The Maryland Department of Labor, Division of Unemployment Insurance, oversees the state's unemployment laws. The state unemployment wage base is the amount of employee wages an employer must pay unemployment tax on for the year. Unemployment tax provides unemployment insurance to eligible employees who lose their jobs.
Taxable Wages
Most Maryland employers have to pay unemployment tax on regular employee wages and salaries. Other wages, however, are also taxable, including reported tips and meals and lodging the employer provides to employees except when the meals and lodging are provided at the work site for the employer's benefit. Taxable wages also include final wages, vacation wages, the first six months of sick time paid to employees, some advances for travel and expenses, and payments the employer makes for the employee's portion of Social Security.
State Wage Base
At the time of publication, Maryland's wage base is $8,500. The employer's unemployment tax rate depends on the length of time of the business and his history with layoffs. An employer with former employees who draw unemployment benefits regularly on his account generally has a higher tax rate than an employer with fewer benefits drawn.
Calculation
To compute unemployment liabilities for each worker, the employer multiplies the tax rate by the state's wage base. Once the employer pays taxes on the required wage base for each employee, he does not owe any more tax for that employee for the year. The employer's tax liability for the employee resumes at the start of the next year and is based on the tax rate the Maryland Division of Unemployment assigns and the mandated wage base for the year.
Excess Wages
If an employer satisfies the 2011 wage base of $8,500 for an employee in the first quarter of the year, the employer does not incur excess wages. However, if the employer paid the employee $6,000 in the second quarter of 2011, he has $6,000 in excess wages since he already satisfied the required wage base of $8,500. The employer would need to file quarterly wage reports with the division showing gross wages paid to each employee for the reporting period. The employee adds all excess wages paid to employees for the quarter and includes it on his wage report.
Federal Wage Base
Most employers in the U.S. must pay federal unemployment tax, including those in Maryland. As of the time of publication, the annual wage base for federal unemployment tax is $7,000. The employer obtains his tax rate for the year from IRS Circular E. He multiplies the rate by the federal wage base to arrive at his tax liability for each employee. At the time of publication, Maryland employers that pay their state unemployment tax can take a credit of 5.4 percent against their federal unemployment tax rate.
