Home → Frequently Asked Questions
01. What is a Service Provider Tax?
November 30, 2012
The Service Provider Tax is not levied on the consumer, but is imposed on the providers of certain identified services provided in Maine. The tax is imposed on the providers of:
• extended cable and satellite television services • fabrication services • rental of video media and video equipment • rental of furniture, audio media and audio equipment pursuant to a rental-purchase agreement • telecommunications services • installation, maintenance or repair of telecommunications equipment • ancillary services • private non-medical institution services • community support services for persons with mental health diagnoses • community support services for persons with mental retardation or autism • home support services
The law allows the provider to pass the tax on to the consumer, but only if it is separately stated and identified as “service provider tax”.
02. How do I register to get a tax number?
November 30, 2012
Return to the Home page by clicking on the gold seal in the upper left hand corner.
The Application for Tax Registration is found on the right hand side of the Home page under Related Links.
Choose the Online link to complete the application electronically. Scroll to the bottom of the page to get started. Check the appropriate box for the type of registrations you want to complete. Click GO. You must fill in all fields that have an *(asterisk).
Choose the PDF link to print the application and either fax or mail it back to the Central Registration Section. The mailing address and fax number are on the front page of the application.
03. Do I need a Federal Employer Identification Number (EIN) to register for a tax number? How do I apply for Federal Employer Identification number (EIN)?
Any entity other than a sole proprietor will need an EIN to register for a tax number.
Employer Identification Numbers are issued by the I.R.S. You can access their home page at www.IRS.Gov. Enter SS-4 under search. You will need to select the SS-4 form and/or instructions.
You should read the instructions before filling out the application.
04. Why didn’t I receive a Resale Certificate?
To qualify for a resale certificate, a retailer must have an active account and report more than $3,000 of gross sales per year. Maine Revenue Services annually reviews all active sales tax accounts and reissues expiring resale certificates to those retailers that qualify.
If you do not qualify for a resale certificate, sales tax must be paid to your vendor on all items purchased for resale. A credit can be taken on your next sales tax return on the line that reads, “Credit for Sales Tax Paid on Goods Resold”. Enter the amount of sales tax paid.
If you believe your business qualifies for a resale certificate and one has not been issued to you, contact us at (207) 624-9693.
05. How and when do I report tax due?
November 30, 2012
Tax returns are due on the 15th day of the month following your reporting period. If you file your returns electronically and have entered your email address in the Business Information section of the IFile program, you will receive an e-mail reminder before the next return is due.
If you have a waiver to file paper returns, a tax return will automatically be sent to you for each reporting period about one month before the return is due.
06. Can I file my tax return over the internet?
November 30, 2012
Please go to the Electronic Services page at: http://www.maine.gov/revenue/netfile/gateway2.htm
Select Sales/Use or Service Provider Tax I-File. This will take you into the internet informational page. First time filers should read the informational file. After reading the informational file, select Next to go to the registration page. Enter your account number and password. First time users will be required to enter a six character password of your choice and complete the Business Information section. Click Next to Select an Activity. Choose File a Return and click Next. Enter the filing period start date and click Next. Continue to follow the screen prompts until you see a Completed Return with two confirmation numbers, one for the return and one for the payment.
07. I need to file an amended tax return. Can this be done on-line?
November 30, 2012
Unfortunately, amended returns cannot be filed on-line. To file an amended return: Using a blank tax return, enter all the information as it should have been filed for that period. Make sure to enter your tax number and the period you are amending. Print amended in bold letters at the very top of the return.
If you do not have a blank tax return, on the left side of this page under Bureau Information, select Sales/Use & Service Provider Tax. Links to the returns are found on the right hand side under Quick Links.
08. I am out of business. How do I close my tax account?
November 30, 2012
To close a tax account, a final return will have to be filed.
If you are filing on line, check the out of business box in the change business information section of the return and provide the effective date the business closed.
If you file paper returns, check the out of business box in the upper right hand corner of your final tax return. Enter the effective date the business closed.
Please return any certificates.
09. Are there any penalties or interest if I file my returns late?
November 30, 2012
There is a failure to file penalty of $25.00 or 10% of the tax due whichever is greater, if the return is not postmarked or electronically filed by the due date.
There is a failure to pay penalty of 1% per month or for any part thereof, if the payment is not postmarked or electronically paid by the due date.
Interest is compounded monthly or for any partial month that a balance remains unpaid.
The interest rate is established January 1 of each calendar year. To see the current interest rates go to: http://www.maine.gov/revenue/incomeestate/interest.htm
10. Why has my filing frequency changed?
Maine Revenue Services does an annual look back reviewing the tax liabilities of all active accounts. Filing frequencies are adjusted as necessary based on that look back analysis. Taxpayers are notified of the change in status.
Generally, every retailer with average liability of $600 or more per month must file a monthly tax return. Retailers with smaller tax liabilities may qualify to file on a less regular basis.
Retailers with average tax liability of $100-$599.99 per month may file quarterly returns.
Retailers with average tax liability of less than $100 per month may file semi-annual returns.
Retailers whose average tax liability is less than $50 per year may file an annual return.
Seasonal businesses may have different filing requirements.
Rule 304 establishes required filing frequencies for all sales and use tax return filers. Rule 304 may be viewed on-line at: http://www.maine.gov/revenue/rules/homepage.html
11. Can I change my business and/or banking information (mailing address, email address etc.) on-line?
November 30, 2012
Please go to the Electronic Services page at: http://www.maine.gov/revenue/netfile/gateway2.htm
Select Sales/Use or Service Provider Tax I-File. Enter your account number and select Change Business Information or Change Banking Information from the select activity box.
12. Are labor charges subject to tax?
Most labor charges, if stated separately, are not subject to tax. If not separately stated, the total amount of the sale will be taxable.
The labor for the installation, maintenance and repair services to telecommunications equipment and labor involved in fabrication services are subject to the service provider tax. (See Question # 1 for a complete list of services.)
13. Are shipping charges, freight or transportation charges subject to tax?
Transportation charges are not subject to tax if all three of the following requirements are met:
- Shipment is made directly to the purchaser, and
- The charges are separately stated, and
- The transportation occurs by common carrier, contract carrier, or U.S. mail.
Please note: If transportation charges are combined with other charges, such as “shipping and handling”, this does not qualify as “separately stated”. The charges are considered as part of the sale price and subject to tax.
14. Do I need to charge Maine sales tax to people purchasing my products from out of state?
There would be no Maine sales tax on sales where the seller arranges for shipment directly out of state or out of the country. A copy of the sales slip and shipping invoice will need to be retained showing that sale was shipped directly out of state or out of the country.
Any sales shipped within the State of Maine would be taxable except sales to tax exempt organizations or sales for resale. For these types of sales you will need to retain a copy of the permanent exemption certificate or the resale certificate for your files.
15. Are sales over the Internet taxable?
Sales made over the Internet are subject to the same sales tax application as mail order sales. If the seller is required to be registered to collect Maine Sales Tax and the product is shipped to a Maine address, the seller should collect the tax on the sale. If the seller does not collect the sales tax, the purchaser would owe a Maine Use Tax, payable directly to Maine Revenue Services, based on the sale price of the goods. Most Maine taxpayers report this use tax liability on their Maine 1040 - provided the purchase of a single item is less than $5,000.
Individuals making purchases of single items costing more than $5,000 are required to file an Individual Use Tax return directly with Maine Revenue Services by the 15th of the month following the month of the purchase. The following link will take you to the individual use form. http://www.maine.gov/revenue/salesuse/IUse.pdf
16. Can I sell a boat, motor and trailer to a person that is not a resident of this state and use the Affidavit for Immediate Removal of a Watercraft?
The sale of a watercraft (and the motor if sold as a package) may be sold tax exempt as long as the purchaser and the seller complete an Affidavit of Exemption for Immediate Removal for a Watercraft Sold to a Legal Resident of Another State.
There is no immediate removal exemption for a trailer. Sales tax would be due on the retail selling price of the trailer, even if sold as a package with the boat and/or motor.
17. What is use tax?
Use Tax is a substitute for sales tax. All states which have a sales tax also impose a use tax. The use tax rate is the same as the sales tax rate. Use tax applies when sales tax has not been charged by the vendor. Common examples are items purchased from outside the State of Maine or over the internet.
For more information on use tax or to download a form to report an individual use tax liability, go to the following link on our Use Tax Page:
Businesses can report use tax liabilities directly on their sales tax return. If your business is not required to be registered to collect sales tax, you can register for a use tax only account. See How do I register to get a tax number? for details about opening a use tax account.
Individual Income Tax
01. How can I tell if I am a resident of Maine?
January 1, 2005
For income tax purposes, you are a resident of Maine if: 1) You are domiciled in Maine, or 2) you are not domiciled in Maine for the entire tax year, but have a permanent home in Maine for the entire tax year and spend more than 183 days of the tax year in Maine. If you are in the military, your home of record usually is your legal residence. EXCEPTION: If you qualify as a "Safe Harbor" resident, you will be treated as a nonresident for Maine income tax purposes. For more information on "safe harbor" residency, see the Guidance to Residency "Safe Harbors" pamphlet available at http://www.maine.gov/revenue/incomeestate/guidance/.
If you are domiciled in Maine, you remain domiciled in Maine until you relinquish your domicile here and establish a domicile elsewhere.
If you are domiciled in Maine, the number days you spend in Maine or outside Maine does not change the fact that your are a resident of Maine for income tax purposes. It is possible for someone who is domiciled in Maine to be outside the state for the entire year and still be a resident of Maine.
If you are domiciled in another state, but have a permanent home or apartment in Maine for the entire tax year, you are a resident of Maine for income tax purposes if you spend more than 183 days in Maine.
Maine Revenue Services reviews such indicators as residential property ownership, driver’s license, vehicle registrations, professional licenses, job requirements, hunting and fishing licenses, and voter registration in determining a person’s domicile; however, these may not be the only factors considered.
For more information, refer to the Guidance to Residency Status and/or the Guidance to Residency "Safe Harbors" pamphlets. You can request a copy of the pamphlet(s) by visiting our web site at http://www.maine.gov/revenue/incomeestate/guidance/ or calling our forms order line at (207) 624-7894.
02. How can I get an extension to file?
If you are unable to file your return by the original due date, Maine will allow an automatic six-month extension of time in which to file your return. Requests for additional time beyond the automatic six-month extension to file must be submitted in writing prior to the expiration of the six-month period. Generally, the total extension period cannot exceed eight months. The automatic extension is only effective if the return is filed within the six-month period.
A penalty for failure to file will not be assessed if you file your return by the extended due date. However, to avoid penalties for late payment, you must pay at least 90 percent of the tax you owe by the original return due date. Please remit your estimated tax payment with the extension payment voucher found in the booklet. Interest will be charged on any unpaid tax balance remaining after the original return due date regardless of any extensions to file.
03. Do I file my return even though I do not have the money to pay?
If you cannot pay all of your taxes by the original due date, you should still file your return on time. It is important to pay as much money as you can by the due date. Late payment penalties and interest are charged on any unpaid tax balance. By paying as much as possible by the original due date, you will minimize these charges.
04. I did not live in Maine for the entire year. Do I have to file a return?
If you moved in or out of Maine during the tax year, you will generally have to file an income tax return with Maine. Anyone who is a resident of Maine for any part of the tax year, and has taxable Maine source income on their federal return, must file a Maine return. Anyone who is not a resident of Maine, but performs personal services in Maine for more than 10 days, must file a Maine return regardless of the amount of income earned in Maine and regardless of when the compensation is received.
If you established or relinquished your Maine residency during the tax year, you are a part-year resident for income tax purposes, regardless of when you changed your residency. For example, if you were a Maine resident but moved to California on November 1st and became a California resident, you would be a part-year resident of Maine for that year.
Part-year residents, nonresidents and "safe harbor" residents must file a Maine return based on their total federal adjusted gross income. Your tax liability is first calculated as if you were a resident of Maine for the entire year. You are then allowed to calculate a nonresident credit on Maine Schedule NR that will reduce your Maine tax by the portion of the tax that is related to the income you earned outside the state while a nonresident or "safe harbor" resident of Maine.
For more information, refer to the Guidance to Residency Status and/or the Guidance to Residency "Safe Harbor" pamphlets. You can download copies of the pamphlets from our web site at http://www.maine.gov/revenue/incomeestate/guidance/ or request copies by calling our forms order line at (207) 624-7894.
05. I forgot to attach my W-2s when I mailed my return. What do I do?
Do not send the W-2s to Maine Revenue Services until we ask you to do so. We will send you a notice requesting legible copies of the W-2/1099 forms. When you get this notice, attach your W-2s to the notice and return it to Maine Revenue Services. We will allow the withholdings and adjust your account if your W-2s show that you paid Maine withholdings.
06. I haven’t received a W-2. What do I do?
Generally, employers must provide their employees with a W-2 on or before January 31st. If it is after January 31st and you have not received your W-2, you should contact your employer to find out if and when it was mailed.
If you employer has gone out of business and filed bankruptcy, you should contact the bankruptcy court in your area. There may be an attorney assigned to handle the bankruptcy proceedings, and the attorney should be able to supply you with a W-2.
If you cannot get a copy of your W-2, you can send a copy of the federal Form 4852, Substitute Withholding Statement, with your paycheck stubs when you file your Maine return. You must request federal Form 4852 from the IRS. Complete Form 4852 with your Maine information and attach it to your return.
07. What is the Pension Benefits Income Deduction?
For tax years beginning on or after January 1, 2000 each recipient of certain pension benefits may deduct up to $6,000.00 of pension income that is included in federal adjusted gross income. For tax year 2000, the $6,000.00 cap must be reduced by all taxable and nontaxable social security or railroad retirement benefits received. Deductible pension income includes state, federal and military pension benefits as well as retirement benefits received from plans established and maintained by an employer for the benefit of its employees such as: qualified pension plans, including qualified SIMPLE plans; employee annuities; and eligible deferred compensation plans from state and local government or tax exempt organizations.
For tax years 2001 or later, military pensions are fully deductible up to $6,000.00 per recipient, and do not have to be reduced by social security or railroad retirement benefits received.
Married taxpayers who elect to file a joint return may have a total deduction of up to $12,000.00.
You must complete the Worksheet for Pension Income Deduction found in your income tax booklet, and submit the worksheet with your income tax return to claim a Pension Income Deduction.
08. I receive Social Security Benefits, do I qualify for the Pension Benefits Income Deduction?
Each recipient of an eligible pension must reduce the benefits deduction by all taxable and nontaxable social security or railroad retirement benefits received. If the total social security or railroad retirement benefit is less than $6,000.00 you will qualify for a portion of the deduction. If your total benefit exceeds $6,000.00, you do not qualify for the deduction.
For tax years 2001 or later, military pensions are fully deductible up to $6,000.00 per recipient, and do not have to be reduced by social security or railroad retirement benefits received.
You must complete the Worksheet for Pension Income Deduction found in your income tax booklet, and submit the worksheet with your income tax return to claim a Pension Income Deduction.
09. How do I complete Schedule NR?
You must file a Maine long form to get a nonresident credit on Schedule NR.
Read the instructions for Schedule NR carefully. Read the specific instructions for each line on the schedule before you complete that line on the form.
You should keep the following points in mind when completing Schedule NR:
• Only part-year residents, nonresidents and "safe harbor" residents of Maine may claim a credit from Schedule NR. Residents of Maine should not file Schedule NR.
• Any income you received as a resident of Maine is Maine income, regardless of where it was earned.
• Any income earned by a nonresident or "safe harbor" resident of Maine within the state is Maine income.
o Nonresidents and "safe harbor" residents of Maine generally do not have to include income from most pensions, annuities, or interest as Maine income, even if the income is from Maine banks or is from a previous employer within Maine.
o Wages, business income, and capital gains from sources within Maine are Maine income even if you received the income as a nonresident.
o All part-year residents, nonresidents and "safe harbor" residents must send a copy of their federal return with their Maine return.
Additional written instructions are available to help you complete Schedule NR at http://www.maine.gov/revenue/incomeestate/guidance/ScheduleNRGuide11.pdf
10. How do I complete Schedule NRH?
You must file a Maine long form if you use Schedule NRH.
Read the instructions for Schedule NRH carefully. Read the specific instructions for each line on the schedule before you complete that line on the form.
If you filed a married joint federal income tax return, but you and your spouse have different residency status, you may be able to use Schedule NRH. Also, if you and your spouse are both nonresidents or "safe harbor" residents of Maine, but only one of you has income from Maine, you may use Schedule NRH.
By filing Schedule NRH, you are choosing to be taxed as a single individual on your state return, even though you filed a joint federal return.
You should keep the following points in mind when completing Schedule NRH:
• Do not include your spouse’s name or social security number on the front of your return.
• Check the filing status box for Single. Do not check the box for Married Filing Separate, Married Filing Joint, or Head of Household.
• Check the residency status that applies to you. For more information regarding residency status, see the Guidance to Residency Status and/or the Guidance to Residency "Safe Harbors" pamphlets. You can download copies of the pamphlets from our web site at http://www.maine.gov/revenue/incomeestate/guidance/ or request copies by calling our forms order line at (207) 624-7894.
• Do not claim your spouse’s personal exemption. The total number of exemptions on your Maine return should be one less than the total number of exemptions shown on your married joint federal return.
• Do not enter your spouse’s income under Column C. Column A is not designed to equal the total of Column B and Column C.
• Nonresidents and part-year residents are the only people who may enter anything in Column C. Residents of Maine should leave Column C blank.
• If you have any tax additions or tax credits, such as a child care credit, complete Maine Schedule A. The additions or tax credits on Schedule A must be prorated based on your portion of the household income as shown on Schedule NRH.
• You must send a copy of your federal return when filing Schedule NRH.
Additional written instructions are available to help you complete Schedule NRH at http://www.maine.gov/revenue/incomeestate/guidance/ScheduleNRHGuide11.pdf
11. How do I complete the Worksheet for Credit for Tax Paid Other Jurisdictions?
You must file a Maine Form 1040ME in order to claim a credit for taxes paid to another jurisdiction.
If you were a resident of Maine (excluding "safe harbor" residents) during the tax year, and received income that was taxed during the year by another state, you may claim a credit for income taxes paid to another jurisdiction.
Read the instructions for the Worksheet for Credit Paid to Other Jurisdictions before completing the worksheet. Always complete the other state’s income tax return before completing the Maine return. You must submit a copy of the other state’s return with your Maine return.
When completing line 4b, entitled “Income taxes paid to other jurisdiction,” do not write the amount of withholdings paid to another state on this line. Instead, write the actual tax liability due to the other state on this line. That amount is usually the amount of the other state’s withholdings, plus any additional money you owed them when you filed your return, or less any refund you are entitled to from the other state.
If you paid income taxes to a number of states, complete a separate Worksheet for Credit for Tax Paid to Other Jurisdiction for each state. Add the resulting tax credits together when reporting the allowable credit on Maine Schedule A.
Generally, you cannot claim both a credit for taxes paid to another jurisdiction and a Schedule NR nonresident credit on the same return. However, if you are a part-year resident, and you earned income as a resident of Maine that was also taxed by another state, you may be eligible to claim both credits. Complete Schedule NR first. Then complete the Worksheet for Credit for Tax Paid to Other Jurisdiction based only on the portion of your income that was earned as a resident of Maine.
Additional written instructions are available to help you complete the Worksheet for Credit for Tax Paid to Other Jurisdiction at http://www.maine.gov/revenue/incomeestate/guidance/CrTaxPaidOtherJurisdictionGuide12.pdf
12. My spouse has passed away. You sent a refund with both our names on it. What do I do?
Take the check and a copy of the death certificate to your bank and try to cash or deposit the check.
If your bank will not accept the refund check, you must complete Maine Form 1310ME, Statement of Person Claiming Refund Due a Deceased Taxpayer, to have the check reissued in your name only. Call our forms line at (207) 624-7894 to request Form 1310ME. The number is also listed in your income tax booklet.
Return the uncashed check and the completed Form 1310ME to Maine Revenue Services, Income/Estate Tax Division. Allow 10 to 12 weeks from the date you return the check to Maine Revenue Services for us to issue a new refund check.
13. I received a letter saying that you sent my refund to another agency. Why?
We were notified that you owed money for back federal taxes, child support, college loans, or other state agency debts. State law requires us to send your tax refund to state and federal agencies to pay these debts.
Our notice shows how much of your refund was sent and to what agency. If you believe the amount sent was incorrect, or that you do not owe the money, you must contact that agency directly. Maine Revenue Services cannot provide additional information beyond what is provided in your notice. Our notice provides the address and telephone number of the agency requesting the monies from your refund.
Unless you also owe another agency, any remaining refund monies will usually be sent to you within three weeks.
If you filed a joint return, your refund may be taken to pay a past or present debt of either spouse, even if the debt was incurred before your marriage. Again, if you have questions, our notice shows the agency you must contact to get answers.
14. I received a bill, and I can’t pay it in full. What do I do?
If we sent you a bill, and you are unable to pay the amount due in full, you should pay as much as you can with that notice. Penalties and interest will accrue on any unpaid balance until paid.
You may call Maine Revenue Services at (207) 621-4300 to discuss a payment plan. This number is also listed in your income tax booklet. Often we can save you significant penalties if you contact us timely. Establishing an acceptable payment plan will also prevent enforced collections activity against you.
15. Why didn’t you give me credit for my withholdings?
We may not have given you credit for your withholdings because of a missing or unclear W-2 or 1099. You may not claim federal tax, medicaid, social security, or taxes paid to another state as Maine withholdings. The box on your W-2 or 1099 labeled ”State income tax” lists the amount of state withholdings. The box labeled ”State” indicates the state to which the withholdings were sent.
To tell if the amount you claimed on your return is correct, add up the boxes labeled ”State income tax” that were withheld for Maine on all your W-2s and 1099s. If this is more than the amount we allowed you, send us legible copies of your W-2s and 1099s, with a copy of your notice and we will review our changes.
16. What should I do if I amend my federal tax return or my federal return was changed by the IRS?
If the IRS examined and changed your federal return, you must report these changes to Maine Revenue Services within 90 days, if the changes affect your Maine tax liability.
You must complete Maine Form 1040X-ME to change your Maine return. Be sure to include a copy of the final federal determination along with all notices and schedules supporting the federal adjustment.
If you have amended your federal return and the changes will affect your Maine tax liability, you must also report the changes to Maine by filing Form 1040X-ME. Attach a copy of your federal 1040X to your Maine return when filing.
If the changes result in an additional tax liability, you will be charged interest on the additional liability from the due date for payment of the original return until the amended payment is received. However, we will not assess penalties if you pay the liability in full when you file your return.
If the changes result in a refund due you, Maine Revenue Services has 90 days from the date we receive your complete return to process your refund before any interest is due you.
17. I received a notice that didn’t show all payments made. How do I get credit for them?
To get credit for missing payments, attach copies of the front and back of your cancelled checks to the notice you received and mail them to Maine Revenue Services at the address shown on the notice. We will research your payments and adjust your return accordingly. If you made your payments with a money order, you must request a copy of the cancelled money order from the place it was purchased. A copy of your receipt will not help us track your payment.
18. How can I purchase a State of Maine Park Pass?
You can purchase a park pass through Maine Revenue Services when you file your income tax return on or before the original due date of the return.
If you are filing a Maine Form 1040ME paper return from the income tax booklet you have been mailed, you will need to fill out Schedule CP and attach it to your income tax return. You can request as many individual or vehicle passes as you would like for yourself or to give as gifts. All passes requested will be mailed to the address you provide on your tax return. You must have an excess refund amount or send in payment enough to cover the cost of the passes purchased in order for Maine Revenue Services to issue the park pass to you.
If you have already filed your Maine income tax return and wish to purchase a Maine State park pass, you must call the Bureau of Parks and Lands at (207)287-3821. You will not be able to purchase a park pass when filing an amended 1040 return.
19. What if my park pass is lost or stolen?
You will need to contact the Bureau of Parks and Lands at (207) 287-3821 for a replacement pass if it has been lost, stolen, or issued in error.
20. Do I qualify for Innocent or Injured Spouse status?
Maine Revenue Services acknowledges Innocent and Injured Spouse Claims (see federal Form 8379 or Form 8857 and related instructions) for purposes of individual income tax only. The spouse is not required to request federal relief prior to requesting state relief. For more information call the Compliance Division of Maine Revenue Services at (207) 624-9595 or e-mail email@example.com. If you believe that your refund may be set off to pay a debt other than an income tax debt, you must contact the other tax department or agency directly to request injured spouse relief.
21. What if I file or pay late?
You will be charged interest at 7% per year, compounded monthly, on income tax not paid by the due date (April 16, 2013 for calendar-year filers). An extension allows only additional time to file; it does not allow additional time for payment of tax due or prevent accrual of interest.
In addition to interest, a penalty is assessed for late filing. A separate penalty is assessed for the late payment of tax. The penalty for late filing is $25 or 10% of the tax due, whichever is greater. If a tax return is not filed upon demand, the penalty for late filing is the greater of $25 or 25% of the tax due. The penalty for late payment of the tax is 1% per month up to a maximum of 25%. Both penalties are assessed when the return is filed late and the tax is paid late. The law also provides for penalties for underpaying estimated tax, preparing or filing a fraudulent income tax return, and for understating income.
April 12, 2010
January 25, 2011
December, 2011 December, 2012
22. Is there a penalty for not paying enough estimated tax?
Yes. If you did not pay enough estimated tax or have enough tax withheld from your earnings by any due date for paying estimated tax, you may be subject to a penalty. For calendar year 2012, the underpayment penalty is 7%, compounded monthly. For 2013, the underpayment penalty is also 7%, compounded monthly.
If your 2012 tax liability is $1,000 or more, you should refer to Form 2210ME, Underpayment of Estimated Tax by Individuals.
April 12, 2010
January 25, 2011
December, 2011 December, 2012
23. I am a nonresident of Maine with business activity (such as rental property) located in the state. In prior years, this activity has generated a loss, but this year I realized a gain. Can I use the previous years’ losses to offset this year’s gain?
No, unless you have a federal loss that you can carry forward to this year. If your Maine losses have previously offset federal income, you cannot use those losses again to offset future Maine income.
24. Does Maine Revenue Services accept facsimile signatures on tax returns completed by either a taxpayer or by a paid preparer?
Any Return filed with Maine Revenue Services must contain a declaration that statements contained in that return are true and made under penalties of perjury.
Maine Revenue Services generally follows IRS filing procedures requiring that taxpayers affix an original signature to tax returns; that is, they must personally sign their Maine return. Facsimile signatures are not acceptable.
Maine Revenue allows paid preparers to affix their signature as the return preparer consistent with IRS Notice 2004-54/IRB 2004-33, 209, which permits paid preparers to sign returns by rubber stamp, mechanical device (such as signature pen), or computer software program (i.e., a computer program that prints the preparer’s name on the signature line of the form).
When a tax return is filed electronically by a taxpayer or with the taxpayer’s permission, the filing of that return constitutes a sworn statement by the taxpayer, made under penalties of perjury, that the tax liability shown on the return is correct. No additional signature is required. See 36 MRSA § 193(1).
25. Which form do I file?
The Maine short form has been eliminated for tax years beginning on or after January 1, 2012. You must use Maine Form 1040ME to file your return. You can also file your Maine return electronically. For more information, visit http://www.maine.gov/revenue/netfile/gateway2.htm
Forms 1099G, 1099-MISC and 1099-INT
01. What is the 1099-G, 1099-MISC, or 1099-INT?
The Form 1099-G, 1099-MISC, or 1099-INT is a report of income tax refunds (or overpayments carried to another tax period), Maine Residents Property Tax and Rent Program refunds, or refunds from the Business Equipment Tax Reimbursement Program, and interest payments that you received from Maine Revenue Services (MRS) during the prior calendar year. The Internal Revenue Service (IRS) requires government agencies to report certain payments made during the year, because those payments may be considered taxable income for the recipients. Maine Revenue Services must report any income tax refund or overpayment credit amount as well as property tax refunds issued during the tax year to individuals who claimed itemized deductions on their income tax returns for the year. The IRS normally requires that refund and interest amounts be reported on separate forms: Form 1099-G (income tax and Maine Residents Property Tax and Rent refunds and interest amounts up to $600); Form 1099-INT (interest greater than $600); and 1099-MISC (Business Equipment Tax Reimbursement refunds). • If you did not itemize deductions in the prior tax year, you can disregard the form. • The 1099-G, 1099-MISC, or 1099-INT is not a bill. • The 1099-G, 1099-MISC, or 1099-INT shows amounts that were already refunded to you during the prior calendar year.
02. What should I do with this statement? Do I need to pay the amount shown?
The Form 1099-G, 1099-INT, or 1099-MISC is a report of income you received from the Maine Revenue Services during the prior calendar year. It is not a bill. Do not send any type of payment in response to the statement. If a professional preparer handles your taxes, you should give this statement to the preparer, along with your other tax information, such as W-2s. If you prepare your own taxes, you should review the federal return instructions for reporting state income tax and/or property tax refunds, or visit the IRS web site at http://www.irs.gov for more information.
03. Why did I receive this statement?
Maine Revenue Service records show that we issued you a refund or overpayment credit during the prior calendar year , and that you may have claimed itemized deductions on your federal income tax return for that year. Therefore, you may be required to report the refund or credit as income on your federal income tax return for the current tax year.
04. Why would I have to report my refund as income?
If you itemize deductions on your federal tax return (instead of using the standard deduction), you are allowed to include state income taxes and property taxes paid during the year in your deduction amount. The itemized deduction reduces federal taxable income. Therefore, if any part of the state income tax or property tax included in itemized deductions on the federal return is later refunded by the state, that amount generally has to be reported as taxable income for the year in which the refund is issued.
For example: A taxpayer claimed both state income tax ($2,000) and property taxes ($1,000) as itemized deductions on their 2011 federal return. Then, during 2012, they filed a 2011 Maine income tax return and a 2012 Maine Residents Property Tax and Rent Refund (Circuitbreaker) Program application and received both income tax ($500) and property tax refunds ($200). In January 2013, MRS reports to the taxpayer and to the IRS the two refunds issued during 2012 totaling $700 ($500 + $200). This means that the taxpayer only paid $1,500 in state income taxes for 2011, rather than the $2,000 claimed and property taxes of $800 rather than the $1,000 claimed. Therefore, the taxpayer will generally be required to report the difference of $700 (the total amount of the refunds) on the federal return for 2012.
05. What is an "overpayment"?
The term “overpayment” as it relates to Maine income taxes is used to describe the amount by which your tax payments for the year exceed the tax due for the year. An overpayment may include amounts that were refunded to you, interest paid to you, amounts that were carried forward to next year’s tax, amounts that were offset to cover other outstanding debts you may owe, and amounts you paid for use tax, voluntary contributions and park pass purchases. Maine Revenue Services is required to report the total amount of overpayment regardless of what it was used for.
06. I claimed a Maine refund on my last year’s Maine return, but Maine Revenue Services applied the money to a bill for another year. Doesn't that mean this 1099 form is wrong? Do I still have to report this as income?
The 1099 form is not wrong; you must still report the overpayment as income. The application of the refund to another balance doesn't change the fact that you had an overpayment for the year on your tax return. Even though you didn't actually receive a check, an overpayment transaction took place, and you are subject to the same federal reporting requirements as if you had received a refund check.
07. I did show an overpayment on my Maine return that I filed last year, but I had the money applied as a credit to the next year’s return. Since I didn't get a refund, do I still have to report this?
You must report the overpayment applied as a credit the same way you would report a refund. Both refunds and credits are considered overpayment transactions. The application of the overpayment to another tax year doesn't change the fact that you had an overpayment for the year on your tax return. Even though you didn't actually receive a check, an overpayment transaction took place, and you are subject to the same federal reporting requirements as if you had received a refund check.
08. This statement says the refund was issued for 2010. I already reported that refund on my 2011 federal return. Can you correct the statement? If not, what should I do?
We are required to report refund transactions in the year they actually occur. Since your 2010 refund was issued in 2012, we cannot issue a 1099 form as if the transaction took place in 2011. You should contact the IRS, or visit their web site at http://www.irs.gov to find out whether you should amend your 2011 federal return or take some other action to correct the reporting error.
09. This statement shows a refund of $1,500 last year. I did get a refund for that amount, but I amended my return a few months later, and had to pay $500 back. Shouldn't the statement say my net refund was $1,000?
Federal law requires Maine Revenue Services to report the actual refund or credit amount. We cannot net the amount against other transactions. Therefore, your 1099 form is correct as issued. For information on how to report the income and deduct your payment on your federal return, contact the IRS, or visit their web site at http://www.irs.gov .
10. This statement says the refund was issued for 2009. Why should I have to report that now? Why was a 2009 refund issued last year?
Our records show that a refund for 2009 was issued on your account last year, and that you may have claimed itemized deductions for 2009. Since the refund was issued during 2012, the income would be reported on your 2012 federal return. If you don't have a record of receiving a refund for 2009, call Maine Revenue Services at (207) 626-8475 for an explanation.
11. I have checked my records and I'm sure this statement is incorrect. What should I do?
Call Maine Revenue Services at (207) 626-8475, or send an e-mail to: firstname.lastname@example.org to request a correction. Be sure to include your social security number, and explain why you believe the form is incorrect.
12. Why does my 1099-G form show use tax, voluntary contributions, or park pass purchases?
You indicated on your income tax return for the year shown on your 1099-G form that you owed Maine use tax, you purchased one or more Maine park passes, or you elected to voluntarily contribute money to one or more of the following organizations on Schedule CP: Democratic Party, Green Independent Party, Republican Party, Endangered and Nongame Wildlife Fund (Chickadee Check-off), Maine Children’s Trust, the Bone Marrow Screening Fund, the Companion Animal Sterilization Fund, the Maine Military Family Relief Fund, the Maine Veterans' Memorial Cemetery Maintenance Fund or the Maine Asthma & Lung Disease Research Fund. These amounts are overpayments of tax and must still be reported to you on Form 1099-G. The fact that you used the refund to pay use tax, to purchase park passes or to make voluntary contributions doesn't change that you had an overpayment for the year on your tax return. Even though you may not have actually received a check, an overpayment transaction took place, and you are subject to the same federal reporting requirements as if you had received a refund check.
13. I received a refundable child care credit last year. Is this amount included on my 1099-G?
Refundable child care credit amounts are not included in the "Total Overpayment" column on the 1099-G. The refundable credit is not an overpayment of tax - child care payments are not used to reduce income on the federal return. The entire refund check amount including the refundable child care credit is included in the "Refund" column, however, the refundable portion of the credit has been subtracted from the "Total Overpayment." (For example: a taxpayer who received an income tax refund last year of $400, of which $100 was a refundable child care credit, would receive a 1099-G that shows $400 in the "Refund" column and $300 in the "Total Overpayment" column.) Thus, only the $300 amount may be reportable as income on your federal return.
Corporate Income Tax
1. What is Maine’s Corporate Income Tax Rate?
If adjusted federal taxable income is: Greater But not The gross Than over tax is: $ 0 $ 25,000 3.5% of federal taxable income $ 25,000 $ 75,000 $875 plus 7.93% of the excess over $ 25,000 $ 75,000 $ 250,000 $4,840 plus 8.33% of the excess over $ 75,000 $ 250,000 or more $19,418 plus 8.93% of the excess over $250,000
2. When does Maine have jurisdiction to impose a tax on a corporation?
When a corporation’s presence in, or connection with, a state reaches a certain level, the corporation is said to have “nexus” with that state, subjecting the corporation to the state’s income tax laws. Nexus with Maine is generally created by conducting business in Maine, or by owning or using property in Maine. MRS Rule 808 provides detailed criteria about activities that create Maine nexus. A determination about whether or not a corporation has nexus with Maine must be made in light of all of the relevant facts, and a physical presence in the state is not necessary to establish nexus in all circumstances. If you need assistance determining whether or not a corporation has nexus with Maine, you may complete a nexus questionnaire and send it to MRS with a cover letter that identifies who MRS should contact for more information. You must enter a response to every question. The questionnaire is available in the corporate income tax section of maine.gov/revenue/forms.
3. Who must file Form 1120ME?
A corporation that has nexus with Maine is required to file Form 1120ME if it has Maine income and is subject to federal corporate income tax. Tax exempt corporations with unrelated business income and subchapter S corporations with certain taxable gains must file Form 1120ME to report taxable income. Certain financial institutions are not subject to corporate income tax, but must file Form 1120B to report franchise tax.
4. When is the Maine corporate income tax return due?
The Maine corporate income tax return (Form 1120ME) is due on the same date as your federal corporate income tax return (the fifteenth day of the third month after the end of the tax year), without regard to an extension to file. The Maine filing due date for tax exempt entities subject to tax on unrelated business income (as reported on federal Form 990T) is 4 ½ months after the end of the tax year (May 15 for calendar year filers).
5. How do I request an extension of time to file Form 1120ME?
Maine Revenue Services does not require a written request to obtain an automatic extension to file. If you are unable to file your return by the original due date, Maine allows an automatic seven-month extension of time in which to file a corporate income tax return. Requests for additional time to file the Maine return beyond the automatic seven-month extension period must be submitted in writing prior to the expiration of the extension period. Generally, the total Maine extension period may not exceed eight months. However, if the Internal Revenue Service has granted an extension to file the federal return beyond the automatic seven-month period, the date for filing the Maine return is automatically extended for the same period as long as proof of the federal extended due date is attached to the Maine return when filed.
1040 Fast File
1. Am I eligible to electronically file with Maine?
Most Maine residents and certain qualified nonresidents are eligible to use Maine's free I-File application. If you were a nonresident for the calendar year with zero Maine income tax before claiming the nonresident credit OR if all your income is sourced to Maine and you do not need to complete Schedule NR, you may qualify to use I-File.
Most residents, part-year residents and nonresidents are eligible to E-File their individual income tax returns. We require that you use tax software that has been approved by Maine. Not all software packages support all of the Maine tax forms that you will be required to use for your filing. Choose carefully. Contact the software company if you find that the software you have purchased does not fit your Maine tax-filing needs. Learn more about Maine e-file and online filing options at http://www.maine.gov/revenue/netfile/efile.htm .
Also, some Maine tax forms cannot be e-filed. Paper-filing is required in some cases.
2. I did not receive an e-file PIN from Maine this year. Can I still e-file my return?
Yes. In an effort to offer completely "paperless" filing, Maine Revenue Services no longer assigns or requires PIN's for e-file purposes. The act of transmitting electronically is considered the signature.
3. I cannot locate the 1040ME-EL electronic signature document. Do I need to sign one?
No. In addition to doing away with e-file PIN's, Maine also no longer requires an electronic signature document to be used. The forms that once accompanied the 1040ME-EL (W-2’s, 1099’s, other signed documents) no longer need to be mailed either.
4. Has my return been accepted?
I-File issues a confirmation number to indicate that a return has been accepted.
E-File issues an acknowledgement. If you feel that an E-File return has successfully been transmitted and you have not received an acknowledgement within 48 hours, then please contact the software company that transmitted the return to Maine. Maine processes electronic returns as soon as they are received and the acknowledgements are immediately posted for the transmitter to pick up. It is the responsibility of the software company transmitting the returns to Maine to pass along acknowledgements to taxpayers in a timely and efficient manner.
5. I’ve received some reject codes on an e-file return. How do I find out what they mean so I can fix the problem and retransmit the return?
The software that you are using should give you some indication what the problem is. If not, please contact your software company for assistance.
6. Where is my refund?
Please check our 1040 Refund Status web page at https://portal.maine.gov/refundstatus/ for the status of your refund. (Click ‘Refresh’ or try clicking the link again if it does not come up on the first try.)
If your e-file return has been accepted by Maine, you have not received your refund within 14 business days and the information you find there is not helpful, then please call Maine’s Income Tax Division at 207-626-8475.
7. I need to amend my Maine income tax return. Can I do this electronically?
Yes, for 2013, 2014 and 2015 returns only. For returns prior to 2013, you must amend on paper forms and mail them to Maine Revenue Services.
8. What is Maine's e-file application process for out-of-state Electronic Return Originators (ERO's)?
MRS has access to IRS approved EFINS through their database, so it is not necessary to fax or email federal acceptance letters to us. Once you are accepted by the IRS to e-file federally, then Maine automatically accepts e-file individual income tax returns.
rev. February 2016
1. Do I have to file a Maine estate tax return?
If you answer “yes” to either of the following questions, you must file a Maine estate tax return.
A) Is a federal estate tax return required?
If a federal Form 706 is required, then a Maine estate tax return is also required if there is any Maine property in the decedent’s estate.
B) Does the value of the federal gross estate plus prior taxable gifts plus Maine elective property exceed the filing requirement threshold?
For deaths occurring in 2012, the filing threshold is $1,000,000. For deaths occurring in 2013, the filing threshold is $2,000,000 and prior taxable gifts include only those gifts made within one year before the date of death.
If the answer to questions A) and B) is "no," you probably do not have to file an estate tax return. The fact that a federal Form 706 is not required does not mean that an estate is not liable for Maine estate tax. In 2013 the Maine exclusion is $2,000,000 and the federal exclusion is $5,250,000, creating “gap” estates that are taxable to Maine but not to the federal government. More information on Maine's estate taxability threshold for each year can be found at the Estate Tax homepage on our web site at http://www.maine.gov/revenue/incomeestate/estate .
If an estate not required to file Form 706ME contains real property (land or buildings) or tangible personal property located in Maine, Form 706ME-EZ may be filed for decedents dying prior to January 1, 2013 or Statement of Value (Statement 700-SOV) may be filed for 2013 decedents with a completed Certificate of Discharge of Estate Tax Lien to release the automatic lien on that property. On the date of death, an automatic estate tax lien applies to any property located in Maine that is owned by the decedent. The purpose of the lien is to prevent the property from being sold before the estate tax is paid. See FAQ #3.
If an estate is subject to the probate process in Maine, you may be required to file either Form 706ME-EZ for estates of decedents dying prior to January 1, 2013, Statement 700-SOV for estates of decedents dying after 2012, or Form 706ME, even though taxes are not owed. The probate court may require a copy of an official letter from Maine Revenue Services certifying that an estate tax return has been filed (Certification of Filing) and that any tax due has been paid.
2. How do I file for an extension?
If you are unable to file an estate tax return within nine months of the date of death, Maine allows an automatic six-month extension of time to file. If you received an extension to file your federal return, Maine allows an extension for the same period. If you are making an estimated payment prior to filing a return, send a copy of the federal Form 4768 with the payment.
A request for an extension in addition to the automatic six-month period must be submitted in writing prior to the expiration of the automatic six-month extension period. Generally, the total extension period cannot exceed eight months.
CAUTION: An extension to file the Maine estate tax return is not an extension for the payment of tax. If the estate owes tax, a payment of at least 90% of the amount due must be paid by the original due date for filing the return in order to avoid a failure to pay penalty. Interest is charged on any tax paid after the original due date of the return.
3. How do I request a lien release for real and tangible personal property in an estate?
When someone owning Maine real or tangible personal property dies, Maine estate tax law places an automatic lien on that property. To request a release of the lien, the representative must take the following steps:
1) Complete an appropriate Certificate of Discharge of Estate Tax Lien (either or both for real or tangible personal property). The Registry of Deeds for the county in which the property is located will be able to help if you do not have the proper book and page numbers for the property.
2) Complete Form 706ME, Form 706ME-EZ (for decedents dying before January 1, 2013) or Statement 700-SOV as appropriate.
3) Submit the completed form, including documentation of value if required, with the appropriate Certificate of Discharge of Estate Tax Lien.
4) Make sure to include any payment due with the return (Form 706ME only). The return must show that all tax, interest, and penalties are being or have been paid.
5) The Certificate of Discharge of Estate Tax Lien, signed by the State Tax Assessor, will be mailed back to you. Bring the original document to the county Registry of Deeds and they will record the lien release.
For a list of the county Registries of Deeds, go to: http://www.maine.gov/sos/cec/ucc/county.pdf
4. Does Maine conform to the federal law and regulations regarding the alternate valuation date?
Yes. Maine accepts the federal alternate valuation date, even for gap estates. Alternate valuation is not automatic. It must be elected by checking the box for the alternate valuation election on page 2 of federal Form 706. The election, once made, cannot be changed. When filing the Maine estate tax return, a copy of the entire federal return or pro forma return must be attached. Also, write “Alternate Valuation Date Elected” across the top of Form 706ME.
5. Is the federal value of an estate automatically accepted as its value for Maine purposes?
No. Maine law provides that where an estate has a federal tax liability, the federal value will be the value for Maine purposes unless the State Tax Assessor determines a different value. For estates with no federal filing, the Assessor will determine the value of the estate in accordance with principles of federal tax law.
6. The IRS gives a credit for tax paid on recently inherited assets. Does Maine have a similar credit?
No. Maine law does not provide a credit for Maine estate tax previously paid by another estate on the same property.
7. If a nonresident decedent owns property in Maine and the property qualifies for the estate tax marital deduction, is a Maine return required?
Yes, if the federal gross estate plus prior taxable gifts plus Maine elective property is equal to or greater than $2,000,000 for decedents dying in 2013, regardless of whether the property is included in the marital deduction.
8. Can I ask to have interest and penalties waived?
Yes. The State Tax Assessor shall waive penalties on a showing of reasonable cause as provided by 36 M.R.S.A. § 187-B (7). The State Tax Assessor may waive interest in certain unusual circumstances. However, these cases are very rare. You can ask for reconsideration of interest and penalty charges in writing within 60 days of receiving an assessment. Use the Petition for Reconsideration form available at http://www.maine.gov/revenue/forms/general/generalforms.htm for this purpose. Reasonable cause includes erroneous information provided by MRS, death or serious illness of the taxpayer or member of the taxpayer’s immediate family, a natural disaster, etc.
9. Maine property in a trust, LLC or pass-through entity is included in the estate of a nonresident decedent. What Maine property held by the trust, LLC or pass-through entity is sourced to Maine under 36 M.R.S.A. § 4104?
Generally, Maine property held by a pass-through entity is sourced to Maine, if included in a nonresident decedent’s estate, and:
1) The entity does not carry on a business for the purpose of profit and gain;
2) The ownership of the property in the entity was not for a valid business purpose; or
3) The property was acquired by other than a bona fide sale for full and adequate consideration and the decedent retained a power with respect to or interest in the property that would bring the real or tangible personal property located in this state within the decedent’s adjusted federal gross estate.
See MRS Rule 601 & MRS Proposed Rule 603 for further, more comprehensive, information.
Real Estate Withholding
1. What is Maine real estate withholding?
Maine Law requires, at the time of closing, a buyer to withhold 2.5% of the consideration price ($50,000 or more) from any nonresident individual, estate or business. This 2.5% withholding is an estimated tax payment to ensure that a seller complies with Maine income tax responsibilities. The withholding, along with a completed Form REW-1, must be sent to MRS within 30 days of the date of closing. A seller may qualify for a reduction in or exemption from the real estate withholding requirement. For more information, go to http://www.maine.gov/revenue/incomeestate/rew/ .
2. Are there any exceptions to the Maine real estate withholding requirement?
Yes. If the seller is a resident of Maine at the time of the sale, if the consideration is less than $50,000 (see note below) or if the capital gain is not recognized for federal or Maine income tax purposes, withholding is not required. See 36 M.R.S.A. § 5250-A(3) for these and other exemptions that may apply. See question 4 for requesting an exemption from the Maine real estate withholding requirement.
If property is subject to a foreclosure sale and the consideration received for the property does not exceed the debt secured by that property, no Maine income tax withholding is required and Maine Revenue Services does not require a withholding exemption certificate (see 36 M.R.S.A. § 5250-A(3-A)).
Note: Federally taxable gains on the sale of Maine real property are taxable by Maine, even if the total consideration is less than $50,000.
3. Can the Maine real estate withholding amount be reduced?
Yes. The seller or the buyer may submit a request to the State Tax Assessor to reduce the withholding. If the seller is a nonresident individual or trust and 7.95% of the realized gain is less than 2.5% of the sales price, that lower amount may be allowed. If the seller is a nonresident corporation and 8.93% of the realized gain is less than 2.5% of the sales price, that lower amount may be allowed. Installment sales may also result in a reduced withholding amount (see question 6). If there will be no gain, the seller may apply for an exemption from withholding (see question 4).
4. How do I request an exemption or a reduction of the withholding?
Form REW-5 must be completed to request an exemption or a reduction in the real estate withholding amount. Exemptions are generally granted when there is a loss on the sale of the property, a federal exclusion of the gain on the sale of a principal residence, the transaction involves a like-kind exchange, or for other situations resulting in no Maine income tax liability. In addition, reductions in the real estate withholding amount may be authorized for the situations stated in question 3.
5. When is the withholding or the request for exemption or reduction due?
Withholding must be submitted to MRS within 30 days of property transfer. A request for exemption or reduction must be completed and submitted at least five business days prior to the closing date. The real estate withholding is retained by the closing agent at the time of the property transfer and remitted to MRS with Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120. Once the payment is submitted to MRS, no refunds will be made until the related income tax return is filed for the year of sale. For more information, go to http://www.maine.gov/revenue/incomeestate/rew/ .
6. What is the Maine real estate withholding based on if the property is sold on an installment sale basis?
The required withholding amount is still 2.5% of the total sales price. However, the seller may request that a lower amount be withheld. Following the federal guidelines for an installment sale, the seller reports the amount of gain to be realized in the year of the sale. The Maine real estate withholding amount may be based on this first year gain. The taxpayer is then responsible for making estimated tax payments and filing a Maine income tax return yearly until the installment contract is complete.
7. Am I subject to the Maine real estate withholding requirement if the sale of the Maine real property is considered a Section 1031 like-kind exchange?
The 2.5% withholding from total sale price is required, even in a like-kind exchange. Maine Revenue Services follows the federal guidelines on the treatment of IRC Section 1031 like-kind exchanges. Therefore, if no gain is recognized for federal income tax purposes (due to the qualifying like-kind exchange transaction), no gain is recognized for Maine income tax purposes. As such, the seller may request an exemption from the Maine real estate withholding requirement for this property transfer. A copy of the Section 1031 like-kind exchange contract must accompany the request for exemption form prior to the closing.
8. Are nonresident individuals selling property in Maine the only individuals subject to the real estate withholding requirement?
Yes. Although Maine resident individuals are also subject to Maine income tax on gains realized from the sale of real estate, only nonresident individuals are subject to the Maine real estate withholding requirement. Non-Maine businesses and nonresident estates and trusts selling Maine real property are also subject to the Maine real estate withholding requirement.
9. Am I subject to Maine real estate withholding if I placed my Maine home on the market as a Maine resident but don’t sell the property until after I have become a nonresident?
Yes. If you are a nonresident at the time of the property closing, you are subject to the Maine real estate withholding requirement. If you believe that any portion of the gain is exempt from Maine taxation, see questions 2 and 3.
10. Is the Maine real estate withholding amount considered the final Maine income tax due on the sale of my Maine property?
No. The Maine real estate withholding amount is merely an estimate of the income tax due on the gain from the sale of the Maine property. A Maine income tax return must be filed to determine the actual tax due on the gain and whether or not a refund is due to you. In some cases, an additional amount may be due with the Maine income tax return filed.
11. What if there is more than one owner of the Maine property being sold?
If the total purchase price for the property exceeds $50,000, the closing agent will withhold 2.5% from each nonresident seller’s share of the total sales price. The amount withheld is remitted to Maine and the proper amount will be credited to each nonresident’s Maine income tax account.
12. How does a partnership operating in Maine determine if it is subject to Maine real estate withholding?
A resident partnership, of which at least 75% of the ownership interest is held by Maine residents, is not subject to the requirement. Limited liability companies ("LLCs") are considered partnerships unless otherwise classified for federal income tax purposes.
13. How do I complete Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120 if there are multiple sellers or the seller is an LLC or partnership?
When property is sold by more than one nonresident seller, you must complete a separate form for each nonresident seller receiving proceeds from the sale. For example, if the Maine property is owned by more than one individual, a separate Form REW-1-1040 must be completed for each nonresident individual receiving proceeds from the sale. If the seller is an LLC or partnership, complete a separate Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120 for each nonresident partner receiving proceeds from the disposition. Be sure to complete the appropriate form for each seller. Use REW-1-1040 for individuals and sole proprietors, REW-1-1041 for trusts and estates and REW-1-1120 for corporations.
Income Tax Withholding/Unemployment Contributions
1. How do I remit income tax withholding payments?
You may make payments electronically either using the Maine EZ Pay internet based payment system or via EFT (ACH credit or ACH debit). For more information go to http://www.maine.gov/revenue/netfile/gateway2.htm and look for the Maine EZ Pay and Electronic Funds Transfer links. To speak with someone about making EFT payments, call the EFT Unit at 207-624-5625.
NOTE: Beginning in 2014, if your annual payments to Maine Revenue Services for all taxes combined exceed $12,000 per year, you must make payments electronically. Because of this requirement, Forms 900ME are no longer automatically mailed to employers and other withholding agents. Also, employers or non-payroll filers that are registered for Maine income tax withholding must electronically file all original Maine quarterly tax returns and annual reconciliation of Maine income tax withholding. Taxpayers may request waivers from these requirements for good cause. See MRS Rules 102 & 104 for more information.
2. What is my payment frequency for remitting Maine income tax withholding?
Beginning in 2014, employers or non-payroll filers who reported Maine income tax withholding of $18,000 or more for the 12 months ending June 30, 2013 are required to make payments of income tax withholding on a semiweekly schedule. See FAQ 03 for payment due dates.
Employers or non-payroll filers who reported Maine income tax withholding of less than $18,000 for the 12 months ending June 30, 2013 are required to make payments quarterly. Employers or non-payroll filers registered for Maine income tax withholding must electronically file Maine quarterly tax returns. Taxpayers may request waivers from the electronic filing requirements for good cause. See MRS Rules 102 & 104 for more information.
3. What is the due date for income tax withholding payments?
Quarterly payments are due the last day of the month following the end of the quarter. The due dates are April 30, July 31, October 31 and January 31. The payment is due on the same day as the quarterly return.
Semiweekly payments are based on payment of wages and are due according to the following schedule:
- For wages paid on Wednesday, Thursday or Friday, remit withholding payment on or before the following Wednesday.
- For wages paid on Saturday, Sunday, Monday or Tuesday, remit withholding payment on or before the following Friday.
4. How do I obtain a copy of the current Maine withholding tax tables?
Withholding tables are available on the MRS web site at http://www.maine.gov/revenue/forms/ - choose the "Employment Taxes" category. You can also call Maine Revenue Services forms ordering line at 207-624-7894. State your name, address, and request for the Maine withholding tax tables. You should receive this order in two weeks.
5. I am a seasonal employer. How do I file and remit Maine withholding tax?
There is no seasonal filing frequency for Maine income tax withholding. Maine withholding returns must be filed every quarter. If you are registered to remit income tax withholding and do not have a withholding liability during a quarter, file a return showing zero liability. Payment frequencies are quarterly and semiweekly. Refer to FAQ 02 to determine your payment frequency.
6. How do I amend my income tax withholding return if I have understated or overstated my tax liability?
Download Form 941A-ME at http://www.maine.gov/revenue/forms/ - choose the “Employment Taxes” category. All corrections must be made on amended returns and filed for quarterly periods only. Amended returns can also be obtained by calling Maine Revenue Services at 207-626-8475 between 8AM and 5PM weekdays, holidays excepted. If you are using a touch tone phone, press 1 then select option 4.
7. I am establishing a new business. How do I register to remit Maine income tax withholding?
You can download a registration application at http://www.maine.gov/revenue/forms/ or order an application by calling 207-624-7894. You may also register electronically at http://www.maine.gov/revenue/netfile/gateway2.htm . Call Central Registration at 207-624-5644 between 8AM and 4PM weekdays, except holidays, and we will assist you in filling out the registration application. Employers or non-payroll filers registered for Maine income tax withholding must electronically file Maine quarterly tax returns. Taxpayers may request waivers from these requirements for good cause. See MRS Rules 102 & 104 for more information.
8. I am a New Hampshire employer and have Maine residents working for my business. Am I required to withhold Maine income tax from these employees?
Yes. You are required to withhold Maine income tax if: 1) You maintain an office in Maine or transact business in Maine; 2) You make payments to individuals (resident or nonresident) who are taxable to Maine; and 3) You are required to withhold federal income tax from those payments. If you are not required to withhold Maine income tax, but have made payments which are taxable to Maine, you may, as a courtesy, withhold Maine income tax. If you decide not to withhold Maine income tax, those individuals must make estimated tax payments each quarter. Estimated tax forms can be obtained by downloading at http://www.maine.gov/revenue/forms/ or by calling 207-624-7894. For information on registering to withhold Maine income tax, refer to FAQ 07.
9. Does Maine require a year-end reconciliation of income tax withholding liability and copies of W-2s and 1099s?
Yes. All employers and nonwage payers who withhold Maine income tax from payments to employees or other recipients must file a year-end reconciliation, Form W-3ME. Unless you have a waiver, you must file Form W-3ME electronically (see http://www.maine.gov/revenue/netfile/gateway2.htm). If you have waiver from the electronic filing requirement, you may download the form at http://www.maine.gov/revenue/forms/ .
Maine Revenue Services does not accept paper copies of payee statements (Forms W-2 and 1099). Employers and payers issuing 250 or more Forms W-2 or 1099 must file such forms with MRS electronically using the Maine Employers Electronic Tax Reporting System (“MEETRS”). For more information about electronic filing of Forms W-2 and 1099, see http://www.maine.gov/revenue/magmedia/magmedia.html . Employers and payers issuing fewer than 250 Forms 1099 may submit data either directly to MRS or to MRS through the IRS under the Combined Federal/State Filing Program, but are not required to submit. All forms W-2G are required to be filed directly with MRS. See MRS specifications for Forms 1099 and W-2G at http://www.maine.gov/revenue/netfile/gateway2.htm .
10. Does Maine accept magnetic media reporting for year-end W-2s and 1099s?
Maine Revenue Services requires Forms 1099 and W-2G to be submitted electronically or via the Combined Federal/State Filing Program.
Forms W-2 must be submitted electronically.
Magnetic media and paper copies will not be accepted.
Specifications are available at http://www.maine.gov/revenue/magmedia/w2and1099specs.htm
Appropriate contact information is included in the specifications. If you are unable to access the specifications online, call the withholding unit at 207-626-8475, press 1 then select option 4.
11. How can I verify if my payroll processor has filed and paid my Maine withholding tax return and payment?
Call MRS at 207-626-8475, press 1 then select 4. Please have your Maine withholding account number available.
12. How can I verify if my payroll processor has filed and paid my Maine unemployment tax return and payment?
Call the Department of Labor at 207-621-5120. Please have your Maine unemployment account number available.
13. How do I verify that my payroll processor has been granted a license to provide payroll services in Maine?
Call the Department of Professional and Financial Regulation at 207-624-8527. For more information, visit their web site at http://www.maine.gov/pfr and select Office of Consumer Credit Regulation.
14. Does Maine Revenue Services accept facsimile signatures on tax returns completed by either a taxpayer or by a paid preparer?
No, unless the return is filed electronically, in which case a signature is not required. Any return filed with Maine Revenue Services must contain a declaration that the statements contained in that return are true and made under penalties of perjury. Maine Revenue Services generally follows IRS filing procedures requiring that taxpayers affix an original signature to tax returns; that is, they must personally sign their Maine return. Facsimile signatures are not acceptable. Maine Revenue Services allows paid preparers to affix their signature as the return preparer consistent with IRS Notice 2004-54/IRB 2004-33, 209, which permits paid preparers to sign returns by rubber stamp, mechanical device (such as signature pen), or computer software program (i.e., a computer program that prints the preparer's name on the signature line of the form). When a tax return is filed electronically by a taxpayer or with the taxpayer's permission, the filing of that return constitutes a sworn statement by the taxpayer, made under penalties of perjury, that the tax liability shown on the return is correct. No additional signature is required. See 36 M.R.S.A. § 193(1).
15. What happens if an employer/payer does not furnish Form W-2 or 1099 to a payee?
A person who furnishes a false or fraudulent statement or fails to furnish a statement commits a civil violation for which a fine of $50 for each failure may be imposed.
1. Who should I contact if I have a question relating to insurance premiums, nonadmitted premiums, and fire investigation and prevention taxes: the Bureau of Insurance or Maine Revenue Services?
Contact the Bureau of Insurance (207-624-8475) if you have a question regarding licensing or examination.
Contact Maine Revenue Services (207-624-9753) if you have a question regarding state taxes.
2. When are insurance premiums, nonadmitted premiums and fire investigation and prevention tax payments and returns due?
Generally, insurance premiums and nonadmitted premiums taxes must be paid quarterly, on a calendar year basis, with an annual reconciliation return due March 15 of the following year.
3. Do I have to file an annual/reconciliation return even if there is no tax due?
Every insurer that does business in Maine or collects premiums or assessments in Maine must file an annual premiums tax return, even if there is no tax obligation for the year.
4. Is it permissible for insurance companies to charge their clients for the tax on premiums?
Yes. Maine’s insurance premiums tax is a tax on the insurer in lieu of paying income taxes. Like any cost of doing business, the insurer may pass this cost on to its customers and may also separately state the amount of those taxes. However, the insurer may not make a representation that the premiums tax is imposed on the insured or that the insured is in any way legally responsible to the State of Maine for the tax liability.
Pine Tree Development Zones
Pass-through Entity Withholding
1. I already file withholding for my employees. Can I include nonresident partners on that withholding listing?
No. The withholding requirement for nonresident members of pass-through entities is separate from the employee withholding requirement. The forms used for filing nonresident member withholding are different than those for employee withholding.
2. Do I need to register if I already have an employee withholding account?
No. Although registration is required for employee withholding, it is not required for pass-through entity withholding.
3. Can I withhold from resident members, too?
Yes. Although withholding is required for nonresident members only, you may also make voluntary withholding payments for a resident member, with that member's consent.
4. What if a nonresident member is making or wants to make estimated payments -- do I have to withhold for that member?
If a nonresident member has $1,000 or more in Maine-source income, but that member prefers making estimated payments, the member must file an affidavit with the entity promising to comply with Maine's income tax laws. The entity must then list that member on Schedule 3 when it files Form 941P-ME for the year. Each participating nonresident member must sign an affidavit (Form 941AF-ME) which must be retained by the entity.
5. Is every nonresident member required to file a Maine income tax return?
Yes, if that nonresident member has Maine-source income. A pass-through entity having Maine-source income may file a composite income tax return for all of its eligible nonresident individual members who agree to participate. If a nonresident member participates in the composite return, an individual income tax return is not required from that member. See MRS Rule 805 on the "Laws & Rules" page at http://www.maine.gov/revenue/rules/ . Forms and instructions are located on our "Forms, Publications & Applications" page at http://www.maine.gov/revenue/forms/ .
6. Do I need to withhold from composite filers?
No. Each nonresident member participating in the composite exemption must sign an agreement to participate in the composite filing (Form 941CF-ME). This affidavit must be held by the pass-through entity. The entity must then list that member on Schedule 3 when it files Form 941P-ME for the year. It is not necessary to submit a new affidavit each year. The affidavit will remain in force continuously as long as the member retains an ownership interest in the pass-through entity or it is revoked.
7. Can I make payments more often than quarterly?
Yes. You are not required to make payments more frequently than quarterly, but you may make them as often as you like, using Form 901ES-ME. Be sure to enter your federal employer identification number on the check, as well as the form, to ensure that the payment goes to the correct account.
You may make 901ES-ME payments online using the Maine EZ Pay internet service or by ACH Credit. For more information, go tohttp://www.maine.gov/revenue/netfile/gateway2.htm and select the Maine EZ Pay or EFT option.
8. What if I make a mistake on a return?
If you make a mistake on the return, you must file an amended return on Form 941P-ME.
9. Do I need to withhold for nonresident members that are pass-through entities?
Yes, you are generally required to withhold for all nonresident members, individuals and business entities alike. However, if you can identify all of the ultimate nonresident individual (or business)members in a tiered entity structure, you may withhold against those members' income directly if you prefer, but only after making a written request to the Assessor and receiving approval to do so. For example, Partnership A (lower-tier entity) is partially owned by nonresident Partnership B (upper-tier entity), which is owned by nonresident Individual 1 and nonresident Individual 2. Partnership A (lower-tier entity) must withhold 7.95% of Partnership B's share of Maine-source income, and assign that withholding to Partnership B. If, however, Partnership A can identify the ultimate nonresident members, A may withhold 7.95% against each ultimate member's (Individual 1 and Individual 2) share of income. If a lower-tier entity is withholding for ultimate nonresident members, the lower-tier entity must also report the amount of withholding to those ultimate nonresident members. If the lower-tier entity is withholding for an upper-tier entity, the amount withheld must be reported to the upper-tier entity and the upper-tier entity must then report the appropriate portion of withholding to each member (resident and nonresident).
10. What about the nonresident threshold for taxability?
Maine has a threshold for the taxability of income earned by a nonresident individual working in Maine. Generally, if a nonresident individual works in Maine fewer than 12 days or has total Maine-source income for the year of $3,000 or less, that income is not taxable to Maine. However, income earned from a pass-through entity is not subject to this threshold. Therefore, all Maine-source income from a pass-through entity is taxable to Maine.
11. What if I am operating at a loss?
If a pass-through entity incurs a net loss for the current taxable year, that entity does not have to withhold from any nonresident member unless that member receives guaranteed payments exceeding the member’s allocated share of the net loss. If the entity has income in the current year, but had a net loss for the prior year, withholding will be required, but estimated payments will not be required provided the prior year was a full year and the entity filed Form 941P-ME for that year. .
12. I represent a tax-exempt organization that is a member of a pass-through entity. Must the pass-through entity withhold from my organization’s share of the entity income?
A pass-through entity is not required to withhold from income distributable to a tax-exempt entity member, if that income is not taxable to the entity member. However, the pass-through entity may not be aware of the tax status of each of its members. A nonprofit, or tax-exempt, member may be required to provide the pass-through entity with documentation showing the tax-exempt status.
13. My business reports on a fiscal year basis. How do I determine the amount to withhold?
A fiscal year business should calculate member withholding based on the year in which the fiscal year ends. For instance, if an entity's fiscal year is July 1, 2011 through June 30, 2012, income for that period is considered income earned in 2012. For 2012 purposes, withholding must be based on the income for the period 7/1/11 - 6/30/12.
Example: Partnership XYZ operates on a fiscal year ending on 9/30. Maine apportionment is 50%. Partner A is not a resident of Maine and owns a 33% share of partnership XYZ. Partner A files a calendar year return.
IRS requires Partner A to include fiscal year partnership results in his calendar year return for the year during which the partnership year ends. Thus, XYZ results for fiscal year ended 9/30/12 would be included in Partner A's calendar year 2012 return. XYZ's budget projections for FYE ‘12 estimate income of $30,000. Maine income would be $15,000 and Partner A's share would be $5,000.
Thus, the income base for calculating the withholding requirement for Partner A for calendar 2012 would be $5,000. Estimated payments would be required equal to $4,500 (90% of current year).
14. Real estate withholding has been withheld for an entity during the year. Should the REW funds be listed on the 941P-ME as payment withheld?
No. The REW payment may be deducted from the withholding required for the year. Simply reduce the amount of pass-through withholding by the amount of REW withholding. REW payments are reported to Maine Revenue Services separately on Form REW-1. Each member’s share of real estate withholding payments may be entered in Box #3 of Form 1099ME.
15. A nonresident owner is on the payroll of my business and has extra withholding taken out to cover the Maine tax liability. Do I still have to file pass-through entity withholding?
If the nonresident member has $1,000 or more in Maine-source income, but wants to pay through extra payroll withholding, the member must file an affidavit with the entity, promising to comply with Maine 's income tax laws. Each nonresident member participating in the compliant taxpayer exemption must sign an affidavit (Form 941AF-ME). Withholding is not required if the appropriate affidavits have been obtained. However, the entity will still be required to file Form 941P-ME annually to report entity information and list the exempt members on Schedule 3.
16. My pass-through entity is owned by other pass-through entities (upper-tier). Can those upper tier entities qualify for the compliant taxpayer exemption?
Yes, an upper tier entity may qualify. However, the upper tier entity will become responsible for withholding on any Maine-source income flowing from the lower tier to the upper tier or obtaining exemptions for the subsequent upper tier owners. In addition to obtaining Form 941AF-ME from the upper-tier pass-through entity, the lower-tier entity must file Form 941P-ME for the year and list the upper tier entity on Schedule 3.
17. I represent an upper-tier entity with Maine-source income only from a lower-tier entity. How can I be sure the lower-tier entity is withholding so that I don’t have to do it?
The lower-tier entity must withhold from its upper-tier members unless it obtains Form 941AF-ME from an upper-tier entity that wishes to be exempt. At the end of the year, the lower-tier entity is required to provide the upper-tier entity with Form 1099ME showing the portion of withholding for the year that is attributable to that upper-tier entity. The upper-tier entity then provides its members with Form 1099ME reporting their proportionate distributive share of the withholding in box 2.
18. Are withholding statements required to be filed by the pass-through entity at the end of the year?
After the calendar year and by the following January 31st, pass-through entities must issue Form 1099ME to each member from whom Maine income tax was withheld. Do not file Forms 1099ME directly with Maine Revenue Services. Form 1099ME identifies the member's share of Maine income tax withheld, and must be submitted with the nonresident owner's Maine personal income tax return. Failure to provide Form 1099ME to your members may result in disallowance of the withholding claimed on the member’s personal return.
19. How long are Forms 941CF-ME and 941AF-ME effective and retained?
These affidavits must be held by the pass-through entity. It is not necessary for members to submit a new affidavit each year. Provided it has not been revoked, the affidavit will remain in force continuously as long as the member retains an ownership interest in the pass-through entity. A revoked affidavit must be retained by the pass-through entity for at least three years after the year in which it is revoked.
20. Is an upper-tier entity required to file Form 941P-ME to report amounts withheld by a lower-tier entity?
No. An entity should report only those amounts withheld directly by that entity. The lower-tier entity will file returns and report the amounts it withheld. However, the upper-tier entity will need to issue Forms 1099ME to its members and report in box 2 each member’s share of the amount withheld by the lower-tier entity.
Individual Income Tax
Pass-through Entity Withholding
Income Tax Withholding/Unemployment Contributions
Business Equipment Tax Reimbursement
Forms 1099G, 1099-MISC, and 1099-INT
Real Estate Withholding
Corporate Income Tax
Pine Tree Development Zones
Homestead Exemption Program