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Tax Filing Season Frequently Asked Questions

Learn about important new issues from the Department of Revenue including topics that are new this filing season, the new due date for some returns and the new advance payment requirement.

Updated: September 16, 2021

Table of Contents

Filing Season FAQs – New May 17 deadline, PPP, and more

New May 17 deadline for individual income tax returns and payments

The deadline has been extended for both filing individual income tax returns and making payments from April 15, 2021 to May 17, 2021. 

Is the new filing and payment deadline for individuals only?

Yes. The date change does not affect taxpayers other than individuals filing personal income tax returns and making payments. Form 1, Form 1-NR/PY and Form NRCR for non-resident composite filers are included. 

Has the October 15 extension date for income tax filing changed?

No. The extension date of October 15 for personal income tax filing has not changed.

Has the date for making an extension payment changed?

Yes, the date for making an extension payment has been changed from April 15 to May 17.

What about estimated payments?

Estimated payments due April 15 are not impacted by the date change and remain due on April 15.

What if I already filed my income tax return but didn’t submit my payment?

Taxpayers who have already filed their personal income tax returns, but have not made the associated payment, will have until May 17 to make the payment. 

If I’ve scheduled a payment to be deducted from my bank account before April 15th, will DOR change the payment date now that the due date has been changed to May 17th?

No.  If you take no action, your scheduled payment will still be withdrawn from your bank account on whatever date you originally chose.   See below for information about cancelling your payment. 

Can I cancel a payment scheduled through 3rd party software?

If a payment request was submitted with an electronically-filed tax return and the payment is scheduled to be debited from a bank account on a future date, the taxpayer (or someone authorized by the taxpayer) can contact DOR to cancel the payment request before it’s processed. Contact DOR by sending a message through MassTaxConnect or by calling the contact center at 617-887-6367. The payment can only be canceled up to 4pm the night before the scheduled payment date. DOR cannot change the payment date, cancelling the payment is the only option. A new payment may be scheduled through MassTaxConnect.

If I’ve scheduled a payment using MassTaxConnect, can I cancel the payment and schedule a new one for a later date?

Payments scheduled through MassTaxConnect to be withdrawn from a checking or savings account can be cancelled through MassTaxConnect. Because you can log in to your MassTaxConnect account to schedule a payment or schedule a payment without logging in to an account, you have to cancel accordingly. See the instructions below. Once you have cancelled your payment, you may schedule a new one for a different date. NOTE: Credit card payments CANNOT be deleted once made on the third-party site.  

Cancelling a payment made from your checking or savings account through Mass Tax Connect while not logged into an account

You can cancel a Checking or Savings account payment request ONLY if the request has a status of Submitted. Once the status of the payment request is Processing or Processed, the payment can no longer be cancelled.

  • Go to Mass tax Connect: mass.gov/masstaxconnect  
  • Under Quick Links click on “Find a Submission
  • Enter the email address used for your payment submission and the “Confirmation Code” sent to that email address when you submitted the payment
  • On the payment screen, click on the hyperlink “Cancel
  • Click on “Yes” and your payment is cancelled
Cancelling a payment made from your checking or savings account through Mass Tax Connect while logged into an account

You can delete a Checking or Savings account payment request ONLY if the request has a status of Pending. Once the status of the payment request is Processing or Processed, the payment can no longer be deleted.

  • Go to Mass tax Connect: mass.gov/masstaxconnect  and login to your account
  • Once logged into MassTaxConnect, you will be taken to the Customer page
    • A third-party designee should select the ID hyperlink for the appropriate taxpayer to reach the Customer page.
  • Select the More tab.
  • Under the Submissions tab click the Search Submissions hyperlink
  • Select the Payment hyperlink for the request you wish to cancel.
  • A window will display the information for the payment selected. Verify that this is the payment you would like deleted and click the Delete Submission hyperlink.

If I file on the newly extended May 17, 2021 due date and request that my overpayment be applied to 2021 estimated tax, will the credit carryforward result in a late estimated tax payment since the first quarter 2021 estimated tax due date is still April 15, 2021?

It will not be considered a late payment as long as your overpayment is the result of excess withholding paid during 2020 or any payments made for tax year 2020 provided they were made by April 15, 2021. Under these circumstances, your credit carryforward will be determined to be a timely first quarter 2021 estimated tax payment. If your overpayment is the result of payments made after April 15, 2021, such as an extension payment made on May 17, 2021, your credit carryforward will be considered a late first quarter 2021 estimated tax payment.

Do I have until May 17, 2021 to amend my 2017 Massachusetts individual income tax return as I do for federal tax purposes? 

No, the deadline for filing an amended return for tax year 2017 Massachusetts returns seeking a refund was not extended when the 2020 return deadline was changed from April 15, 2021 to May 17, 2021. If you need to amend your tax year 2017 return to reduce your tax or seek a refund or credit, you generally have:

  • 3 years from the date you filed or the due date of the return,
  • 2 years from the date of assessment, or
  • 1 year from the date of payment, whichever is later.

The 2017 return was due on April 17, 2018. For taxpayers that filed on or before April 17, 2018, an amended return must be filed by April 17, 2021. However, because April 17, 2021 falls on a weekend, a taxpayer has until April 20, 2021, the next business day, to file the amended return.  

If I have not filed a 2017 return yet, and am due a refund, what is the deadline for me to file my 2017 return?

You have until October 15, 2021 to file a 2017 return requesting a refund that results from withholding or payments made by April 17, 2018.  Neither the federal or Massachusetts due date changes altered this deadline.

Paycheck Protection Program (PPP)

Learn how to report PPP loan forgiveness income.

What was the origin of loan forgiveness for PPP loans?

The Coronavirus Aid, Relief and Economic Security (CARES) Act established a Paycheck Protection Program (PPP) that provided loans to small businesses to pay certain business expenses. Under the CARES Act, a PPP loan recipient is eligible for loan forgiveness in an amount spent by the recipient during an 8-week period after the origination date of the loan on certain payroll, mortgage interest, rent, or utilities payments. The CARES Act also provides that any amount of cancelled indebtedness that would otherwise be includable in the gross income of the borrower under the Code for federal income tax purposes is excluded from gross income. Following enactment of the CARES Act, the IRS announced that expenses paid with forgiven PPP loan proceeds would not be deductible by businesses. The Massachusetts Department of Revenue issued guidance on the Massachusetts tax treatment of forgiven PPP loans in Technical Information Release 20-9 (TIR 20-9).

Was there an update to the decision to not allow expenses paid with PPP loans to be deductible?

Yes. Subsequently, the Consolidated Appropriations Act of 2021 (CAA 2021), provided that PPP loan recipients may deduct expenses paid for using PPP loan amounts, even if the PPP loans are ultimately forgiven.

Did Massachusetts update the treatment of loan forgiveness income?

Yes. Loan forgiveness income is excluded from gross income for personal income taxpayers for 2020 under “An Act Financing a Program for Improvements to the Unemployment Insurance Trust Fund and Providing Relief to Employers and Workers in the Commonwealth,” St. 2021, c. 9.

I report my business income on a personal income tax return. Is my forgiven PPP loan taxable?

No, forgiven PPP loans are not taxable for personal income taxpayers, including unincorporated businesses reporting income and expenses on Schedule C, partners in a partnership, and individual shareholders of an S corporationRecently passed Massachusetts legislation excludes PPP loan forgiveness from gross income for 2020 for taxpayers subject to the Massachusetts personal income tax. Therefore, personal income taxpayers do not need to report these amounts.

My business is an S corporation. Do I include forgiven PPP loans when determining how the entity-level excise on net income applies to my business? (Added 6/11/21)

Yes, include forgiven PPP loans when determining whether your business’s total receipts are $6 million or more, subjecting the S corporation to the entity-level excise on net income.  Your business must also include forgiven PPP loans in its total receipts when determining the rate of the entity-level excise on net income.  If your business is subject to the entity-level excise on net income, do not include forgiven PPP loans when computing the amount of income upon which tax is due.

I report my business income on a corporate excise return (Form 355, 355U, 355S or M-990T). Is my forgiven loan taxable in Massachusetts?

No. For purposes of the corporate excise, Massachusetts follows the Code as currently in effect. Therefore, any amount forgiven for a corporate borrower would be excluded from Massachusetts gross income.

Can I deduct my business expenses paid with PPP loan proceeds?

Yes. Whether you are subject to the personal income tax or the corporate excise, if your expenses are deductible on your federal return, they are also deductible on your Massachusetts return.

Where should I report my loan liability from my PPP loan? Do I need to report the loan if I am applying for loan forgiveness?

Yes, even if you are applying for loan forgiveness the initial loan should be reported as a debt instrument and categorized as a loan liability on the balance sheet, which should be categorized as either other current liabilities or long-term Liabilities.

Generally, debt is reported on the following Forms and lines numbers:

Form 355 Business/Manufacturing Corporate Excise Return:  Generally, debt would be reported on Schedule A line 20, “Bonds or Other Funded Debt” or line 24 “Miscellaneous Debt”. It could also impact the Non-Income Measure Calculation.

Form 355S S Corporation Excise Return: Generally, debt would be reported on Schedule A line 20, “Bonds or Other Funded Debt” or line 24 “Miscellaneous Debt”. It could also impact the Non-Income Measure Calculation.

Form 355U Excise for Taxpayers Subject to Combined Reporting: Generally, debt would be reported on Schedule A line 20, “Bonds or Other Funded Debt” or line 24 “Miscellaneous Debt”. It could also impact Schedule U-ST Non-Income Measure Calculation.

M-990T Unrelated Business Income Tax Return: Generally, debt is not recorded on this form.

Form 3 Partnership Income: Debt is reported on Form 3 based on amounts from U.S. Form 1065, line 75 (“Other Liabilities”). A disclosure should also be made on Form 3, line 53 “during the year the partnership had any debt that was cancelled, was forgiven, or had the terms modified so as to reduce the principal amount of debt.”

Coronavirus Relief Fund Grants

Learn about the taxability of grants funded by the CARES Act Coronavirus Relief Fund, including grants awarded by the Massachusetts Growth Capital Corporation (MGCC), the Commonwealth, or municipalities.

My business received a grant awarded by the MGCC, or another Commonwealth or municipal grant funded by the CARES Act Coronavirus Relief Fund.  Is this grant taxable income?

Yes. Federal law requires that grants to businesses be included in gross income. The IRS has specifically stated that if governments use CARES Act Coronavirus Relief Fund payments to establish grant programs to support business, businesses receiving such grants must include the grant amount in their federal gross income. Because these grants are taxable under federal law, they are also taxable under Massachusetts law. 

Can I deduct business expenses paid with grants awarded by the MGCC, or with other Commonwealth or municipal grants funded by the CARES Act Coronavirus Relief Fund?

Yes. Whether you are subject to the personal income tax or the corporate excise, if your expenses are deductible on your federal return, they are also deductible on your Massachusetts return.

Debt Relief Subsidies Paid by the Small Business Administration
 

I report my business income on a personal income tax return. My business received a loan qualifying for debt relief subsidies paid by the Small Business Administration pursuant to Section 1112 of the CARES Act.  Are these debt relief subsidies taxable income?    

No, these debt relief subsidies are not taxable for personal income taxpayers, including unincorporated businesses reporting income and expenses on Schedule C, partners in a partnership, and individual shareholders of an S corporation. Recently passed Massachusetts legislation excludes debt relief subsidies paid by the Small Business Administration pursuant to Section 1112 of the CARES Act for 2020 for taxpayers subject to the Massachusetts personal income tax. Therefore, personal income taxpayers do not need to report these amounts.

Can I deduct business expenses paid with debt relief subsidies paid by the Small Business Administration?

Yes. Whether you are subject to the personal income tax or the corporate excise, if your expenses are deductible on your federal return, they are also deductible on your Massachusetts return.

I report my business income on a corporate excise return (Form 355, 355U, 355S or M-990T) and received debt relief subsidies paid by the Small Business Administration (“SBA”) pursuant to Section 1112 of the CARES Act.  Are these debt relief subsidies taxable in Massachusetts?

No. For purposes of the corporate excise, Massachusetts follows the Code as currently in effect. Therefore, a corporate taxpayer that received such debt relief subsidies would exclude such amounts from Massachusetts gross income.

Economic Injury Disaster Loan Grants
 

I report my business income on a personal income tax return. My business received an Economic Injury Disaster Loan (EIDL) grant awarded pursuant to Section 1110 of the CARES Act or Section 331 of the Economic Aid Act.  Are these EIDL grants taxable income?

No, EIDL grant amounts are not taxable for personal income taxpayers, including unincorporated businesses reporting income and expenses on Schedule C, partners in a partnership, and individual shareholders of an S corporation. Recently passed Massachusetts legislation excludes EIDL grant amounts awarded pursuant to Section 1110 of the CARES Act or Section 331 of the Economic Aid Act for 2020 for taxpayers subject to the Massachusetts personal income tax. Therefore, personal income taxpayers do not need to report these amounts.

Can I deduct business expenses paid with EIDL grants?

Yes. Whether you are subject to the personal income tax or the corporate excise, if your expenses are deductible on your federal return, they are also deductible on your Massachusetts return.

I report my business income on a corporate excise return (Form 355, 355U, 355S or M-990T) and received an Economic Injury Disaster Loan (EIDL) grant awarded pursuant to Section 1110 of the CARES Act or Section 331 of the Economic Aid Act. Are these EIDL grants taxable in Massachusetts?

No. For purposes of the corporate excise, Massachusetts follows the Code as currently in effect. Therefore, a corporate taxpayer that received such EIDL grants would exclude such amounts from Massachusetts gross income.

Employees working remotely due to the COVID-19 pandemic

Learn about the tax impact of telecommuting in 2020 if you commuted across state lines before the COVID-19 state of emergency (Updated 6/18/21)

For Massachusetts personal income tax purposes, Massachusetts residents are generally taxed on all income from sources inside or outside of Massachusetts.  Non-residents are only taxed on items of gross income from sources within the Commonwealth, including income derived from or connected with any trade or business, including any employment, in Massachusetts.  Employers must withhold Massachusetts tax on any wage income that is subject to the Massachusetts personal income tax whether the employee is a resident or a non-resident of Massachusetts.  

There are special rules for wages or other compensation paid to employees who are working remotely (working from home or a location other than their usual work location) due to the COVID-19 Pandemic. The special income sourcing rules adopted for telecommuting employees are intended to minimize disruption for employers and employees during the Massachusetts COVID-19 state of emergency. These rules are effective for the period beginning March 10, 2020 and ending September 13, 2021. This page provides answers to commonly asked questions on this subject.  

How does a non-resident telecommuting employee determine the amount of wages subject to the Massachusetts personal income tax and Massachusetts withholding in 2020? 

A non-resident employee who, prior to the Massachusetts COVID-19 state of emergency, determined Massachusetts source income by apportioning based on days spent working in Massachusetts, must apportion their wages for 2020 based on either of the following:

  1. The percentage of the employee’s workdays spent in Massachusetts during the period January 1 through February 29, 2020  or
  2. If the employee worked for the same employer in 2019, the apportionment percentage properly used to determine the portion of employee wages constituting Massachusetts source income on the employee’s 2019 return.

What is a workday for purposes of determining the portion of a non-resident employee’s wages subject to Massachusetts personal income tax and Massachusetts withholding? (Added 9/13/21)

A workday includes any day an employee was required to work during the year (or during the period the non-resident employee worked, if the non-resident employee’s job lasted less than a year).  It does not include days where the non-resident employee was not required to work, such as holidays, sick days, vacations, and paid or unpaid leave. When a workday is spent working partly in Massachusetts and partly elsewhere, the day is considered a day spent working in Massachusetts, unless the non-resident can prove that he worked outside Massachusetts for more than half the day. A non-resident employee required to apportion his income to Massachusetts by calculating his workdays spent in Massachusetts must determine this apportionment percentage by dividing his workdays spent in Massachusetts by his total amount of workdays.

Can a Massachusetts resident telecommuting employee claim a credit for taxes paid to another state in 2020 if they did not physically work in the other state?    

For a resident of Massachusetts, all wages are taxable, regardless of where they are earned.  A resident employee who, prior to the Massachusetts COVID-19 state of emergency, worked in a state other than Massachusetts, but is now telecommuting from a location in Massachusetts due to the COVID-19 pandemic, will be eligible for a credit for taxes paid to that other state to the extent provided in M.G.L. c. 62, § 6(a) if the other state applies similar sourcing rules. 

What if a non-resident’s former work location in Massachusetts closed permanently?

A non-resident who is telecommuting as a result of the COVID-19 pandemic must continue to report their wages to Massachusetts as they did prior to the Massachusetts COVID-19 state of emergency  regardless of whether their former work location closed. 

What if a non-resident who formerly worked in Massachusetts started a new job in 2020?

 If a non-resident started a new job on or after March 10, 2020, the day the COVID-19 state of emergency was declared in Massachusetts, the special rules do not apply and wages earned while telecommuting from outside of Massachusetts may be apportioned based on actual days in and out of Massachusetts.  For example, if a non-resident exclusively worked from home since starting the new job, none of the income would be considered Massachusetts source income. 

What if my employer stopped withholding Massachusetts personal income tax or changed my withholding to a different state before Massachusetts issued guidance about the special rules on April 21, 2020? 

A non-resident telecommuting employee’s 2020 personal income tax liability will be calculated based on the rules described in the guidance, with wages of non-residents that worked in Massachusetts before the Massachusetts COVID-19 state of emergency and who are now working for the same employer in a different state being sourced to Massachusetts. 

When will the COVID-related non-resident telecommuting rules expire? (Added 6/13/21)

The telecommuting rules that were put in place to minimize disruption for employers and employees during the Massachusetts COVID-19 state of emergency, will cease to be in effect as of September 13, 2021.

Will DOR ask me to verify the apportionment percentage claimed on my 2020 tax return? 

In some cases, DOR will ask for more information before issuing a refund for 2020.  You may be asked to provide:

  • A Letter from your employer outlining your telecommuting arrangement before and after the pandemic started.  This letter must provide information specific to the telecommuting arrangement of the employee, including the specific days the employee worked remotely and the specific days the employee worked in Massachusetts, and how the employer tracks where the employee worked.       
  • A copy of your company’s telecommuting policy that specifically applied to your employment before and after the pandemic started.

Are days spent in Massachusetts due to the COVID-19 pandemic counted for purposes of establishing Massachusetts statutory residency under the 183-day presence test? 

Yes, individuals who spend more than 183 days in Massachusetts and maintain a permanent place of abode in Massachusetts are statutory Massachusetts residents for 2020, regardless of whether any such days are spent in Massachusetts due to the COVID-19 pandemic

How should a non-resident taxpayer complete the apportionment worksheet for their 2020 Massachusetts personal income tax return?

  • If a taxpayer is apportioning 2020 income based on 2019, the taxpayer should report the 2019 day count on the apportionment worksheet 
  • If a taxpayer is apportioning 2020 income based on January and February 2020, the taxpayer should report the day count on the apportionment worksheet

Do the special pandemic related income sourcing rules apply to all non-residents and residents?

No, the special income sourcing rules only apply to individuals who commuted across state lines prior to the pandemic.  These individuals include:

  1. non-residents who worked in Massachusetts before the pandemic and began telecommuting (or increased their telecommuting time) outside Massachusetts due to the COVID-19 pandemic, and to
  2. residents who worked outside of Massachusetts before the pandemic but began telecommuting (or increased their telecommuting time) in Massachusetts due to the COVID-19 pandemic. 

What if someone has the same employer as before the pandemic but has significantly changed their role, such as now being in a management position?

As long as the employee works for the same company, a change in the employee’s role has no impact on how the employee’s Massachusetts source income is calculated.

Additional Resources

Expiration of the Emergency Pandemic Income Sourcing Rules for Non-Resident Employees

Employee Withholding Requirements

What changes after September 13, 2021? (Added 9/13/21)

For the period March 10, 2020 through September 13, 2021, Massachusetts applied emergency pandemic income sourcing rules to wages or other compensation paid to employees who worked remotely (working from home or a location other than their usual work location) due to the COVID-19 Pandemic. For the period beginning after September 13, 2021, wages paid to a non-resident employee will no longer be sourced based on where the employee worked prior to the COVID-19 state of emergency. Instead, the wages for such period will generally be sourced based on where the employee’s work is actually performed. 

I am a Massachusetts non-resident who, prior to the COVID-19 state of emergency, apportioned my wages based on days worked in and out of Massachusetts. Since the beginning of the state of emergency, I have telecommuted entirely from outside of Massachusetts due to the COVID-19 pandemic.  How do I apportion my wages when preparing my 2021 Massachusetts personal income tax return? (Added 9/13/21)

For the period January 1, 2021 through September 13, 2021, apportion your wages using the same method you were required to use for the period March 10, 2020 through December 31, 2020. You would have been required to apportion wages for that period by using either:

  1. The percentage of your workdays spent in Massachusetts during the period January 1 through February 29, 2020 or
  2. If you worked for the same employer in 2019 and 2020, the apportionment percentage properly used to determine the portion of your wages constituting Massachusetts source income on your 2019 return.

For the period beginning after September 13, 2021, you must determine your workdays in and out of Massachusetts based on actual workdays spent in and out of Massachusetts, as explained in 830 CMR 62.5A.1. 

Example 1: A non-resident employee worked for the same employer in 2019, 2020, and 2021.  The non-resident employee spent 40% of his workdays in Massachusetts from January 1, 2020 through February 29, 2020 and he properly determined that 25% of his workdays were in Massachusetts in 2019.  After the Massachusetts COVID-19 state of emergency began, the non-resident employee exclusively telecommuted from his home in another state through December 31, 2021.  The non-resident employee worked a total of 240 workdays in 2021, with 160 of these workdays occurring from January 1, 2021 through September 13, 2021 and 80 occurring from September 14, 2021 through December 31, 2021. 

Because he worked for the same employer in 2019 and 2020, the non-resident employee determined his Massachusetts workdays for the period March 10, 2020 through December 31, 2020 using his Massachusetts workday percentage from 2019, or 25%. The non-resident employee must similarly determine his Massachusetts workdays for the period January 1, 2021 through September 13, 2021 using his 2019 Massachusetts workday percentage.  In contrast, from September 14, 2021 through December 31, 2021, the non-resident employee must determine his Massachusetts workdays based on the number of days he actually worked in Massachusetts, which would be zero.  His total Massachusetts workdays for 2021 is 40 (25% x 160) plus 0, for a total of 40. To determine the portion of his wages apportioned to Massachusetts for 2021, the non-resident employee must multiply his total wages by a fraction, the numerator of which is his 40 Massachusetts workdays, and the denominator of which is his total 240 workdays.  

Example 2: A non-resident employee worked for one employer in 2019 and began working for a different employer starting January 1, 2020.  The non-resident employee spent 40% of her workdays in Massachusetts from January 1, 2020 through February 29, 2020. After the Massachusetts COVID-19 state of emergency began, the non-resident employee mostly telecommuted from her home in another state. The non-resident employee worked a total of 240 workdays in 2021, with 160 of these workdays occurring from January 1, 2021 through September 13, 2021 and 80 occurring from September 14, 2021 through December 31, 2021.  From September 14, 2021 through December 31, 2021, the non-resident employee worked 64 of these days from her home outside of Massachusetts and worked 16 of them from her employer’s office in Massachusetts.    

Because the non-resident employee began working for a new employer in 2020, she must determine her Massachusetts workdays for the period March 10, 2020 through December 31, 2020 by using her workday percentage from January 1, 2020 through February 29, 2020, or 40%. The non-resident employee must also use her workday percentage from January 1, 2020 through February 29, 2020, or 40%, to determine her Massachusetts workdays for the period January 1, 2021 through September 13, 2021.As a result, the non-resident employee had 64 (40% x 160) Massachusetts workdays from January 1, 2021 through September 13, 2021. From September 14, 2021 through December 31, 2021, the non-resident employee must determine her Massachusetts workdays based on the number of days she actually worked in Massachusetts, which would be 16. Her total Massachusetts workdays for 2021 is 64 plus 16, for a total of 80. To determine the portion of her wages apportioned to Massachusetts for 2021, the non-resident employee must multiply her total wages by a fraction, the numerator of which is her 80 Massachusetts workdays, and the denominator of which is her total 240 workdays.

I am a Massachusetts resident.  Can I claim a credit for personal income taxes due to another state for 2021 if I did not physically work in the other state? (Added 9/13/21)    

All wages of a Massachusetts resident are taxable regardless of where those wages are earned.  A resident employee who, prior to the Massachusetts COVID-19 state of emergency, worked in a state other than Massachusetts, but is now telecommuting from a location in Massachusetts due to the COVID-19 pandemic, is eligible for a credit for personal income taxes on the resident employee’s wages that are due to another state. More information about eligibility for this credit may be found on the Department’s “Learn about the income tax paid to another jurisdiction credit” web page.

What are the personal income tax consequences if I am a non-resident and I started working for a new employer in 2021? (Added 9/13/21)

If you started working for a new employer in 2021, the emergency pandemic income sourcing rules do not apply and from that time forward your wages earned while telecommuting from outside of Massachusetts may be apportioned based on actual workdays in and out of Massachusetts. For example, if you worked exclusively from home after starting the new job, none of the income from that job would be considered Massachusetts source income. 

Employer Withholding Requirements

  1. Massachusetts-based companies

My Massachusetts-based company has withheld Massachusetts personal income tax from wages paid to a non-resident employee using the emergency pandemic income sourcing rules.  How does my company withhold after September 13, 2021? (Added 9/13/21)

After September 13, 2021, an employer must withhold Massachusetts personal income tax from wages paid to a non-resident employee for work performed in Massachusetts. Employers do not need to withhold Massachusetts personal income tax from wages paid to a non-resident employee for work performed in another state, even if the employee worked in Massachusetts before the Massachusetts COVID-19 state of emergency and is telecommuting from outside of Massachusetts due to the COVID-19 pandemicTo the extent that a non-resident employee works part-time in Massachusetts and also part-time in another state, the employer must withhold Massachusetts personal income tax from wages paid to the employee for the portion of the work performed in Massachusetts, but will not be required to withhold from wages paid for the portion of the work performed outside Massachusetts.

What records should my company use to withhold Massachusetts personal income tax from wages paid to a non-resident employee based on the employee’s workdays in and out of Massachusetts? (Added 9/13/21)

If the employer’s payroll/attendance records accurately reflect the location from which the work is done, those records can be used to determine the portion of the work done in Massachusetts and as such the wages subject to Massachusetts personal income tax withholding. Alternately, the employer may use any other reasonable method to determine the portion of the non-resident employee’s work performed at locations in Massachusetts, including estimating that portion based on a certification provided by the non-resident employee if taken in good faith. The employer should retain documentation to verify its method and if it is relying on employee certification, the employer should have a signed statement from the employee attesting to the number of days the employee worked in Massachusetts or expects to work in Massachusetts.

  1. Companies based outside of Massachusetts

My company based outside Massachusetts has not withheld Massachusetts personal income tax from wages paid to a Massachusetts resident who worked outside of Massachusetts before the Massachusetts COVID-19 state of emergency but who subsequently has been telecommuting from Massachusetts due to the COVID-19 pandemic.  How does my company withhold after September 13, 2021? (Added 9/13/21)

After September 13, 2021, an employer must withhold Massachusetts personal income tax on all wages paid to a resident employee for work performed in Massachusetts, regardless of whether the employee worked outside of Massachusetts before the Massachusetts COVID-19 state of emergency and regardless of whether the employee is telecommuting from Massachusetts due to the COVID-19 pandemic

Unemployment Benefits and Unemployment Fraud

Are the unemployment benefits I received during 2020 taxable in Massachusetts?

While unemployment is generally taxable income for Massachusetts purposes, see additional questions below about a recent law change providing tax relief for certain unemployment income. If you received unemployment benefits or pandemic unemployment benefits during 2020, you should receive a Form 1099-G, Certain Government Payments, showing the amount of unemployment compensation received. This income must be reported on your 2020 Massachusetts Individual Income Tax return [Form 1 for residents or Form 1-NR/PY for nonresidents or part-year residents] whether you are eligible for a deduction or not.       

Does Massachusetts allow a deduction for unemployment income?

As a result of a recent state law change, taxpayers with household income not more than 200% of the federal poverty level may deduct up to $10,200 of unemployment benefits from their taxable income on their 2020 and 2021 tax returns for each eligible individual. Federal law allows a deduction of up to $10,200 if the taxpayer’s federal adjusted gross income is less than $150,000. Since the Massachusetts income threshold is different from the federal income threshold, some taxpayers may be eligible for a deduction on their federal tax return but not on their Massachusetts tax return. Complete the worksheet to find out if you are eligible for a deduction.

If I’ve already filed my 2020 income tax return, should I file an amended return to claim the new deduction?

No, do not file an amended 2020 return before you hear from us. DOR sent a communication to all taxpayers who filed a 2020 income tax return on or before April 9, 2021 reporting unemployment income. We are adjusting tax returns automatically for most taxpayers who meet the criteria for the unemployment deduction. Starting the week of May 17, 2021, we will send notices to those who are eligible for a deduction. The following week we will send notices to those who are not eligible for a deduction because their household income is more than 200% of the federal poverty level.   

If I’m eligible for a deduction, will I get a refund?  When will refunds be issued?

If you are eligible for the Massachusetts unemployment income deduction and we adjust your return, your reported tax for 2020 will be reduced and you may be entitled to a refund. If you have no outstanding liabilities, DOR will send the refund to you in the form of a paper check. If you have outstanding tax liabilities or certain other obligations, DOR will apply any overpayment to those obligations first and issue a refund for any remaining balance. We will begin to issue refunds on May 20, 2021.  Allow 10 to 14 days for the check to be delivered.

What if I don’t agree with DOR’s determination that I’m not eligible for the MA unemployment deduction?

If  you believe you are eligible for the Massachusetts unemployment deduction, please contact us at (617) 887-6367.  

When my federal return was adjusted for the unemployment deduction, other changes were made as well.  Will DOR make all the same adjustments as the IRS?

DOR is only making adjustments to returns to allow the 2020 Massachusetts unemployment income deduction for eligible taxpayers. You may wish to file an amended Massachusetts return if your taxable unemployment income was reduced on your federal tax return and you became eligible for new or increased federal tax credits or deductions.   

For example, if your federal EITC amount has increased, you are eligible for an increase in the Massachusetts EITC amount.  DOR will not automatically make this adjustment for you, but you can file an amended return to claim the additional credit.

I filed my Massachusetts return and claimed a deduction for my unemployment before I saw any information about who qualifies for the deduction and how to report it on a MA return. What if I made a mistake?

As DOR reviews previously filed 2020 returns reporting unemployment, we will try to identify those that already claimed the deduction. If you qualify for the MA deduction but reported it incorrectly, we may adjust your return even if this doesn’t result in a change in tax. If you were not eligible for the deduction because your household income was above 200% of the federal poverty level, DOR will adjust your return in the future and will send a bill, which may include interest. If you know that you don’t qualify for the MA unemployment deduction and you claimed it in error, you can avoid paying interest by filing an amended 2020 return with payment of any tax due by May 17, 2021.  

If I have not filed my 2020 income tax return, how can I claim the new unemployment deduction?

If you have not filed a 2020 tax return yet, you should report all of your unemployment compensation on your Massachusetts return as usual using line 8a on Form 1 (for resident taxpayers) or line 10a on Form NR/PY (for nonresidents or part-year residents). If you are eligible for a deduction, you should report the deduction amount on Schedule Y, line 9. Note that you may be eligible for a deduction on your federal return but not eligible for a deduction on your Massachusetts return. Complete the worksheet to find out if you are eligible for a deduction.

If I filed my 2020 Massachusetts income tax return after April 9, 2021 but did not claim an unemployment deduction, what should I do now? (Updated 5/25/21)

If you are eligible for the Massachusetts unemployment income deduction but did not claim it on your original return, you should file an amended return.  Use our unemployment worksheet to find out if you’re eligible.  File a complete new return including your total unemployment compensation as income and reporting the allowable unemployment deduction amount on Schedule Y, line 9.  

Are unemployment benefits included in the household income calculation to determine eligibility?

Yes. The full amount of unemployment benefits received during tax year 2020 should be included in a taxpayer’s income in determining whether the taxpayer meets the household income threshold for eligibility.

Are Social Security benefits and other MA non-taxable income (such as MA and US government pensions) included in the household income calculation?    

Yes. The calculation of household income follows Section 36B(d) of the Internal Revenue Code and includes all of a taxpayer’s income, whether or not it is taxable.     

If an individual who is claimed as a dependent files their own MA tax return, are they entitled to the MA unemployment deduction?

Yes. A dependent who received unemployment compensation determines whether they are eligible for a deduction based on their own information. If the dependent’s income is at or below 200% of the federal poverty level, then the dependent would be entitled to a deduction.

The number of dependents claimed on my MA return is different from the number of dependents claimed on my federal return. Which number should I use to calculate household income for the MA unemployment deduction?

When completing the MA unemployment deduction worksheet, you may use the number of dependents from your MA return if that number is higher, however, the same dependent cannot be counted as part of more than one household for purposes of calculating eligibility for the MA unemployment deduction.  

On the Form NR/PY (for nonresident and part-year residents), should taxpayers report all unemployment compensation even if it was not related to previous MA employment or received while a resident of MA?

When completing Form NR/PY, non-residents or part year residents should report as income the amount of unemployment compensation that would be taxable to Massachusetts without considering the new deduction. This would include unemployment received from any source while a resident of MA plus unemployment received while a non-resident that is related to MA employment. A deduction of $10,200 per individual, but not more than the unemployment reported by that individual, can then be claimed on Schedule Y. When determining if the nonresident or part year resident is at or below 200% of the federal poverty level the nonresident or part year resident must include all its income including any unemployment income that is not taxable in MA.

Is a resident taxpayer who collected unemployment compensation from another state eligible for this deduction?

Yes. For a MA resident all unemployment compensation regardless of source should be reported on the Form 1. The deduction applies to any unemployment income taxable in Massachusetts and reported on Form 1. 

Does the unemployment deduction reduce my income for purposes of the Circuit Breaker Credit calculation?  

No. When calculating income for the Circuit Breaker Credit, do not exclude any amount on Schedule Y, line 9 that represents a deduction for unemployment compensation. 

Does the unemployment deduction reduce my Massachusetts Adjusted Gross Income (AGI) for purposes of calculating No Tax Status or the Limited Income Tax Credit?

No. When calculating MA AGI for No Tax Status or the Limited Income Tax Credit do not exclude any amount on Schedule Y, line 9 that represents a deduction for unemployment compensation. 

The Massachusetts Schedule HC asks for Federal AGI from U.S. Form 1040 line 11 which includes my federal unemployment exclusion. Do I need to adjust this amount?  

No, on Schedule HC you should report the amount from U.S. Form 1040 line 11 without further adjustments

What should I do if I received a Form 1099-G or unemployment compensation, but I didn’t request or receive unemployment benefits?

If you received a Form 1099-G reporting unemployment benefits but did NOT receive unemployment benefits, someone may have used your identity to falsely claim unemployment benefits. You should notify the Department of Unemployment Assistance (DUA) by filing a fraud report online or call the DUA customer service department at 877-626-6800. This income should not be reported on your Massachusetts Individual Income Tax return.  After DUA reviews the fraud report, they will send a corrected Form 1099-G. Keep a copy of all Forms 1099-G with your 2020 tax records and be aware that DOR may ask for an explanation of why the amount shown on the Form 1099-G was not reported on the return.

If my unpaid tax balance is related only to unemployment income received in 2020 will penalties be waived? (Updated 5/25/21)

Yes, if you have a balance due on your 2020 individual income tax return only because taxes were not paid on unemployment income, DOR will waive related late payment and underpayment of estimated tax penalties through 12/31/21.  After that date, if you have not paid your 2020 taxes in full, penalties will begin to accrue.   Interest will be charged on any balance not paid by the return due date, May 17, 2021.

Will I be notified of penalties related to tax due on unemployment income or will DOR automatically waive those penalties? (Updated 5/25/21)

The penalty waiver is automated, and you will not receive notice of any waived penalties. You will only receive a notice about taxes and interest due if you did not pay in full by May 17, 2021. If you are billed for penalties you believe should have been waived, you can file an appeal through MassTaxConnect.

Can I enter into a payment agreement to pay the outstanding taxes due to unpaid unemployment income taxes for 2020? (Updated 5/25/21)

Yes, a payment agreement can be established. While no penalties will be assessed through December 31, 2021, interest will still be due.

New! Return due date for sales and use taxes and room occupancy excise

A provision in the FY21 Budget changed the due date for sales and use tax and room occupancy excise returns.  Returns previously due 20 days after the close of the tax period will now be due 30 days after the close of the tax period.  Payments due with the return will also be due 30 days after the close of the tax period.

This change applies to all tax returns filed for the following tax types:

  • Sales/use tax
  • Sales tax on services
  • Meals tax
  • Room occupancy excise
  • Marijuana retail taxes

Please review this information, including charts, for a detailed look at how the changed due date affects filing and paying sales and use taxes and room occupancy excise.

Does the due date change apply to all types of sales and use tax filings

No. This change does not apply to sales/use tax returns filed by materialmen (due 50 days after the close of the tax period) or annual use tax returns for purchasers, Forms ST-10 or ST-11, which remain due on April 15th.          

When does the change in due date go into effect?

The new due date applies for periods ending after April 1, 2021. March 2021 monthly or quarterly returns are still due on April 20th as under prior law.  April 2021 monthly returns are due May 30th.  Note: because May 30th is a Sunday and May 31st is the Memorial Day Holiday, taxpayers will have up to   June 1st to file the April 2021 monthly return.

Is the new date always the 30th of the month? 

The new due date is 30 days after the close of the filing period.  It will be the 30th of the following month except for the January monthly filing period. 

What is the new due date for January returns?

If the last day of February is the 28th, the return for the January monthly filing period would be due March 2nd.

If the last day of February is the 29th, the return for the January monthly filing period would be due March 1st.

DOR further suspended the due date for certain operators and vendors to file returns and pay taxes otherwise due from March 20, 2020 through June 1, 2021. This includes the returns and payments for tax periods beginning Feb 1, 2020 through periods ending April 30, 2021.  Are all of these returns and payments now due on October 30, 2021 (due November 1, next succeeding business day)? (Updated 9/16/21)

Yes, for eligible taxpayers, all of the returns and payments originally due from March 20, 2020 through June 1, 2021 are now due on October 30, 2021 (due November 1, next succeeding business day).

When is the return and payment due for the May 2021 tax period and the June 2021 quarterly tax period? (Updated 5/28/21)

The return and return payment for the May 2021 tax period is due on June 30, 2021. The return and payment for the June 2021 quarterly tax period is due July 30, 2021.   

Additional Resources

New! Advance payment requirements

Beginning April 2021, a provision in the FY21 budget requires that some vendors and operators, depending on amount of tax or excise liability from previous year, make an advance payment before the related tax return is due. This requirement will begin for tax periods ending after April 1, 2021.

This change applies to tax returns filed for the following tax types:

  • Sales/use tax
  • Sales tax on services
  • Meals tax
  • Room occupancy excise
  • Marijuana retail taxes

Please review this information, including charts, for a detailed look at how the new advance payment affects filing and paying sales and use taxes and room occupancy excise.

Who is required to make advance payments?

Taxpayers with over $150,000 in cumulative tax liability in the prior year for the tax types listed above will be required to make advance payments.  

  • The advance payment is due on the 25th of the month for the “tax collected”, generally meaning the tax on gross receipts,  from the 1st through the 21st of that same monthly filing period. 
  • No return or voucher is required with the advance payment.
  • The remaining tax for the month will be due with the tax return, 30 days after the close of the filing period.

When does the advance payment requirement go into effect?

The first advance payment will be due on April 25th and will cover the tax liability for April 1st through April 21st. The April return and final payment for period ending April 30, 2021 will be due on May 30, 2021. Note: when a due date falls on a weekend or holiday the return or payment is due on the next business day.

Is a return or voucher required to be filed with the advance payment?

No. The advance payment will be a “return payment” made on the appropriate tax period. No return or voucher is required at the time the advance payment is submitted. 

How will I make my advance payment on MassTaxConnect?

All taxpayers may use ACH debit to make their advance payments through MassTaxConnect. After login:        

  • Locate the account type and select the Returns hyperlink. 
  • Select the Period you want. 
  • Select the Make a Payment hyperlink
  • Select Return Payment in the payment type dropdown

Video tutorial: How to Make an Advance Payment on MassTaxConnect

Can I use the Meals Tax Bulk File option to make Advance Payments?

Yes. The Meals Tax Bulk File format accommodates filing both Payments and Returns. These can be filed together or separately, by making use of the Y/N Flags within the file as follows:

  • To make an Advance Payment for Meals Tax, you should set the Return Flag (at position 57) to “N”, and set the Payment Flag (at position 166) to “Y” for each location. The Payment will be processed, and the return values will be ignored.
  • To file the Monthly Return for Meals Tax, you should set the Return Flag (at position 57) to “Y”, and set the Payment Flag (at position 166) to “Y” if making a payment for the remaining Amount Due. Otherwise Payment would be “N”. The values of the return should reflect the entire period but the payment amount should reflect the balance due after subtracting out any advance payment made.

Can I make my advance payment through ACH Credit?  

ACH credit is available for sales/use tax and sales tax on services. If you are currently making ACH credit payments through your bank, you will be able to make your advance payment using ACH Credit also, following the same process you use currently.

How do I claim a credit for my advance payment on my tax return?

Currently the tax returns where an advance payment is required do not have a line to report the advance payment. Starting with the April 2021 filing period, when you file your tax return through MassTaxConnect, you should deduct the amount of your advance payment from the amount shown as the balance due on the payment screen and submit a payment for the difference. Changes may be made to the tax returns in the future, but this process should be followed until further notice.

Do I have to include the use tax I owe on purchases in my advance payment?

No, you should not include use tax on purchases in your advance payment. Your use tax on purchases must be reported and paid when the return is filed.

Do I have to include any additional taxes and fees in my advance payment?

Yes, if you are liable for any additional taxes from the 1st through the 21st of the month (e.g., the local option meals tax, room occupancy excise or marijuana excise) or fees (e.g., the Convention Center Financing Fee, Cape Cod and Islands Water Protection Fund Fee, and the Community Impact Fee) you must include these amounts in your advance payment.

How does a tobacco retailer that prepays sales tax determine their advance payment?

The advance payment is based on the tax liability from the 1st through the 21st of the monthly filing period.  A tobacco retailer that has prepaid tax to a wholesaler may reduce the amount of the advance payment by the amount that was already paid from the 1st through the 21st of that same monthly filing period.

How does a taxpayer that currently determines tax liabilities when they bill their customers determine their advance payment? (Updated 7/12/21)

For purposes of calculating the advance payment, a taxpayer that currently determines tax liabilities when they bill their customers should determine the tax liability from the 1st through the 21st of the month using their current method of accounting for the tax types subject to the advance payment requirement, so long as it is the same method used for purposes of each monthly return required to be filed. 

For example, a utility company reports gross receipts from taxable sales on its Massachusetts sales and use tax return based on the date the customer is billed. Assuming all of its customers are billed on the 30th day of the month, it does not have any receipts subject to tax from the 1st through the 21st of the month, and therefore has no advance payment obligation. However, if it bills the customer on the 15th of the month, it must include those receipts in calculating its tax liability from the 1st through the 21st of the month and make an advance payment on the 25th of the month.

My business operates 6 restaurant locations and collected approximately $30,000 in meals tax for each restaurant location in the prior year. Am I required to make an advance payment based on the prior year total meals tax collected or should I consider each location separately? 

If all locations are part of a single business, you are required to make an advance payment for all 6 locations because the cumulative prior year tax liability for all locations together is more than $150,000. 

My business operates a hotel that pays room occupancy tax and meals tax.  In the prior year, the hotel collected more than $150,000 in room occupancy taxes. At the onsite restaurant, the business collected $70,000 in meals tax in the prior year. Am I required to make an advance payment for both room occupancy taxes and meals tax?

No. Each tax type is considered separately. You are required to make an advance payment for the room occupancy taxes but not for meals tax.

I am a vendor who reported use tax on purchases on my sales and use tax return last year. Do I include the use tax I reported on purchases in the prior year for purposes of calculating my cumulative prior year sales and use tax liability?

No. Vendors who reported use tax are not required to include use tax on purchases for purposes of calculating their cumulative prior year tax liability to determine whether they are over the $150,000 threshold.

If I was not in business for all 12 months of 2020, how do I determine if I’m required to make an advance payment?

If your cumulative tax liability was over $150,000 for the period of time you were operating during calendar year 2020, you are required to make advance payments beginning in April 2021. If your cumulative tax liability for 2020 was $150,000 or less for the months you were operating, you are not required to make advance payments in 2021. 

If I was not filing and paying for most of 2020 due to the COVID relief extension, how do I determine if I’m required to make an advance payment?

If your tax liability was over $150,000 from Jan 1, 2020 through December 31, 2020, even if returns were not filed and tax was not paid you are subject to the advance payment requirement for 2021.

I am eligible for the COVID due date extension, am I still required to make an advance payment for the April 2021 and May 2021 tax periods? (Updated 9/16/21)

Taxpayers eligible for the recently expanded COVID due date extension are not required to make an advance payment for the April 2021 and May 2021 tax periods. The total tax liability for the April 2021 tax period is now due on October 30, 2021 (due November 1, next succeeding business day). However, the total tax liability for the May 2021 tax period is due on June 30, 2021.

If am not eligible for the COVID due date extension, but I am eligible for the late file and late pay penalty relief in TIR 21-7, am I still required to make an advance payment in April and May 2021? (Updated 5/28/21)

For vendors subject to sales tax on meals and operators subject to room occupancy excise that do not qualify for the COVID due date extension, the late pay penalty relief in TIR 21-7 is extended to include a waiver of the penalty for an underpayment of the advance payment for the April 2021 and May 2021 tax periods. Such taxpayers may still make the advance payments, but the total tax liability is due when the return is due.

If I’m a new business, am I required to make an advance payment based on estimated future sales?

No. If your first obligation to pay one of the taxes subject to the advance payment requirements is in 2021, you are not required to make advance payments for the remainder of 2021. Your requirement for 2022 will be based on your 2021 tax liability. 

Am I allowed to estimate the advance payment amount based on the prior month or the prior year?

No, the advance payment must be based on your actual tax liability from the 1st through the 21st of the month.

Is there a penalty for not making an advance payment?

Yes.  A 5% penalty may be imposed if the advance payment made on the 25th is less than the amount required to be paid. The penalty will be imposed on the amount of the underpayment. If the advance payment is at least 70% of the final tax, no penalty will be imposed. 

Can my advance payment be less than the 70% threshold?

Yes.  If your actual tax liability through the 21st of the month is less than 70% of the total due for the month, your advance payment requirement would be less than 70%. Since there is no underpayment, no penalty will be imposed.

Will Massachusetts automatically calculate a penalty based on the difference between the advance payment amount and the total tax for the period using the 70% threshold?

No, Massachusetts will not automatically calculate a penalty based on the difference between the advance payment amount and the total tax for the period using the 70% threshold.

If I underpay the advance payment can my penalty be waived for reasonable cause?

Yes, where the advance payment is less than the actual tax liability through the 21st of the month and also less than 70% of the total due for the month, your penalty can be waived if you can show the failure to timely pay was due to reasonable cause.

For filing periods from April 2021 through December 2021, the Department will presume that reasonable cause exists for the waiver of any underpayment penalty where the taxpayer makes an advance payment on or before the 25th  that is equal to 80% or more of the taxpayer’s total tax or excise due for the immediately preceding month, if there was a liability in the prior month. For example, DOR will presume that reasonable cause exists and will not assess a penalty if a taxpayer makes an advance payment on April 25, 2021 that is 80% of their March 2021 tax liability.

I am a vendor who reports use tax on purchases on my sales and use tax return. Do I include the use tax I report on purchases for purposes of calculating 70% of the total due for the month or 80% of the total due for the prior month?

No. Vendors should not include the use tax they report on purchases for purposes of calculating 70% of the total due for the month or 80% of the total due for the prior month.

Additional Resources

Contact

Phone

Tax Department (617) 887-6367
Toll-free in Massachusetts (800) 392-6089

9 a.m.–4 p.m., Monday through Friday

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