If your small business has employees working in Maine, you’ll need to pay Maine unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In Maine, state UI tax is just one of several taxes that employers must pay.
Different states have different rules and rates for UI taxes. Here are the basic rules on Maine’s UI tax.
As a Maine employer subject to UI tax, your small business must establish a Maine UI tax account with the Maine Department of Labor (DOL). You set up your account by registering your business simultaneously with the DOL and Maine Revenue Services (MRS) either online or on paper. To register online, use the Maine Employer Registration Internet System (MERIS) on the DOL website. MERIS allows you to also register for a withholding tax account number, but only if you are also registering for a UI tax account. You can also use the online system to register for sales and service provider taxes. To register on paper, use the state’s Registration Form (Maine Revenue Services and Department of Labor Application for Tax Registration). Blank forms, including complete instructions, are available for download from the Tax Publications and Forms section of the DOL website. There is no fee to register your business for UI tax purposes.
Note: To establish your Maine UI tax account, you’ll need a federal employer identification number (EIN). You can apply for an EIN at IRS.gov. Generally, if you apply online, you will receive your EIN immediately.
As a Maine employer, you generally are liable for the state’s UI tax if you:
Different rules, not covered here, apply to agricultural workers, domestic (in-home) workers, and employees of some (but not all) non-profit organizations.
For many years, Maine has required UI taxes on the first $15,000 of each employee’s wages. However, that amount, known as the taxable wage base, could change.
The UI tax rate for new employers, which recently has been 2.60%, also is subject to change. Established employers are subject to a lower or higher rate than new employers depending on “experience.” This means, among other things, whether your business has ever had any employees who made claims for state unemployment benefits.
One piece of good news is that state UI tax payments generally can be credited against your federal taxes under the Federal Unemployment Tax Act (FUTA).
In Maine, UI tax returns and payments are due 30 days after the end of each calendar quarter. In other words, UI tax returns are due according to the following schedule:
If the payment is due on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day.
You must file UI tax returns and payments electronically unless you’ve been granted a hardship waiver by the DOL (not covered here). To file electronically, you can use the Maine Employers Electronic Tax Reporting System(MEETRS). You can also file electronically using the MRS Internet filing program (Maine I-file).
If you pay with a check you’ll need to print out and use a payment voucher. Larger employers are required to pay by Electronic Funds Transfer (EFT). Other employers can pay electronically via EFT or Automated Clearing House (ACH). You can make payments online using MRS’s EZ Pay system.
You are required to post a notice (poster) regarding state unemployment insurance in a conspicuous place for all employees. The poster provides basic information about how an employee can file a claim for unemployment benefits, including the basic eligibility requirements. You can download a poster that meets the legal requirements (Form Me. I-1) from the Tax Publications and Forms section of the DOL website.
Employers who use independent contractors rather than hiring employees are not subject to the UI tax. However, it’s important that you do not misclassify an employee as an independent contractor. If you do misclassify an employee, you could be subject to penalties or fines.
You may decide that it’s easiest to hand over responsibility for payroll, including UI taxes, to an outside payroll service. If so, keep in mind that your business, or even you personally, may still be held directly responsible for mistakes made by an outside payroll company.
This article touches on only the most basic elements of Maine UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and DOL websites for the latest information. In addition to state UI tax, employers have other responsibilities not covered in this article such as federal UI tax, state and federal withholding taxes, and required reporting of new hires. You also can get more information about other small business tax issues in other articles on Nolo.com.