Maryland payroll setup for your first hire

Maryland takes state income tax and county or Baltimore City tax from paychecks. Those amounts sit with the Comptroller, not the Division of Unemployment Insurance.

Maryland takes state income tax from paychecks. It also takes a local income tax for Maryland’s 23 counties and Baltimore City. This is not Texas, Florida, Washington, or Tennessee. Those states do not take state income tax from paychecks. A federal Employee’s Withholding Certificate (Form W-4) is not the Maryland certificate.

The Comptroller of Maryland is the income-tax office. The 2026 Maryland Employer Withholding Guide says every employer subject to withholding must register with the Revenue Administration Division by filing the Combined Registration Application (Form CRA). You can also register online at marylandcomptroller.gov or on Maryland Tax Connect, the Comptroller e-services portal. New shops can start that same CRA on Maryland Business Express. The Comptroller assigns a Central Registration Number (CRN). That is the eight-digit Maryland tax account number. Hold that number. A Division of Unemployment Insurance login is not that number. A payroll login is not either account.

Employees complete the Employee’s Maryland Withholding Exemption Certificate (Form MW507). That form names the county or Baltimore City where the employee lives. The Withholding Guide says to use the local rate for the area where a Maryland resident lives. Nonresidents use the special 2.25% nonresident rate and no local tax, except where the Comptroller names a reciprocity rule. Maryland has a state-tax reciprocity agreement with Pennsylvania. For a Pennsylvania resident who works in Maryland and does not keep a Maryland home for 183 days, the Comptroller’s withholding page says withhold only the local tax of the Maryland place of work. That local tax still rides the Comptroller file. It is not a separate city collector the way Pennsylvania earned income tax, called EIT, is.

File the Employer’s Return of Income Tax Withheld (Form MW506) on the schedule the Comptroller assigns. File the Annual Employer Withholding Reconciliation Return (Form MW508) by January 31. The Withholding Guide says quarterly MW506 returns are due on the 15th day of the month after the quarter. Maryland Tax Connect can take those files. One CRA can also start unemployment with the Division of Unemployment Insurance. The withholding number still sits with the Comptroller. The unemployment number still sits with the Division.

When you owe unemployment: one covered worker for some portion of a day

The Division of Unemployment Insurance collects state unemployment tax. That tax is often called SUTA, state unemployment tax, or SUI, state unemployment insurance. Older vendor pages still call the office DLLR, the Department of Labor, Licensing and Regulation. The live office is the Maryland Department of Labor. The Division’s new-employer page restates Maryland unemployment insurance law. An employer is a person or governmental entity who employs at least one individual within the State. Labor and Employment § 8-101 prints that one-worker definition. An employing unit is an employer that has at least one employee engaged in covered employment for at least part of a day. The Employers’ Quick Reference Guide uses the same one-or-more test. Agricultural, domestic, and farm-crew shops use other tests. This scorecard is the regular-business path.

This is not California’s $100-in-a-quarter test. There is no 15-day California clock on the Division page. Do not copy that clock onto Maryland. This is not Missouri’s $1,500-in-a-quarter or 20-week test. Do not copy that test onto Maryland. This is not Indiana’s $1 covered-wage test. Do not copy that $1 test onto Maryland. Massachusetts uses 13 weeks. Do not copy a 13-week clock onto Maryland. Maryland does take state paycheck withholding. Do not treat Maryland like a no-withholding state.

The Quick Reference Guide tells new shops to file the Combined Registration Application no later than 20 days after the first day of business. That 20-day CRA clock is a Maryland business-start clock. It is not California’s 15-day registration clock after $100 in a quarter. If the Division finds you liable, it assigns an unemployment insurance employer account number. Hold that number. Use it on reports and payments. Do not substitute a federal Employer Identification Number, called FEIN.

Register unemployment on BEACON. The Combined Registration Application can start the file. The number still sits with the Division.

BEACON is the Maryland Unemployment Insurance Portal, the Division of Unemployment Insurance’s online system, at employer.beacon.labor.md.gov. The Division’s BEACON instructions say a new shop that does not yet have a Maryland unemployment account number selects Register for an Account. You will need the FEIN, the legal name, the date wages will be or were first paid for services in Maryland, owner or officer information, and the Maryland work location. The new-employer page says shops that register in BEACON may still need the Combined Registration Application for other state tax accounts.

After the account exists, file the quarterly contribution and wage report in BEACON. The Division’s tax-rate page says those reports and payments are due within one month after the end of each calendar quarter. A late report can draw a $35 penalty. Late payments draw 1.5% interest per month. A quarterly wage report is not the new-hire report.

The same tax-rate page prints the 2026 taxable wage base as the first $8,500 of wages a worker earns from that employer in the calendar year. New-employer rates may range from 1.0% to 2.6%. Construction shops headquartered in another state use a different construction-industry average, and that rate may not fall below the new-employer rate then in effect. Use the rate on your Experience Rate Notice in BEACON, not a number from a software page. Tax Table A is in effect for 2026. Experience rates for shops with a history range from 0.30% to 7.50%.

New hire is a 20-day Maryland State Directory of New Hires report. A BEACON wage report does not take it.

The new-hire report is a list of who you just hired. It is not a box on the BEACON wage report. The Department of Human Services new-hire page requires a report of a newly hired or rehired employee within 20 days. File with the Maryland State Directory of New Hires at mdnewhire.com. Labor and Employment § 8-626.1 sets that 20-day clock from the date of employment, the day the employee starts work. The statute also names the starting wage, whether health insurance is available, the federal EIN, and the State unemployment insurance account number. A quarterly BEACON wage report does not satisfy that clock. This is not Massachusetts’s 14-day Department of Revenue report. This is not Georgia’s 10-day report.

The Quick Reference Guide repeats the 20-day report and the 10-digit Maryland unemployment account number. Electronic shops that report twice a month keep those files no fewer than 12 days and no more than 16 days apart. The first missed report draws a written warning. Later months can draw a $20 civil penalty, or $500 if the failure was a conspiracy between the employer and the employee. The payroll service can send the file. The clock still sits on you.

Family and Medical Leave Insurance is not a 2026 paycheck withholding. Contributions start in 2027.

FAMLI is Family and Medical Leave Insurance, Maryland’s paid family and medical leave program. The FAMLI contribution page says payroll deductions start in January 2027. The first quarterly payment is due April 30, 2027. Benefits are later. This is not Massachusetts Paid Family and Medical Leave. That program already withholds on a first hire. This is not Colorado Family and Medical Leave Insurance. That program already files on a first hire. Do not copy a 2026 FAMLI withholding clock onto a Maryland first hire.

Workplace injury insurance is due when the first employee starts. The Commission does not sell the policy.

This is a first-hire policy for ordinary shops. It is not Florida’s four-employee wait. It is not Tennessee’s five-employee wait. It is not Missouri’s five-employee wait. It is not the three-employee test used in Georgia, North Carolina, or Virginia. It is not Texas optional coverage. It is not Washington’s exclusive state fund. It is not Ohio’s Bureau of Workers’ Compensation monopoly. Maryland calls this workers’ compensation.

Labor and Employment § 9-202 presumes an individual is a covered employee while in the service of an employer under a contract of hire. Labor and Employment § 9-402 says each employer shall secure compensation for all covered employees. The Workers’ Compensation Commission employer FAQ says to buy that insurance from any company licensed to write workers’ compensation in Maryland, or from the Chesapeake Employers’ Insurance Company. WCC is the Workers’ Compensation Commission, the office for that coverage. WCC does not sell that policy. Chesapeake Employers’ Insurance Company is Maryland’s insurer of guaranteed market. Ordinary shops can also buy a licensed private policy, or apply to self-insure with the Commission. A payroll login is not a policy. Failing to secure the insurance can draw a fine of not more than $10,000. The entire premium sits on the employer. Deducting any part of that premium from wages is a misdemeanor.

Patriot’s registration article says you can sign up through a private provider or a state-operated fund. That state-fund line is what the software page says. The Commission’s ordinary path is a licensed private carrier, Chesapeake Employers’ Insurance Company, or self-insurance with the Commission. Do not treat Maryland like Washington or Ohio on that point. Chesapeake Employers is not an exclusive fund. Other licensed carriers can write a policy.

How Gusto and Patriot describe Maryland

Confirm the live withholding number on Maryland Tax Connect. Confirm the unemployment account and rate on BEACON and on the Experience Rate Notice. Confirm workplace injury insurance with a licensed carrier, Chesapeake Employers’ Insurance Company, or on the Workers’ Compensation Commission employer pages. Confirm county or Baltimore City withholding on the MW507, not on a separate city portal.

Gusto’s Maryland help article says Middesk (Gusto’s business-verification company) may register state income-tax withholding and state unemployment insurance (SUI). It names the Comptroller of Maryland for withholding and the Maryland Department of Labor, Licensing and Regulation (DLLR) for unemployment tax. DLLR is the older name for the Maryland Department of Labor. It then sends both tax types to Maryland Tax Connect and the Combined Registration Application. Check the boxes for Employer Withholding Tax Account and Unemployment Insurance. The same article says the Central Registration Number is eight digits and usually starts with 0, 1, 2, or 3. It calls the unemployment Employer Account Number 10 digits and usually starting with 00 or 01. It lists Form MW506, Form MW508, and Form DLLR/DUI 15 among Maryland files. It says Maryland county taxes are paid and filed together with state income tax in one lump sum to the Comptroller, based on where the employee lives. Middesk’s standard order does not open FAMLI. Confirm the live numbers on Maryland Tax Connect and BEACON. Confirm the rate on the Experience Rate Notice. Read Gusto’s Maryland article. See Gusto on the directory.

Patriot’s tax table says Full Service files Maryland Unemployment Insurance (SUI or SUTA) on the quarterly Form DLLR/DUI 15. It files Maryland income-tax withholding on Form MW506 and the annual Form MW508. It also names all Maryland county taxes on those same MW506 and MW508 files. Patriot’s registration article says one Comptroller registration covers withholding and unemployment. The Combined Registration Application can start both. The accounts still sit with two agencies. The article prints a 1.0% to 2.6% new-employer SUTA range for 2026. The Division also prints that range on its tax-rate page. Use the rate on your Experience Rate Notice, not a number from a software page. The same article tells employees to complete Form MW507 and puts the 20-day new-hire report on the Maryland State Directory of New Hires. The article also says workplace injury insurance can come from a private provider or a state-operated fund. The Commission’s ordinary path is not a Washington-style exclusive state fund. Read Patriot’s article and Patriot’s registration article. See Patriot on the directory.

What still sits on the employer

• Decide that one covered worker has started. Agricultural, domestic, farm-crew, and successor shops use other tests.
• Complete the Combined Registration Application or Maryland Tax Connect so the Comptroller can open withholding. Complete BEACON so the Division of Unemployment Insurance can open unemployment if the combined file did not.
• File the Combined Registration Application no later than 20 days after the first day of business.
• Hold the 10-digit unemployment account number. Do not substitute a federal EIN for that number.
• Enter the premium rate from the Experience Rate Notice, not a marketing figure. The Division prints a 1.0% to 2.6% range for new shops in 2026. Confirm the live notice.
• File the quarterly contribution and wage report in BEACON after the account exists, even in a zero-wage quarter until the Division closes the file.
• Register withholding on Maryland Tax Connect or Form CRA. Collect Form W-4 and Form MW507. A federal W-4 is not the Maryland certificate. File Form MW506 and Form MW508. County and Baltimore City tax ride that same Comptroller file.
• File the 20-day new-hire report with the Maryland State Directory of New Hires. A quarterly BEACON wage report does not satisfy that clock.
• Buy workplace injury insurance when the first covered employee starts. The Workers’ Compensation Commission does not sell that policy. Payroll software does not issue that policy.
• Do not withhold FAMLI in 2026. Contributions start in January 2027.
• Do not copy another state’s clock onto Maryland. Maryland does not use California’s $100-quarter test. Maryland does not use Missouri’s $1,500-quarter or 20-week unemployment test. Maryland does not use Indiana’s $1 unemployment test. Maryland does not skip state paycheck withholding the way Texas, Florida, Washington, or Tennessee do. Maryland does not send county tax to a separate collector the way Pennsylvania sends earned income tax. Maryland does not use Florida’s four-employee workplace-injury wait. Maryland does not use Missouri’s or Tennessee’s five-employee wait. Maryland does not use the three-employee wait used in Georgia, North Carolina, or Virginia. Maryland does not use Washington’s exclusive state fund. Maryland does not use Ohio’s Bureau of Workers’ Compensation monopoly.

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