The 2017 withholding tables and the percentage method instructions can be found on the MRS website.
Document ID: 2017-0104 | ||||||||||||||||||||
