Things You'll Need
Calculate state and local income tax. The employee's state income tax withholding depends on her filing status, number of exemptions (as stated on her Maryland Withholding Exemption Certificate --- MW 507 form) and the Maryland withholding tax tables. The Comptroller simplifies the calculation process by including the state income tax and local income tax percentage in the withholding tax tables. Use the table that corresponds with the employee's locality.
Do not withhold Maryland income tax if the employee claims exempt on her MW507. The employee is exempt if last year he had a right to a full refund of all Maryland income tax withheld because he did not owe any tax and if in the present year he expects a full refund of income taxes withheld because he does not anticipate owing any Maryland income tax.
Do not withhold Maryland income tax if the employee lives in Washington D.C. Pennsylvania,
Virginia or West Virginia but works in Maryland. Maryland residents who work in these four states are required to file their state income tax with Maryland. Delaware employees who live in Maryland are required to file their tax return in both states.
Use the IRS Circular E's withholding tax tables and the employee's filing status and allowances, as shown on his W-4 form, to figure federal income tax. The employee is excluded from federal income tax if he claims "exempt" on his W-4 and meets the following conditions: in the last year he was entitled to a full refund because he did not owe any federal income tax, and in the present year he expects a full refund because he does not foresee owing any federal income tax.
Figure Social Security tax at 6.2 percent of gross wages, up to the annual wage maximum of $106,800; and Medicare tax at 1.45 percent of all gross compensation.