Employers will have to be more vigilant about where their employees live to determine the proper amount of local income taxes to withhold under new guidelines issued by the Maryland comptroller of the treasury.
One of the major changes in withholding is the piggyback tax imposed by the counties and Baltimore. For the past three years, this rate had been 50 percent of the state income tax rate in all parts of Maryland except Worcester County, where it is 20 percent.
But during its last session the General Assembly raised the ceiling from 50 percent to 60 percent. Officials in Allegany County, Baltimore County and Montgomery County raised their rates to 55 percent, while those in Prince George's County and Talbot County went all the way to 60 percent. The rest of the state, including Baltimore, kept the old rates.
Since the rate is based on where a worker lives -- not where he works -- companies may have to contend with a variety of rates. The new rates are effective Wednesday.
Two large employers say they will be able to handle the problem with some simple reprogramming of their computers. "It's not a significant problem," said Ann E. Grizzel, a spokeswoman for Westinghouse Electric Corp., which has about 12,800 workers in the state. The problem is solved by simply changing some software, she said.
Bethlehem Steel Corp., with about 7,000 employees, already had its employees' residences coded into the computer. "That change is not causing us any problems," said company spokesman Arthur J. Roth.
Some workers who live in counties that increased the piggyback tax might want additional money withheld, said Marvin A. Bond, a spokesman for the comptroller.
Even though the new piggyback rates are retroactive to Jan. 1, the new withholding rate will be in effect only for the last six months of 1992. A taxpayer who received a refund for 1991 of less than $100 might end up underpaying state taxes, Mr. Bond said. "If you came out on the short end of the stick last year, you might want to withhold more," he said.
For most workers from the counties raising their rates, the discrepancy will mean a smaller refund check. About 75 percent of Maryland taxpayers received refunds last year. The average was $370.
Another change in state taxes is a new 6 percent rate for taxable income above $100,000 for single people and $150,000 for married couples filing jointly. The rate for income up to $100,000 remains 5 percent.
The 6 percent rate, scheduled to expire at the end of 1994, will affect 27,000 to 28,000 taxpayers and is expected to raise about $61.8 million, Mr. Bond said. Of that amount, $50 million is earmarked for the state's "rainy day" fund, he said.
Income taxed at the 6 percent rate will be subject to a maximum 50 percent piggyback rate, Mr. Bond said. However, the new piggyback tax rates will apply to income below the $100,000 or $150,000 thresholds.