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 is refunded to the employee when they file their taxes for that year.
The American Recovery and Reinvestment Act (ARRA) of 2009 which may have reduced employee federal income tax withholding, expired effective January 1, 2011. Information concerning federal income tax withholding and applicable tables can be found in the 2011 Publication 15 (Circular E), Employer's Tax Guide. Maryland state income tax withholding rates and personal exemption amounts which became effective on January 1, 2008, remains except for income of $1,000,000 or more. The income tax rate for $1,000,000 or more is reduced to 5.5% for 2011. Information on withholding should be reviewed prior to submission of any new W-4/MW507 forms. For easy access we have provided the following articles 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 on the following pages, 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.
2011
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 5.65% of wages and a pre-tax retirement deduction for ST EMP Pension Mod 5% was used. The data are shown at three levels of income.
| |
Bi-Weekly Wage
|
| |
$1,000
|
$2,000
|
$3,000
|
| Federal Income Tax |
114.01
|
305.70
|
543.16
|
| State Income tax-including County Tax at 3.20% |
63.60
|
143.10
|
222.60
|
| Social Security Tax |
56.50
|
113.00
|
169.50
|
| Total Tax |
234.11
|
561.80
|
935.26
|
| % of Wage |
23.41%
|
28.09%
|
31.18%
|
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 5.65% of wages and a pre-tax retirement deduction for ST EMP Pension Mod 5% was used. The data are shown at three levels of income.
| |
Bi-Weekly Wage
|
| |
$1,000
|
$2,000
|
$3,000
|
| Federal Income Tax |
7.67
|
121.30
|
263.78
|
| State Income tax-including County Tax at 2.56% |
31.48
|
104.58
|
177.68
|
| Social Security Tax |
56.50
|
113.00
|
169.50
|
| Total Tax |
95.65
|
338.88
|
610.96
|
| % of Wage |
9.57%
|
16.94%
|
20.37%
|
| 
