If you are a sole proprietor, you must pay Massachusetts personal income tax on your business profits and annually file Form 1 , Massachusetts Resident Income Tax Return, or Form 1-NR/PY , Massachusetts Nonresident/Part-Year Resident Income Tax Return. You must file a Schedule C, Profit or Loss from Business or Profession, with these forms for each business owned, on or before the 15th day of the fourth month after the close of the business's taxable year, calendar or fiscal. Note: A husband and wife running a business together are considered a partnership, not a sole proprietorship.
For additional information, see Frequently Asked Questions about Massachusetts State Income Taxes.
Nonresident/Part-Year Resident: See the
Department of Revenue's Nonresidents and Part-Year Residents of Massachusetts - General Information and FAQs and the Massachusetts nonresident regulation,
830 CMR 62.5A.1: Nonresident Income Tax.
If you expect to owe more than $400 in Massachusetts income tax on the income you receive from your business (or from any other source not subject to withholding), you must make estimated income tax payments. If you file on a calendar-year basis, your estimated tax may be paid in full on or before April 15 of the taxable year, or in four equal installments on or before April 15, June 15, and September 15 of the taxable year, and January 15 of the following year. Estimated payments must be made with a Form 1-ES. Failure to make sufficient payments on time could result in your owing underpayment penalties.
Massachusetts does not impose a penalty if you paid at least *80 percent of your total current year tax liability on time, or if you paid at least as much in withholding and/or estimated taxes as your previous year's tax liability and your taxable year was 12 months long. For example: If last year your total tax was $1,000 (and your taxable year was 12 months long), and this year your total tax is $1,300 and you made estimated payments totaling $1,000, then the additional $300 of tax you owe will not be subject to an underpayment penalty if you pay it with your income tax return by April 15 and attach a
Form M-2210 , Underpayment of Massachusetts Estimated Income Tax.
*Qualified farmers and fishermen: The 80 percent requirement is reduced to 66 2/3 percent. To qualify, your gross income from farming or fishing must be at least two-thirds of your annual gross income. Also, Massachusetts does not impose a penalty if you are a qualified farmer or fisherman who files and pays in full with your return by March 1 of the following year.
For more information, see the Department of Revenue's guide, Should You Be Paying Individual Estimated Taxes?, or see the Form 1-ES Instructions , which has a worksheet for calculating what your estimated payments should be.
At the federal level, you must file similar forms and schedules, plus pay self-employment tax. Use the links in the chart below or see the section at the end of this guide for contact information.
The chart below summarizes your state and federal filing requirements:
|Sole Proprietors||Form to file|
|Quarterly estimated payments|
Due 15th day of the fourth, sixth, and ninth months of your fiscal year, and the 15th day of your next fiscal year (if your fiscal year is a calendar year: April 15, June 15, September 15, January 15)
If you expect to owe more than $400 in state tax on business income
If you expect to owe more than $1,000 in federal tax on business income
|Annual personal income tax return|
Due 15th day of fourth month following taxable year, calendar or fiscal. If you file on a calendar-year basis, your return is due April 15.
|Form 1 or|
Form 1 NR/PY
|Profit and loss|
Due with annual state and federal personal income tax returns.
|Massachusetts Schedule C|
plus a copy of federal Schedule C or F
(Or Schedule F for farm income)
|Depreciation and amortization (if applicable)|
Due with annual state and federal personal income tax returns
|Copy of federal Form 4562||Form 4562|