Updated October 7, 2026. Quick answer: Yes, unless you claim an exemption. Maine Revenue Services’ Form W-4ME says “Maine law requires employers and other persons to withhold money” from certain payments, most commonly wages, retirement payments and gambling winnings, and that payers “must withhold from payments subject to Maine income tax unless an” exemption is claimed. For a one-time distribution from an IRA or an employer plan, Maine Rule 803 sets a flat 5% when federal withholding applies, which is $2,500 on $50,000 (computed as $50,000 times 5%).
Maine withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | Yes for payments subject to Maine income tax, unless an exemption is claimed on line 6; a payee exempt from federal withholding is also exempt from Maine withholding |
| Rate or amount | A flat 5% of a one-time (nonperiodic) distribution from an IRA or employer plan when federal withholding applies (Rule 803); periodic payments use a reasonable estimate under Rule 803, and with no valid form the payer withholds as if single with no allowances |
| How to start or stop it | Form W-4ME, given to the payer; line 6d exempts periodic retirement payments if you had and expect no Maine income tax liability |
| Direct rollover | Rule 803 applies the 5% only “when subject to federal withholding”, and the IRS says the mandatory withholding does not apply in a direct rollover; Rule 803 does not mention a direct rollover by name |
| Changed for 2026? | Form W-4ME is revised December 2021 and Rule 803 is the May 2024 edition; no 2026 change is stated |
What the Maine documents say
Form W-4ME, Maine’s withholding certificate, includes a notice to payers. It says that “Maine law requires employers and other persons to withhold money” from certain payments and send it to Maine Revenue Services. In its instructions it adds that payers “must withhold from payments subject to Maine income tax unless an” exemption is claimed on line 6.
Two exemptions matter for retirement money. A payee who is exempt from federal income tax withholding is also exempt from Maine withholding. And recipients of periodic retirement payments that are subject to federal withholding are exempt “if the recipient certifies (by checking the box on line 6d) that” they had no Maine income tax liability for the prior year and expect none for the current year. The exemption remains in effect until an updated W-4ME is submitted.
Maine Rule 803, the rule the form points to, adds a flat rate for one-time retirement payouts: “Non-wage payments subject to flat rate federal withholding are subject to Maine withholding at a flat rate of five percent.” Its list of flat-rate payments includes “Non-periodic distributions from certain retirement plans, including Individual Retirement Accounts (IRAs), employer-sponsored deferred compensation plans, and self-employed pension plans when subject to federal withholding.”
A $50,000 withdrawal: cash in hand or a direct rollover
Take a $50,000 401(k) withdrawal paid to you. The IRS says a taxable eligible rollover distribution paid to you from an employer plan is subject to “mandatory income tax withholding (generally at a rate of 20%)”, which on $50,000 is $10,000 (computed as $50,000 times 20%) held back for federal tax. Maine withholding then applies unless you claim an exemption; the form says the payer withholds as if you were single and claiming no allowances when it has no valid form. Rule 803 sets a flat 5% for a one-time distribution from an employer plan when federal withholding applies, and the 20% federal withholding on this payout applies, so Maine withholding is $2,500 (computed as $50,000 times 5%).
The other path is a direct rollover to an IRA or another plan. For federal tax the IRS says “The mandatory withholding doesn’t apply in a direct rollover”. The Maine documents read do not say how a direct rollover is treated for state withholding, so confirm it with the payer before choosing.
What a mover should know
This page is about Maine as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- Form W-4ME is revised December 2021 and states no flat rate for a one-time distribution. Rule 803 (May 2024) states the 5% but does not mention a direct rollover by name, and neither document describes a 2026 change.
Common mistakes
- Checking line 6d to stop withholding on a one-time withdrawal; the line is for periodic retirement payments.
- Assuming federal opt-out does not matter; the form says a payee exempt from federal withholding is also exempt from Maine withholding.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: state withholding on retirement withdrawals, how Maine taxes 401(k) and IRA withdrawals, Maine retirement taxes, and retirement withholding calculator.
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Answer againSources
- Form W-4ME Maine Employee’s Withholding Allowance Certificate (revised December 2021): https://www.maine.gov/revenue/sites/maine.gov.revenue/files/inline-files/22_form_w-4me_ff.pdf
- Maine Revenue Services Rule 803, Income Tax Withholding Reports and Payments (May 2024; read October 8, 2026): https://www.maine.gov/revenue/sites/maine.gov.revenue/files/inline-files/Rule%20803_May_2024.pdf
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.