Taxpayer files single and is 66 years old
|Schedule C gross receipts derived from three states:|
|Schedule C gross receipts||$75,000|
|Cost of goods sold||($30,000)|
|Total cost of goods sold and expenses||($40,000)|
|Net income from business reported on Schedule C||$35,000|
|Massachusetts rental loss reported on Schedule E||($3,500)|
|Total self employment tax paid||$4,200|
|Line 1. Filing Status – Single|
|Line 3. Total Income from U.S. 1040, Line 22||$31,500|
|Line 4. Exemptions|
|4a. Personal exemptions||$4,400|
|4c. Age 65 or older||$700|
|Line 4f. Total exemptions||$5,100|
|Line 13. NONRESIDENT APPORTIONMENT WORKSHEET (to Determine Trade or Business, Including Employment Carried on in Massachusetts):|
|13a. Sales outside of Massachusetts|
13b. Sales inside Massachusetts
13c. Total sales
13e Mass. ratio line 13b by line 13c $20,000/$75,000
13f. Total income being apportioned
Line 13g. Massachusetts income multiply 13e by line 13f
|Since this nonresident's presence for business in Massachusetts is not casual, isolated and inconsequential, the income must be included in Massachusetts gross income.|
|Line 8. Business/Profession|
Line 9. Rental Loss
Line 12. Total 5.2% Income
|Line 14 NONRESIDENT DEDUCTION AND EXEMPTION RATIO:|
|14a. Total 5.2% income (from Line 12)|
14b. Interest Income
14c. Total capital gain income (from Sch B and D)
14d. Total income this return
14e. Non-Massachusetts source income that would be taxable to a MA resident. ($35,000 less $9,331)
14f. Total income
14g. Deduction and Exemption ratio 14d/14f
|Line 15. Self Employment tax paid ($4,200 * .2666) (Deduction directly related to income reported)|
Line 20. TOTAL DEDUCTIONS
Line 21. 5.2% INCOME AFTER DEDUCTIONS
Line 22. Exemption Amount * Line 14g ($5,100*.1851)
Line 23. 5.2% INCOME AFTER EXEMPTIONS
|Does the Taxpayer have a Filing Requirement?|
The pro-rated personal exemption test ensures that taxpayers having less than $8,000 Massachusetts gross income but total income of $31,500 must still file a return.
|Massachusetts source income|
Total Income from all sources
Ratio of Massachusetts
= $5,831/$31,500 = .1851
= $4,400 x .1851 = $814
Even though Massachusetts gross income is less than the $8,000 threshold, it exceeds the pro-rated personal exemptions. The nonresident taxpayer is required to file a return since the income of $5,831 exceeds the pro-rated personal exemption of $814.
No Tax Status or Limited Income Credit:
Nonresidents must use adjusted gross income as if they were Massachusetts residents to determine if they qualify for either NTS or LIC. As a full year Massachusetts resident, this taxpayer's Massachusetts adjusted gross income would be $31,500 and therefore does not qualify for either No Tax Status or the Limited income Credit.
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