Maryland Employer Withholding Guide - 2012 Page 5
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36All records should be retained for a period of at least three
3. PAYMENTS SUBJECT TO
years after the date the tax to which they relate became due or
WITHHOLDING
the date the tax was paid, whichever is later.
What are taxable wages?
Are there penalties for failing to comply?
For withholding purposes “wages” means all remuneration
Yes. Any employer who fails to file returns or remit amounts
for services performed by an employee, including the cash value
collected as required is subject to a penalty not to exceed 25%
of all remuneration paid in any medium other than cash.
of the unpaid tax.
(Exceptions are listed later in this section.) These exceptions are
similar to the exclusions for federal withholding purposes, so
If an employer pays tax, interest or penalty by check (or
that in most instances wages subject to federal withholding will
other instrument) that is not honored by the bank on which it
also be subject to Maryland withholding.
is drawn, the employer shall be assessed a service charge of
$30.
Taxable “wages” include all employee compensation, such as
salaries, fees, bonuses, commissions, vacation allowances, back
pay and retroactive increases.
Remember!
Wages paid in any form other than money are measured by
The money you withhold from your employees is
their fair market value. These include lodging, meals, property
held in trust for the State of Maryland.
or other considerations for personal services.
Agricultural wages subject to Social Security (FICA) tax are
subject to Maryland withholding tax. Tips and gratuities paid to
an employee by a customer are also subject to withholding tax
Civil and Criminal Penalties
in the same manner as reported for federal purposes.
Withholding is not required for the following:
Civil Penalties
• D omestic service in a private home, local college club or
➤ Suspension or revocation of all business licenses
local chapter of a college fraternity or sorority.
issued by the State to the employer for willful failure
• S ervices performed by a duly ordained, commissioned
to withhold or pay income tax to the Comptroller.
or licensed minister of a church in the exercise of his
➤ Imposition of a $50 penalty for each violation for
ministry or by a member of a religious order in the
willful failure to provide an income tax statement or
exercise of duties required by such order.
for providing a false withholding statement.
• N onresident individuals employed as seamen upon vessels
Also, for willful non-compliance with a wage lien, the
engaged in oceanic and foreign trade or commerce while
employer will be personally liable for excess wages
such vessels are within any of the ports of Maryland.
paid to an employee subject to the lien. In addition, all
• S ingle and student employees whose total income
unpaid withholding tax, interest and penalties, consti-
will be less than the minimum filing requirement.
tute a lien in favor of the State of Maryland, extending
(See page 9.)
to all real and personal property belonging to the
• e mployees paid at a rate of less than $5,000 annually.
employer.
Are nonresident employees subject to withholding?
Criminal Penalties (Upon Conviction)
A nonresident is not subject to tax if:
➤ Not to exceed ten thousand dollars ($10,000) or
• H is income consists entirely of wages or other compensa-
imprisonment not exceeding five years or both, for:
tion for personal services performed in Maryland; and
• Willful failure to file a return.
• T he state of residence has agreed in writing to allow a
• Willful failure to withhold the required tax.
reciprocal exemption from tax and withholding for each
other’s residents.
• Willful failure to pay the tax withheld to the
Comptroller.
As a result of this provision, the residents of a number of
states are exempt and no withholding of Maryland tax is to be
➤ Not to exceed five-hundred dollars ($500) or
made by the employer. Under such circumstances, it is neces-
imprisonment not exceeding six months or both, for:
sary that Maryland Form MW507, Employee Maryland
• Willful failure to provide a copy of withholding
Withholding Exemption Certificate, be filed with the employer
tax statement.
in which the employee certifies that he resides within one of the
• Providing a false or fraudulent withholding tax
reciprocal states listed on the form.
statement.
Nonresidents from states that have no income tax law or have
• Failure to provide information on a withholding
no written reciprocal income tax agreement with this state are
certificate or for filing a false certificate.
subject to Maryland tax and withholding must be made from
salaries and wages for services performed in Maryland.
• Willful failure to pay to the Comptroller salary
wages or compensation subject to a salary lien.
Withholding is also required in a sale or exchange of real
property and associated tangible personal property owned by a
nonresident or nonresident entity.
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