- I already file withholding for my employees. Can I include nonresident partners on that withholding listing?
- Can I file and pay pass-through entity withholding electronically?
- Can I request a waiver from the electronic filing and payment requirements?
- Can I withhold from resident members, too?
- What if a nonresident member is making or wants to make estimated payments -- do I have to withhold for that member?
- Is every nonresident member required to file a Maine income tax return?
- Do I need to withhold from composite filers?
- How much must be withheld?
- Can I make payments more often than quarterly?
- What if I make a mistake on a return?
- Do I need to withhold for nonresident members that are pass-through entities?
- What about the nonresident threshold for taxability?
- What if I am operating at a loss?
- 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?
- My business reports on a fiscal year basis. How do I determine the amount to withhold?
- Real estate withholding has been withheld for an entity during the year. Should the REW funds be listed on Form 941P-ME as payment withheld?
- 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?
- My pass-through entity is owned by other pass-through entities (upper-tier). Can those upper tier entities qualify for the compliant taxpayer exemption?
- 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?
- Are withholding statements required to be filed by the pass-through entity at the end of the year?
- How long are Forms 941CF-ME and 941AF-ME effective and retained?
- Is an upper-tier entity required to report amounts withheld by a lower-tier entity on Form 941P-ME?
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.
You must file Form 941P-ME to report withholding on Maine source income of nonresident members. For more information, visit Pass-Through Entity Withholding & Returns.
Revised: March 1, 2019
2. Can I file and pay pass-through entity withholding electronically?
Yes.
Electronic Filing. MRS Rule 104 requires pass-through entities with any nonresident members that are subject to pass-through withholding on Maine-source income to electronically file Form 941P-ME. Form 941P-ME may be filed electronically using either the:
- Maine Tax Portal (MTP)* or
- Modernized e-File (MEF).
*To file on the Maine Tax Portal, the entity must have an MTP username. If a MTP username has not already been created, go to revenue.maine.gov and select Create a Username under the Username and Password fields. You will be required to provide the entity's federal employer identification number (FEIN) and one of the following:
- the amount due or refunded from one of the entity's last three returns (must be greater than $0 for authentication); or,
- a Letter ID from correspondence the entity recently received from Maine Revenue Services (MRS). The Letter ID is found on the top right corner of the letter and begins with an L.
Electronic Payments. MRS Rule 102 requires taxpayers with a combined annual tax liability for all taxes that is $10,000 or more for the prior calendar year to remit all Maine tax payments electronically and continue to remit electronically in future years. Payments of pass-through entity withholding may be made electronically using either the:
- MTP (ACH debit) or
- ACH credit.
For more information, see Electronic Services at www.maine.gov/revenue or email MRS at taxpayerassist@maine.gov.
Note: Taxpayers may request waivers from the electronic filing and electronic payment requirements for good cause. See Question 3 below for more information.
Revised: April 5, 2024
3. Can I request a waiver from the electronic filing and payment requirements?
Yes. A pass-through entity unable to meet the electronic filing requirement because of undue hardship may request a waiver from the State Tax Assessor. The request must be in writing and must include the name, address, and federal ID number of the entity, a detailed explanation of why filing electronically poses a significant hardship, and when the entity will be able to comply with the electronic filing requirements. See MRS Rule 104, Section .08.
Additionally, an entity may make a written request to MRS for a waiver from the electronic payment requirement for good cause. Good cause determinations will be made on a case-by-case basis. See MRS Rule 102, Section .06.
| Mail waiver request to: | Maine Revenue Services |
| Corporate Tax Unit | |
| P.O. Box 9107 | |
| Augusta, ME 04332-9107 | |
| OR email: | corporate.tax@maine.gov |
Revised: April 5, 2024
4. 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.
Revised: July 19, 2023
5. 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 3P 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.
Revised: April 5, 2024
6. 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. Forms and instructions are located on the MRS Forms page.
Revised: July 19, 2023
7. 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). Form 941CF-ME must be retained by the pass-through entity for at least six years after the filing of the composite return for the taxable year. The entity must then list that member on the Form 941P-ME, Schedule 3P filed for the tax year. A new Form 941CF-ME must be submitted each year by each eligible person electing to participate in the composite return for the taxable year. Estimated payments are required to be made by the entity on behalf of the composite filing group as long as the aggregate Maine income tax liability is greater than $1,000.
Revised: April 5, 2024
8. How much must be withheld?
You must withhold 7.15% of the estimated Maine source distributive income of each nonresident member, except you must withhold 8.93% if the nonresident member is a C corporation. The Maine source distributive income of a nonresident member is equal to the member’s share of the net income determined by the items of income, loss, and deduction as reported on federal Form 1065, Schedule K of the entity for the calendar year (or, for fiscal year filers, for the fiscal year ending during the calendar year) apportioned to Maine in accordance with 36 M.R.S., Chapter 821.
If you do not know the amount of Maine source distributive income of a nonresident member, you must estimate.
For purposes of Maine pass-through entity withholding, the net income of an entity for the calendar year (or fiscal year) is calculated on an estimated basis. See the instructions for Form 941P-ME, Schedule 1P, line 5 for more information.
An entity that is required to withhold a total of more than $1,000 from its members for the calendar year must, for each calendar quarter, make estimated payments equal to 25% of the lesser of the following:
(a) 90% of the amount required to be withheld for the calendar year; or
(b) The amount required to have been withheld for the prior calendar year, except that this paragraph does not apply if the preceding year was less than 12 months, or if the pass-through entity was not required to withhold, or if the entity did not file an annual return for the prior year.
The estimated payments may be made electronically or by check using Form 901ES-ME on or before: April 30th, July 31st, October 31st, and January 31st of the following year.
See question 2 above for electronic filing and payment options.
Revised: July 19, 2023
9. 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.
See question 2 above for electronic filing and payment options.
Revised: July 19, 2023
10. What if I make a mistake on a return?
If you make a mistake on the return, you must file an amended Form 941P-ME. Check the box indicating you are filing an amended return.
See question 2 above for electronic filing and payment options.
Revised: July 19, 2023
11. 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 7.15% 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, Partnership A may withhold 7.15% 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).
Revised: July 19, 2023
12. 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.
Revised: July 19, 2023
13. 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. It is important to note that even if withholding is not required, the company must still file Form 941P-ME.
Revised: July 19, 2023
14. 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.
Revised: July 19, 2023
15. 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, 2022 through June 30, 2023, income for that period is considered income earned in 2023. For 2023 purposes, withholding must be based on the income for the period July 1, 2022 through June 30, 2023.
Example: Partnership XYZ operates on a fiscal year ending on September 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.
The IRS requires Partner A to include fiscal year partnership results in the calendar year return for the year during which the partnership year ends. Thus, XYZ results for fiscal year ended September 30, 2023 would be included in Partner A's calendar year 2023 return. XYZ's budget projections for the fiscal year ending during 2023 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 2023 would be $5,000.
Revised: April 5, 2024
16. Real estate withholding ("REW") has been withheld for an entity during the year. Should the REW funds be listed on Form 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.
Revised: July 19, 2023
17. 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 3P.
Revised: April 5, 2024
18. 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 3P.
Revised: April 5, 2024
19. 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 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.
Revised: July 19, 2023
20. 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 income tax return. Failure to provide Form 1099ME to your members may result in disallowance of the withholding claimed on the member’s return.
Note: A person who willfully fails to furnish a statement by the due date, or who willfully furnishes a false or fraudulent statement, commits a civil violation and is subject to a fine of $50 for each such failure or each such furnishing. See 36 M.R.S. § 5251-A.
Revised: July 19, 2023
21. How long are Forms 941CF-ME and 941AF-ME effective and retained?
These affidavits must be held by the pass-through entity for at least six years after the filing of the composite return for the taxable year. A new affidavit must be submitted each year by each eligible person for which an election is made. An affidavit may be revoked if for any reason the pass-through entity does not include the nonresident member(s) on the Form 941P-ME, Schedule 3P filed for the tax year. A revoked affidavit must be retained by the pass-through entity for at least three years after the year in which it is revoked.
Revised: July 19, 2023
22. Is an upper-tier entity required to report amounts withheld by a lower-tier entity on Form 941P-ME?
An entity should report only those amounts withheld directly by that entity. In this case, the lower-tier entity must file Form 941P-ME and report the amounts it withheld. However, the upper-tier entity must issue Forms 1099ME to its members and report in Form 1099ME, box 2 each member’s share of the amount withheld by the lower-tier entity. Additionally, the upper-tier entity must also file Form 941P-ME to report its Maine-source income.
Revised: July 25, 2023