Federal Gross Income:
Taxpayer files single and is 66 years old
 Schedule C gross receipts derived from three states:
 

 

 Massachusetts
Rhode Island
New Hampshire

$20,000
$40,000
$15,000
 
 
 Schedule C gross receipts $75.000

 

Cost of goods sold

($30,000)

 



 

Expenses

($10,000)

 

 Net income from business 

$35,000

 

Massachusetts real estate rental loss


 

($3,500)

 

Total Income

 

$31,500



 

Total self employment tax paid

 

$4,200


Form 1-NR/PY:

 

Line 1. Filing Status - Single

 

Line 3. Total Income from U.S. 1040, Line 22

$44,000

Line 4. Exemptions

 
4a. Personal exemptions
4c. Age 65 or older
 

$4,400
$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

$55,000
$20,000
$75,000
.2666
$35,000
$9,331


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
$9,331
($3,500)
$5,831

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


$5,831
$0
$0
$5,831
$25,669

$31,500
.1851


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
$1,120
$1,120
$4,711
$944
$3,767

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
Personal Exemption
= $5,831
= $31,500
= $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.