Registration Requirements In Maine
All businesses in Maine are required to register with the Maine Secretary of State. Some businesses may be required to re-register annually. More information can be found on their website below.
If you operate a business with nexus in Maine, you must register with the Maine Department of Revenue. More information can be found on the Maine Department of Revenue website below.
S Corporation Tax
Maine recognizes the federal S-election, and Maine S corporations are not required to pay tax to the state. However, individual S corporation shareholders will owe tax on their share of the corporation’s income. Maine no longer requires s corporations to file form 1065ME/1120S-ME. Pass through entities that have at least one nonresident owner are now required to file Form 941P-ME - Pass-through Withholding.
Partnerships and LLCs are not required to pay income tax to Maine. Instead, income from the business is distributed to individual LLC members or partners, who then pay Maine income tax on that amount with their personal return. Maine no longer requires s corporations to file form 1065ME/1120S-ME. Pass through entities that have at least one nonresident owner are now required to file Form 941P-ME - Pass-through Withholding.
Maine has a franchise tax which is imposed on banks and financial institutions. These financial institutions are required to file even if the institution is established as a partnership, s corporation, or disregarded entity. Businesses which are required to file this tax use Form 1120B-ME. The form can be found here:
Qualified “Nonresident Partners” for both S corporations and partnerships may elect to have the business report and pay a “composite income tax” on behalf of the taxpayer. This relieves participating eligible members the obligation to file an individual income tax return. Partnerships / s corporations who elect to hold composite tax will use Form 1040C-ME - Maine Composite Income Tax Return.
Individual Income Tax
Maine has a static conformity with the Internal Revenue Code as it existed on December 31, 2019.
The starting point for computing Maine's personal income tax liability is the federal adjusted gross income.
You can use either your federal itemized deduction or standard deduction, whichever benefits you more. The standard deduction is equal to the federal standard deduction for 2020. Here are the amounts.
Single - $12,400
Married Filing Combined - $24,800
Married Filing Separate - $12,400
Head of Household - $18,650
Qualified Widow(er) - $24,800
Personal and dependent exemptions are offered. Here are the amounts.
Married Filing Joint: $8,600
Maine does not conform to the Internal Revenue Code (IRC) section 199A, also known as the QBI deduction.
Shareholders and partners with income assignable to Maine may be required to file an individual income tax return with the state of Maine.
Individual income tax is filed on Form 1040ME:
Individual income tax rates are as follows:
CARES Act Guidance
Maine decouples from all CARES Act provisions.
Franchise, individual, and composite tax returns are due on April 15th. Pass through withholding tax returns are due on March 15th.
If the due date falls on a weekend or holiday, the due date is extended to the next business day.
Franchise, individual, and composite tax returns are automatically granted a 6 month extension. Pass through entity returns that are granted an IRS extension will receive the equivalent extension for Maine.
Estimated Payment Requirements
Any business or individual that expects to owe more than $1,000 in tax to Maine must make estimated payments.
Financial institutions use form 1120B-ES/ME
PTE withholding payments use form 901ES-ME
Individual/Composite tax use form 1040ES-ME
For franchise, individual, composite and pass through withholding tax the penalty for late filing is $25 or 10% of the tax due, whichever is greater. If a tax return is not filed upon demand, the penalty for late filing is the greater of $25 or 25% of the tax due.
If your business was formed or is located in another state, but generates income in Maine, it may be subject to Maine taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. If you run such a business, you should consult with a tax professional.
Maine Secretary of State:
Maine Department of Revenue: