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Maine Revenue Services (MRS) released the 2020 employer withholding tax guide, that contains the income tax withholding wage-bracket and percentage method tables that are effective with wages paid on and after January 1, 2020.

The 2020 Maine personal exemption amount is $4,300 (up from $4,200), and the Maine basic standard deduction amounts are $12,400 (up from $12,200) for single and $24,800 (up from $24,400) for married individuals filing joint returns. Also, the Maine standard deduction amounts for 2020 are phased out for single taxpayers with Maine income over $82,900 and married taxpayers filing joint returns with Maine income over $165,800.

The Maine basic standard deduction amounts listed above differ slightly from the standard deduction amounts used to calculate Maine withholding. The percentage method for calculating Maine withholding (see pages 6 & 7 of the guide) and the withholding tables are adjusted to reflect the 2020 exemption and deduction amounts.

2020 Form W-4ME now available

MRS Form W-4ME, Employee’s Withholding Allowance Certificate for Maine, is modified to assist employees in determining the number of allowances they should claim for Maine income tax withholding purposes, especially with respect to the number of allowances claimed for children and dependents. Employers should encourage employees to review the updated Form W-4ME to determine if the number of Maine withholding allowances should be changed. Employees, however, are not required to update an existing Form W-4ME if no changes in withholding allowances are needed.

Differences between Maine income tax law and the Internal Revenue Code (such as the federal child credit and Maine dependent exemption credit) may affect the number of allowances an employee may claim. Maine withholding allowances claimed on Form W-4ME are based on the number of allowances claimed on federal Form W-4, with adjustments. The Maine Form W-4ME must be provided by the employee to the employer on the same date the federal Form W-4 is provided.

Failure of the employee to submit Form W-4ME results in the employer withholding as if the employee were single claiming zero allowances.

Supplemental wages

The supplemental rate of income tax withholding for 2020 remains at 5%.

If supplemental wages (such as bonuses, commissions, overtime pay, etc.) are paid with regular wages, the withholding tax is calculated as if the total were a single payment of wages for the regular payroll period. If the supplemental wages are paid separately, the payer may withhold a flat 5.0%. (2020 Withholding tables for individual income tax, page 4.)

Electronic filing required

All employers and non-wage payers registered for Maine income tax withholding accounts must electronically file Maine quarterly withholding tax returns and annual reconciliation of Maine income tax withholding. Waivers from this requirement are available if the requirement causes undue hardship. See MRS Rule 104 and page 5 of the withholding guide for details.

Electronic payments required

Taxpayers that have a combined tax liability for all Maine taxes of $10,000 or more during the lookback period ending in 2019 must remit all Maine tax payments electronically. Thus, in addition to other entities affected by the requirement, employers and non-wage payers required to remit on a semiweekly basis must do so electronically. See MRS Rule 102 and page 2 of the withholding guide for details.

2019 Forms W-2 due January 31, 2020, annual reconciliation return deadline remains February 28, 2020

Employers of 250 or more employees must file calendar year 2019 Forms W-2 electronically with the MRS by January 31, 2020.? Forms W-2 using the Social Security Administration’s EFW2 format must be submitted electronically via the Maine Employers Electronic Reporting System (MEETRS) on the MRS website.

Employers of fewer than 250 employees should report the amount of Maine income tax withholding for each employee or payee on Form 941ME, Schedule 2 for each quarter. Small employers are required to electronically file only Form W-3ME (no need to file Forms W-2). However, if a small employer did not report the amount of Maine withholding for each employee or payee on its quarterly return for each quarter, the employer must submit Forms W-2 electronically. The MRS does not accept paper copies of Forms W-2 and 1099.

The 2019 Form W-3ME, Reconciliation of Maine Income Tax Withheld, must be filed electronically by all employers by February 28, 2020.

For the 2019 Forms W-2 and W-3ME specifications, go to the MRS website.

Questions concerning the 2020 withholding tables, 2019 annual filing specifications, or 2020 quarterly return filing specifications may be sent to withholding.tax@maine.gov.

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