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Updated: July 14, 2023
The state of Maryland has a lot of nicknames. The Old Line refers to the 400 First Maryland Regiment soldiers who fought off 10,000 British soldiers during the Revolutionary War so General George Washington and his army could escape. Maryland is sometimes called “America in Miniature” because you can find just about everything America has to offer (except a desert, but we’ll overlook that) in just 10,460 square miles.
Maryland small business owners are not unlike their predecessors; they are resilient and offer a wide variety of services. But Maryland has one more nickname, the “Free State,” which refers to the way Marylanders opposed prohibition in 1919.
While we’d like to say Maryland payroll taxes mirror the state’s third nickname, unfortunately, they are far from free. Luckily, our payroll tax calculator is here to lessen the burden of calculating payroll taxes so they almost seem free.
Federal payroll taxes for Maryland employers
Small business owners across the United States are bound in unity by federal payroll taxes. So whether you’ve got friends in low places or friends just next door, all small business owners have to deal with the very same federal payroll taxes.
Though you can ask just about anyone for help, we’ve spared you the unnecessary extra effort by spelling out federal payroll taxes below. If you would like to go through each step in even more detail, check out our step-by-step guide here.
- Calculate Gross Wages:
- For your hourly employees, multiply their hours worked by their pay rate (and don’t forget to pay the higher rate for any overtime hours worked).
- For your salaried employees, divide each employee’s annual salary by the number of pay periods per year.
- Don’t forget to add in bonuses, commission, tips, etc to come up with your total gross wages.
- Calculate Any Pre-Tax Deductions:
- If your employees contribute to 401(k), HSA, small business FSA, or any other pre-tax withholding accounts, subtract their contribution from gross wages prior to applying payroll taxes.
- Deduct Federal Income Tax:
- The biggest tax of them all, federal income tax ranges from 0% to 37%. We won’t get into the nitty-gritty in this guide, but you can find all the information you need on the IRS Publication 15-T.
- Deduct (and Match) FICA Taxes:
- Social Security Tax: Withhold 6.2% of each employee’s taxable wages up until they reach total earnings of $160,200 for the year. As an employer, you will need to match this tax one-for-one.
- Medicare Tax: Withhold 1.45% of each employee’s taxable wages up until they have reached total earnings of $200,000 for the year. You as the employer will also need to match this tax. However, for salaries above $200,000, employees need to pay what’s called an Additional Medicare Tax of 0.9%. Only the employee is responsible for paying the Additional Medicare Tax.
- Pay FUTA Unemployment Tax:
- Your employees are not responsible for paying this tax. FUTA tax is the sole responsibility of the employer. You will need to pay 6% of the first $7,000 of taxable income for each employee per year, which means that your tax is capped at $420 per employee. However, if you pay your state unemployment taxes in full and on time, you are eligible for a tax credit of up to 5.4%, making your FUTA tax rate effectively 0.6%. This is a whopping 90% savings!
- Subtract Any Post-Tax Deductions:
- Most of your employees will be done by now, but some of them could be responsible for post-tax deductions such as court-ordered wage garnishments, child support, etc. If so, you will need to withhold these deductions from their paychecks.
Maryland payroll taxes
When you think of Maryland income taxes, think progressive. Tax rates range from 2% to 5.75%. Plus, employees also have to take local income taxes into consideration. Each county in Maryland charges a different rate, and they range from 2% to 5.75%.
Maryland state unemployment tax
For 2023, Maryland’s Unemployment Insurance Rates range from 1% to 10.5%, and the wage base is $8,500 per year. These rates, of course, vary by year.
If you are a new employer (congrats on starting your new business!) then you have a flat unemployment insurance rate of 2.3% or 7% for those in the construction industry. Maryland also provides a table of contribution rates for reference.
Time for some money!
In order to ensure your nickname is “World’s Best Boss” instead of “World’s Lamest Boss,” you need to be speedy in calculating each employee’s net pay so you can pass out those valuable paychecks.
But while you’re cutting those checks, make sure to set aside whatever FUTA and FICA, and SUI taxes you need to pay.
Pay quarterly federal tax filings through Form 941. FUTA also has to be paid each quarter, but you only have to fill out Form 940 once a year.
Check out the online EFTPS payment system. You can also learn more about IRS filing due dates here.
Do you have employees nearby too? These might be helpful.
Additional Maryland payroll tax resources:
As if all that isn’t enough, we’ve got even more Maryland payroll tax resources here at your fingertips.
Comptroller of Maryland | Maryland Income Tax Breakdown | Withholding Guide | Maryland Combined Registration Online Application | Unemployment Insurance Contribution Forms | More Info on Unemployment Insurance | Employer Frequently Asked Questions
More helpful payroll calculators
Maryland employers can use the calculator at the top of this page to quickly calculate their employees’ gross pay, net pay, and deductions in a few clicks (and feel confident when cutting paychecks). However, employers sometimes have little more math they need to do. For instance, do you occasionally reward top-performing employees with bonuses? In the eyes of the IRS, these payments are considered supplemental wages and require taxes to be withheld. Also, if you have workers who occasionally move on, every so often you may need to spend time figuring out their final paychecks. So, if you could use a little more help with the number crunching, check out some of the calculators listed below.