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20. Is an upper-tier entity required to file Form 941P-ME to report amounts withheld by a lower-tier entity?

Tue, 17 Sep 2013 15:36:16 EDT

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.

Rev. 12/3/12

19. How long are Forms 941CF-ME and 941AF-ME effective and retained?

Mon, 03 Dec 2012 09:16:19 EST

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 Provided it has not been revoked, the affidavit will remain in force continuously as long as the member retains an ownership interest in the pass-through entity.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.

Rev. 12/3/12

18. Are withholding statements required to be filed by the pass-through entity at the end of the year?

Mon, 23 Dec 2013 13:39:12 EST

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.

Rev. 12/23/13

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?

Mon, 03 Dec 2012 09:15:10 EST

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.

Rev. 12/3/12

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?

Mon, 23 Dec 2013 13:38:43 EST

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.

Rev. 12/23/13

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?

Mon, 03 Dec 2012 09:13:11 EST

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.

Rev. 12/3/12

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?

Tue, 17 Sep 2013 15:26:33 EDT

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.

Rev. 12/3/12

13. My business reports on a fiscal year basis. How do I determine the amount to withhold?

Mon, 03 Dec 2012 09:12:16 EST

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).

Rev. 12/3/12

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?

Mon, 03 Dec 2012 09:11:33 EST

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.

Rev. 11/12/10

11. What if I am operating at a loss?

Mon, 03 Dec 2012 09:11:06 EST

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. .

Rev. 12/3/12

10. What about the nonresident threshold for taxability?

Mon, 03 Dec 2012 09:10:33 EST

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.

Rev. 12/3/12

9. Do I need to withhold for nonresident members that are pass-through entities?

Mon, 23 Dec 2013 13:38:11 EST

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).

Rev. 12/23/13

8. What if I make a mistake on a return?

Mon, 03 Dec 2012 09:19:21 EST

If you make a mistake on the return, you must file an amended return on Form 941P-ME.

Rev. 12/3/12

7. Can I make payments more often than quarterly?

Mon, 03 Dec 2012 09:19:12 EST

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 to and select the Maine EZ Pay or EFT option.

Rev. 12/3/12

6. Do I need to withhold from composite filers?

Mon, 03 Dec 2012 09:19:05 EST

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.

Rev. 12/3/12