Maryland Filing Status

In the 2007 Special Session, the Maryland General Assembly enacted the Tax Reform Act of 2007.  As part of that package, income taxes / withholding allowances were altered, and became effective January 1, 2008.

The combined W4/MW507 withholding allowances certificate has been redesigned to allow employees a choice between new State of Maryland withholding categories:

• Withholding as a Single Rate, or
• Married (surviving spouse or unmarried Head of Household) Rate or,
• Married but withhold at Single Rate

Prior to January 1, 2008 Maryland Residents did not have different withholding choices under Maryland Law.  Since there was no choice for Maryland withholding offered, the payroll system defaulted all employees to a 'S' for single filing status.

Effective 1/1/2008, we have displayed the 'filing status' for Maryland residents on the pay stub.  This new information can be located on the upper right hand side of the pay stub, directly under the box containing the 'Federal Withholding information'.  Look for 'MD Filing Status: Single'.

With that said, employees will surely have questions like 'Do I or Don't I' need to file a new combined W4/MW507 withholding certificate.  Here are some basic tips that should help guide their answer:

• Employees filing as 'Single', with a taxable income equal to or less than $150,000 will not need to submit a new MW507/W4, as their tax rate will not change.

• Employees eligible to file as Joint, or Surviving Spouse, or Head of Household with a taxable income more than $150,000 will need to submit a new combined W4/MW507 to avoid being over withheld (remember everyone is defaulted as single which in this case would withhold using a higher rate).

Additional details on the Tax Reform Act of 2007 (including tax rates and rate brackets) can be found by visiting:

http://www.marylandtaxes.com/special_session/EmployerWithholdingTaxAlert.pdf

Employees are encouraged to visit the above web site and review all information available before deciding to switch their withholding information.  If after review, employees decided to switch their filing status from 'single' to 'married', then of course the check stub message would change from 'MD Filing Status: Single' to 'MD Filing Status: Married'.