Employer’s Guide to Maryland’s Unemployment Insurance Tax

Everything employers need to know about paying Maryland unemployment insurance taxes.

If your small company employs people in Maryland, you must pay the Maryland unemployment insurance (UI) levy. The UI tax pays for unemployment insurance programs for qualifying workers. In Maryland, the state unemployment insurance levy is simply one of numerous taxes that companies must pay.

Varied states have different UI tax policies and rates. Here are the fundamentals of Maryland’s UI tax.

Become a member of the Department of Labor, Licensing, and Regulation.

As an employer, you must open a Maryland Unemployment Insurance Tax Account with the Maryland Department of Labor, Licensing, and Regulation (DLLR). You create your account by registering your company with the Maryland Comptroller’s Office using Form CRA, Combined Registration Application. You should register your company within 20 days of its inception. Once registered, the state will issue you a CR number, which is a number used by Maryland to identify your firm as an employer for tax reasons.

Form CRA may be submitted online, via ordinary mail, or by fax. If you register online using Maryland’s bFile system, you will instantly get a confirmation number and your account details will be delivered to you. If you want to register on paper, you may get a copy of Form CRA from the Comptroller’s website’s business tax forms area. The downloaded version provides detailed instructions for submitting via fax or normal mail. The Comptroller does not charge a fee to register your company.

You will need a federal employer identification number to set up your Maryland UI tax account (EIN). You may get an EIN by visiting IRS.gov. In most cases, if you apply online, you will obtain your EIN very instantly.

UI Tax Liability Regulations

Unlike in other jurisdictions, Maryland law does not specify a minimum wage level that must be provided for an employer to be responsible for UI tax. Instead, the DLLR seems to anticipate that if an employee is present, the employer will be held accountable. Typical for-profit businesses are typically responsible for federal unemployment taxes under the Federal Unemployment Tax Act (FUTA) if, during the current or prior calendar year, they either:

paid salaries of $1,500 or more in each calendar quarter, or had one or more workers at any time in each of twenty calendar weeks.

Different restrictions apply to agricultural laborers, domestic (in-home) workers, and employees of certain (but not all) non-profit organizations, which are not included here.

Wage Structure and Tax Rates

Maryland has just mandated UI taxes on the first $8,500 of each employee’s salary. However, this figure, known as the taxable wage base, is subject to change.

The UI tax rate for new employers may also alter. The recent new employer rate was 2.6%. Established employers face a reduced or higher charge depending on their “experience.” This includes, among other things, whether your company has ever had workers file claims for state unemployment benefits.

One piece of good news is that state UI tax payments are often deductible from FUTA taxes.

File UI Tax Reports and Payments on Time

UI tax reports (also known as returns) are required in Maryland by the end of the month after the conclusion of the quarter. Payment is needed together with the reports. In other terms, the following are the UI tax due dates:

If the due date occurs on a Saturday, Sunday, or state holiday, it is moved to the next working day.

Previously, you may mail in your quarterly Form DLLR/DUI 15, Contribution Return, and Form DLLR/DUI 16, Employment Wage Report. However, since April 2016, Maryland UI tax reports must be filed online. (Alternatively, you may utilize a third-party payroll provider.) The DLLR invites you to utilize their web-based WebTax Application. The DLLR does, however, provide an E-Pay Reporting system that lets you to submit quarterly wage information, but not contribution returns, through email. Employers will no longer receive paper Quarterly Contribution Reports from the DLLR.

You may make payments in any of the following methods if you file with WebTax:

via E-Check (free) at the time of filing, by credit card (the greater of $1.00 or 2.5% of the tax payable) at the time of filing, or by paper check written to P.O. Box 17291, Baltimore, MD 21297-0365 at the time of filing.
by E-Check (free) after the filing, directly at the provider’s site at Official Payments’ E-Check web site, or by credit card (the greater of $1.00 or 2.5% of the tax due) after the filing, directly at the provider’s site at Official Payments’ Credit Card Web site, or by ACH Credit after obtaining DLLR approval by using the Electronic Funds Transfer Guide.

Even if no salaries are received in a quarter, the Contribution and Employment Report must be submitted. The filing obligation stops when the Division of Unemployment Insurance sends you a letter confirming that your unemployment insurance account has been closed.

Make a Public Notice (Poster)

You must display a notification (poster) about state unemployment insurance in a visible location for all workers. The poster gives basic information on filing a claim for unemployment insurance benefits, including who is eligible and who to contact. From the employment related posters part of the DLLR website, you may obtain a poster that fits the legal criteria (Form DLLR/OUI 238, Employees Rights Under Maryland’s Unemployment Insurance Law).

Employees should not be misclassified as independent contractors.

Employers that hire independent contractors rather than employees are exempt from the UI tax. It is critical, however, that you should not misclassify an employee as an independent contractor. If you misclassify an employee, you may face penalties or fines.

Using Payroll Service Providers

You may decide that it is easier to delegate payroll obligations, including UI taxes, to an outside payroll agency. If this is the case, bear in mind that your company, or even you personally, may be held directly liable for errors made by an outside payroll firm.