Prompt Submission of Employee W-4

Prompt submission of the “Form W-4” is to the advantage of all employees.  In the absence of a Form W-4, the federal and state tax laws and regulations mandate maximum income taxes be withheld as follows:

• Federal maximum income tax is - single status with zero allowances (exemptions).
• Maryland State maximum income tax is - single status with one allowance (exemption).
• County Tax at maximum rate is currently 3.20 %, added to the State tax

Upon receiving the W-4 form from the employee the withholding status will be changed accordingly for future pays.  Tax regulations preclude an employer from making retroactive adjustments to the taxes already withheld.  Any over-payment of taxes are refunded to the employee when they file their taxes for that year.

Please be reminded that during the 2007 Special Session, the Maryland General Assembly enacted the Tax Reform Act of 2007 which altered income tax rates and withholding percentages as of January 1, 2008.  This information should be reviewed prior to submission of any new W-4/MW507 form.  A complete explanation of the changes can be found on our web site.

Accuracy on the W-4 gives the employee a better match between taxes withheld and taxes that may be due at year end.  As demonstrated in the following examples, maximum income tax coupled with social security taxes results in a significant tax withholding obligation for employees.  Therefore, newly hired employees or employees with a changed financial status should promptly complete and submit their Form W-4/MW507 to the Central Payroll Bureau.  Submission of W4/MW507 updates may be accomplished electronically by using our online system POSC.  Forms may still be downloaded for mailing.

Employees should also be reminded that our Net Pay Calculator is a great tool for estimating withholding tax.  We recommend that employees use a copy of their current wage statement (pay stub) information, to help guide them through its use.

2008
Employee Taxation

Scenario #1 – Employee fails to submit a Form W-4 and maximum taxation is invoked.  Employee is taxed as Single with zero allowances for Federal Income Tax; one allowance for State Income Tax and a 3.20% County Income Tax rate.  The tax for Social Security purposes is 7.65% of wages and a pre-tax retirement deduction for ST EMP ALT PEN 4% was used.  The data are shown at three levels of income.

Scenario #2 – Employee submits a Form W-4 which shows that the employee is Married, claiming four allowances for both Federal and State income tax purposes.  The County of Record is described as Anne Arundel (a 2.56% County), and the address verifies that claim.  Employee is taxed as Married with four allowances for Federal and State income Tax and a 2.56 % County Income Tax rate.  The employee is taxed for Social Security purposes at 7.65% of wages and a pre-tax retirement deduction for ST EMP Pension Mod 4% was used.  The data are shown at three levels of income.

Source: Central Payroll Bureau