Payroll tax in Maine: What employers need to know [2024]

Taxes are a headache for most business owners, but they’re unavoidable when running a company. Adhering to federal tax regulations—including FICA taxes—is just one piece of the puzzle, as Maine employers are also responsible for state payroll taxes. Keeping up with all payroll tax regulations can be tricky since the laws vary across states. However, failing to understand the intricacies of payroll taxes can result in costly penalties and legal issues.

Maine has a progressive tax system, which is more complex than the flat-rate system in other states. The higher your employees’ wages, the more taxes they’ll pay. And as you hire new employees, you’ll need to withhold more from their paychecks and make higher tax contributions. 

Whether you’re running a small business or an expanding corporation—no matter the industry—you need to understand the different types of payroll taxes, their rates, and how to file them correctly. Let’s get into the details about Maine’s payroll taxes.

The 2 Maine payroll taxes

Maine has two types of payroll taxes. The Maine Revenue Services (MRS) oversees individual income tax, which employees pay, and the Maine Department of Labor (MDOL) oversees the state unemployment insurance (UI) program, which employers pay into. 

All new employers in Maine must report new hires within seven days, which is slightly stricter than other states. The easiest way to report new hires is through the state’s new hire online portal, but you can also report by fax or mail. 

Unemployment insurance tax

The Maine Unemployment Insurance (UI) program provides temporary, partial wage replacement for workers facing unemployment through no fault of their own. The program's funding comes from unemployment taxes paid by employers, calculated based on the wages for covered employment. Under the Federal Unemployment Tax Act (FUTA), Maine employers must typically also pay federal unemployment taxes.

Maine employers must pay unemployment insurance tax on the initial $12,000 of gross pay per individual in a calendar year. You can find specific exemptions for unemployment taxation on the MDOL website.

Personal income tax

In addition to your federal income tax responsibilities, you also need to withhold state income tax from your employees’ paychecks. Personal income tax, or individual income tax, is what Maine residents owe on their income, which includes wages, salaries, and investments. This money goes towards the state and local budgets covering public services like education, healthcare, roads, and parks.

You have a few different options for calculating the amount of taxes to withhold in Maine:

• Percentage method
• Wage bracket tables method
• Flat-amount of fixed percentage rate method (if an employee asks you to deduct more taxes from their pay than is required, you can do so)

You can find detailed instructions and examples for these methods in this document: Maine Revenue Services Withholding Tables for Individual Income Tax. 

Alternatively, you could make things easier with Rippling’s payroll software. Rippling automatically calculates your taxes and submits your tax forms and payments on your behalf. Plus, it monitors tax laws at both the federal and state levels, so you stay compliant across the board. Rippling’s PEO also registers and maintains your state tax accounts for you, automating the payroll tax process even further.

Payroll tax due dates in Maine

The due dates for Maine income tax withholding payments depend on how much tax you report. 

If you reported less than $18,000 for the 12 months ending June 30 of the previous calendar year, you must make quarterly returns. Employers owing taxes to the MRS on a quarterly basis must meet the following due dates: 

• First quarter (January-March): Due April 30
• Second quarter (April-June): Due July 31
• Third quarter (July-September): Due October 31
• Fourth quarter (October-December): Due January 31

For due dates that fall on a Saturday, Sunday, or holiday, the payment is due the following business day. 

If you reported $18,000 or more for the 12-month lookback pay period ending June 30 of the prior calendar year, you must make payments on a semiweekly schedule. Employers owing taxes to the MRS on a semiweekly basis must meet these due dates:

• For wages paid on Wednesday, Thursday, or Friday, remit withholding payment on or before the following Wednesday.
• For wages paid on Saturday, Sunday, Monday, or Tuesday, remit withholding payment on or before the following Friday.

Keep in mind: Once you’re required to make semiweekly payments, you have to stick to this schedule—even if the amount you report decreases during the lookback period. Additionally, late payments can cost you a pretty penny. If you submit your wage reports and/or tax payments late, you’ll be charged a 7% interest rate for the entire month. 

For unemployment insurance tax, Maine employers must complete and file each quarter according to the following schedule:

• First quarter (January-March): Due April 30
• Second quarter (April-June): Due July 31
• Third quarter (July-September): Due October 31
• Fourth quarter (October-December): Due January 31

How to submit payroll taxes in Maine

Before you submit your payroll taxes, take these key steps:

• Apply for your federal Employer ID number (EIN) from the IRS.
• Register with the Maine Revenue Services. You can download a registration application on the MRS General Forms page. 
• Collect employee payroll forms, such as W-4, I-9, and W-4ME. 

Once those steps are complete, you have a few options for remitting your tax payments in Maine.

File and pay electronically 

Maine employers are generally required to electronically file state income tax withholding returns and annual reconciliation forms per MRS Rule 104 g. You can submit the following forms electronically by using the Maine Tax Portal (MTP):

• Form 941ME: Employer’s Return of Maine Income Tax Withholding (quarterly or semiweekly)
• Form W-3ME: Reconciliation of Maine Income Tax Withheld (annual)

You can make payments electronically either using the Maine Tax Portal with ACH debit or via Electronic Funds Transfer (EFT) with ACH credit. 

To file unemployment insurance taxes, you must submit Form W-3ME on a quarterly basis to report employee wage information and remit unemployment contributions. The MDOL recommends filing these online via ReEmployME. Through this online system, you can also access account and rate history, update your account as needed, file a benefits decision appeal, and more. 

Submit by mail 

Another option is to submit unemployment insurance taxes by mail. Be sure to send it before the deadline so that it’s received on time to avoid late filing fees. You can download the UC-1 form and send it to the address below:

Maine Department of Labor
Unemployment Tax Section
47 State House Station
Augusta, ME 04333-0047

Rippling’s full-service payroll software

Want an even easier option for submitting payroll taxes? Say goodbye to payment complexities with Rippling's payroll software. Rippling handles compliance for you, accurately filing your federal and state payroll taxes on time, every time.

FAQs about Maine payroll taxes

Are there local tax laws in Maine?

No. Maine doesn’t have local taxes, so your employees only have to pay federal and state income taxes.

Can your tax returns be audited in Maine?

Yes. Your tax returns are subject to audits conducted by Maine Revenue Services, which is a standard practice in any state. Ensuring the accuracy of your returns is crucial. Maintain detailed records and adhere to state tax laws to avoid any complications.

Are nonprofit organizations subject to payroll taxes in Maine?

Nonprofit organizations in Maine are generally exempt from federal payroll taxes, such as Social Security and Medicare taxes. However, they may still be responsible for state-specific taxes. You’ll want to check with the Maine Department of Labor or consult a tax professional for detailed information.

Are you required to purchase workers’ compensation coverage in the state of Maine?

Yes. All businesses in Maine with one or more employees must have workers' compensation insurance. This applies to public and private employers. 

However, some exceptions exist: Sole proprietors, partners, LLC members, domestic workers in a private home, and agricultural or aquaculture businesses with six or fewer workers don’t require workers’ compensation insurance. 

Do you need to withhold payroll taxes for nonresidents in Maine?

It depends. If a nonresident individual works in Maine for fewer than 12 days or has a total Maine income for the year of $3,000 or less, that income isn’t taxable by Maine. However, income earned from a pass-through entity isn’t subject to this threshold and will be taxable in Maine.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.