Massachusetts is an attractive state for businesses, but has a complex regulatory environment. The state has a 5% individual income tax rate, and an 8% corporate income tax rate.
Understanding the cost of apportionment in the state can help you accurately report earnings to the IRS and local government.
Corporations Tax in Massachusetts
- Filing Requirements. Entities that are S Corporations for federal purposes are S Corporations for Massachusetts purposes and generally file a Form 355S. S Corporations that are security corporations must file a Form 355SC. Items of S Corporation income, loss, and deduction are passed through the S Corporation to the shareholders, and reported and taxed on their return. For Filers of 355S, S Corporations are liable for the non-income measure of the corporate excise, and for the income measure of the corporate excise on any income that is taxable to the S corporation federally. S Corporations owe at least the minimum tax. S Corporations with total receipts of $6 million or more are liable for the income measure of the corporate excise.
- Allocation & apportionment. Massachusetts follows the three-factor apportionment formula in sourcing receipts from the performance of services to the state.
Partnerships Tax in Massachusetts
Filing Requirements. A partnership is not directly subject to income tax. Instead, each partner is taxed on their share of the partnership income, whether distributed or not. Returns are due annually, by the 15th day of the third month after the close of the partnership’s taxable year, calendar, or fiscal. See Technical Information Release (TIR) 17-5. The partnership must issue Schedules 3K-1 to individual partners. Copies of Schedules 3K-1 must be submitted to the Department of Revenue with Form 3. The state forms to file are Form 3 and Schedule 3K-1. The federal forms to file are Form 1065 or 1065B & Schedules K-1.
Employees & individual filers in Massachusetts
You must file a Massachusetts Income Tax Return if you were a resident for any part of the year, a non-resident with Massachusetts source income over $8,000, or if you earned income from any source within Massachusetts that meets or exceeds the filing threshold. Additionally, you may be required to file if you are eligible for certain tax credits.
Ensuring Accurate Tax Filings
Consulting an expert CPA can help you keep a handle on different laws and tax implications.
At Fusion CPA we can help you take the stress out of tax season, so you can focus on what really matters.
To see how we can help you with a proactive tax strategy to save you time and money, schedule A Discovery Call with one of our CPAs.
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This blog article does not provide legal, accounting, tax advice, or other professional services. Our content is based on current or proposed tax rules at the time of publishing. Older don’t always reflect tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog. We also disclaim the same in relation to use or interpretation of this information. You should not rely on the information on this website as being all-inclusive.
