18-125-803 Me. Code R. § 05

Current through 2024-51, December 18, 2024

Section 125-803-05 - Withholding from non-wage payments

A.Generally. Except for income paid to a tribal member who resides on tribal land that is derived from or connected with sources on tribal land (as determined by 36 M.R.S. §5132 and MRS Rule 825) where no withholding is required, withholding from non-wage payments is determined in accordance with subsections B through F of this section.

B.Flat rate withholding. Non-wage payments subject to flat rate federal withholding are subject to Maine withholding at a flat rate of five percent. Payments subject to flat-rate withholding include, but are not limited to, the following:

1. Reportable payments that are subject to federal backup withholding pursuant to Code § 3406;

2. Wages, interest, dividends, rent, and other payments to nonresident aliens of the United States that are subject to federal withholding under Code § 1441;

3. Payments to foreign corporations that are subject to federal withholding under Code § 1442;

4. Effectively connected income of a foreign partner when subject to federal withholding under Code § 1446;

5. Amounts received on the disposition of a Maine real property interest by a foreign person when subject to withholding under Code § 1445; and

6. Non-periodic distributions from certain retirement plans, including Individual Retirement Accounts (IRAs), employer-sponsored deferred compensation plans, and self-employed pension plans when subject to federal withholding.

C.Withholding from periodic retirement payments. Maine income tax withholding from periodic retirement payments that are treated as wages for federal income tax withholding purposes pursuant to Code § 3405(a) is calculated in the same manner as Maine income tax withholding from wages using the methods described in Section .04(A) above.

D.Federal exemption from withholding. Recipients of periodic retirement payments who elect to be exempt from federal income tax withholding are exempt from Maine income tax withholding.

E.Election to be exempt from withholding. Even if the periodic payments are subject to federal income tax withholding, recipients may elect to be exempt from Maine income tax withholding, provided the recipient certifies that the recipient had no Maine income tax liability for the prior calendar year and reasonably expects to have no Maine income tax liability for the current calendar year. The election must be made on Form W-4ME and remains in effect until the recipient generates a Maine income tax liability.

F.Withholding from gambling winnings. Payments of certain gambling winnings when subject to federal withholding under Code § 3402(q) are subject to Maine withholding at the highest marginal tax rate under 36 M.R.S. §5111 applicable to the calendar year during which the winnings are paid plus any other tax applicable to the winnings under 36 M.R.S. Part 8 (Income Taxes). For calendar year 2023, the withholding rate is 7.15%.

18-125 C.M.R. ch. 803, § 05