Maryland Withholding laws & HR compliance analysis

Maryland Withholding: What you need to know

Under Maryland law, all Maryland employers are required to withhold the state income tax from the wages of residents and most nonresidents who work in Maryland. Nonresidents employed in Maryland are not subject to Maryland withholding if they are residents of the following: the District of Columbia, Pennsylvania, Virginia, and West Virginia. Employees must provide their employer with a Form MW-507 to claim this exemption.
Generally, an employer is a person or organization, subject to the jurisdiction of Maryland, for which an individual performs a service as an employee. An employer that is not required by law to withhold Maryland income tax may withhold Maryland income tax through a voluntary arrangement with the employees or payees, provided that the employer registers with the Revenue Administration Division. This arrangement must conform to the Maryland withholding and payment requirements.
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For withholding purposes, “wages” means all compensation for services performed by an employee, including the cash value of all remuneration paid in any medium other than cash. Exceptions are similar to the exclusions for federal withholding purposes so that, in most instances, wages subject to federal withholding will also be subject to Maryland withholding. Taxable wages include all employee compensation, such as salaries, fees, bonuses, commissions, vacation allowances, back pay, and retroactive increases. Wages paid in any form other than money are measured by their fair market value. These include lodging, meals, property, or other considerations for personal services. Agricultural wages subject to Social Security (Federal Insurance Contributions Act (FICA)) tax are subject to Maryland withholding tax. Tips and ...

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