How to Do Payroll in Maryland: A Step-by-Step Guide

Last reviewed: July 2026

Maryland payroll has one wrinkle most states don't: every county and Baltimore City adds its own local income tax on top of the state rate, withheld from the same paycheck. Here's the order to handle registration and setup once you factor that in.

Step 1: Get Your Federal EIN

Every Maryland employer needs a federal Employer Identification Number before anything else. Apply free at IRS.gov and you'll have the number in about 15 minutes. You'll need it for every state registration that follows.

Step 2: Register with Maryland State Agencies

New Maryland employers need a withholding account with the Comptroller of Maryland and an unemployment insurance account with the Maryland Department of Labor, Division of Unemployment Insurance. If you're also forming an LLC or corporation, the Maryland Business Express portal (State Department of Assessments and Taxation) handles entity filing alongside your tax registrations.

From the Payroll Desk

Register before your first payroll, not after. Give the state agencies a few business days to process, since your account numbers need to exist before you deposit any withheld tax.

Step 3: Set Up State and County Withholding

Employees complete Form MW507, the Employee's Maryland Withholding Exemption Certificate, alongside the federal W-4. What makes Maryland different is that state withholding isn't the whole picture: every county, plus Baltimore City, charges its own "piggyback" income tax, withheld based on the employee's county of residence and reported together with state tax on Form MW506.

Register your withholding account through the Comptroller of Maryland. Your deposit category (accelerated, monthly, quarterly, annual, or seasonal) is assigned based on how much you withhold, with accelerated filers remitting within three business days of payroll.

Step 4: Register for Maryland SUI

State Unemployment Insurance is administered by the Maryland Division of Unemployment Insurance. New employers are commonly assigned a standard rate of 2.6% on the first $8,500 of each employee's wages, though the published new-employer range runs from 1.0% to 2.6% depending on industry classification.

Maryland also requires workers' compensation coverage starting at your first employee, with narrow exceptions for sole proprietors, independent contractors, and very small agricultural employers — confirm your situation with the Maryland Workers' Compensation Commission.

Step 5: Pick a Pay Frequency and Handle Final Pay

Maryland requires employers to pay each employee at least once every two weeks or twice a month. Bona fide executive, administrative, and professional employees can be paid less often. Biweekly and semi-monthly are both common choices that satisfy this rule.

When employment ends, final wages are due on or before the day the employee would have been paid had employment continued — the same rule whether the employee quit or was let go.

New hires need to be reported within 20 days of their start date — see our New Hire Reporting guide for the required fields.

Step 6: Deposit and Filing Calendar

Once payroll is live, three calendars run at the same time:

• Federal: Deposit withheld income tax and FICA on the IRS semi-weekly or monthly schedule, then file Form 941 quarterly.
• Maryland withholding (state + county): Deposit on the Comptroller's assigned category, from accelerated through annual, via Form MW506.
• Maryland SUI: File quarterly wage reports and pay unemployment tax to the Division of Unemployment Insurance.

Because Maryland withholding blends state and county rates, double-check your paycheck math with our paycheck calculator before your first live run rather than assuming a flat state-only rate.

Step 7: Year-End W-2s

By January 31, issue Form W-2 to every employee and file copies with the Social Security Administration, along with your final Form 941 and Form 940 for the year. Maryland W-2s need to show both state and local tax withheld, and both figures should reconcile against what you actually deposited across the year.

Send new employees to our W-4 Helper for a guided walkthrough of the current federal withholding form.

Frequently Asked Questions

What are the basic steps to run payroll in Maryland?

Get a federal EIN from the IRS, register with the Comptroller of Maryland for state and local withholding, register with the Division of Unemployment Insurance for SUI, collect W-4 and MW507 forms from each employee, set a compliant pay schedule, then run payroll, deposit taxes on schedule, and file quarterly and year-end returns.

Does Maryland have local income taxes on top of state withholding?

Yes. Every Maryland county and Baltimore City levies its own piggyback income tax, withheld alongside state tax based on the employee's county of residence and reported together on Form MW506.

How often do Maryland employers need to pay employees?

Maryland requires employers to pay each employee at least once every two weeks or twice a month, with an exception for bona fide executive, administrative, and professional employees who may be paid less often. Final wages are due on or before the day the employee would have been paid had employment continued.

What is the Maryland SUI rate for new employers?

New Maryland employers are typically assigned a standard unemployment insurance rate of 2.6% on the first $8,500 of each employee's wages, though rates for new employers can range from 1.0% to 2.6% depending on industry classification.