Employers advised to take close look at 2017 state income tax withholding
Maine Revenue Services, a bureau of the Maine Department of Administrative and Financial Services, has issued an advisory clarifying the calculation of 2017 Maine income tax withholding for certain wage earners in response to questions it has received from the public.
The bureau stated Friday the amount of tax withheld, on similar wage amounts, should not increase from 2016 to 2017 for a single taxpayer earning $70,000 or less or a married taxpayer earning $140,000 or less annually.
Prior to 2017, the bureau stated, the Maine standard deduction amount was included in the withholding tax rate schedules.
Due to feedback received from taxpayers and software developers regarding the phase-out of this deduction, MRS adopted an approach to income tax withholding that is similar to the methods employed by other states, its advisory stated. When calculating income tax withholding for 2017, the standard deduction amount must be subtracted from the annualized wage amount to determine the net wages before the tax rate schedules are applied.
“As the first payrolls for 2017 are being processed and released, MRS has received dozens of calls inquiring why withholding has increased for 2017," said David Heidrich, director of communications for the Department of Administrative and Financial Services. "In the majority of cases, the employer is not subtracting the standard deduction. As a result, some Maine families are incorrectly having additional income tax withheld from their paychecks."
Despite the change in the percentage method calculation from 2016 to 2017, the amount of withholding for low- and middle-income taxpayers on similar wage amounts is the same.
Heidrich stated that Maine Revenue Services is reaching out to vendors and employers to confirm the correct withholding calculation is being used.
Information about the 2017 withholding schedules and instructions about the percentage method can be found online here.
Taxpayers who have noticed an unexpected increase in their State of Maine income tax withholding should contact their human resources office, the bureau stated in its advisory. Employers that have questions about the calculation should contact the MRS Withholding Tax Unit at (207) 626-8475 (select option 1, then option 4).
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