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Sole Proprietorships

Learn the steps and rules which come with running a sole proprietorship.


Sole proprietors:

  • Must pay Massachusetts personal income tax on business profits
  • File Form 1, Massachusetts Resident Income Tax Return, or Form 1-NR/PY, Massachusetts Nonresident/Part-Year Resident Income Tax Return annually
  • File a Schedule C, Profit or Loss from Business or Profession, with the Form 1 or Form 1 NR/PY for each business owned, on or before the 15th day of the fourth month after the close of the business's taxable year.

Nonresidents can visit the Massachusetts nonresident regulation, 830 CMR 62.5A.1: Nonresident Income Tax for more information.

Keep in mind:

Making estimated payments

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% 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:

  • Last year your total tax was $1,000 (and your taxable year was 12 months long)
  • 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% requirement is reduced to 66 2/3%. 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 Estimated tax payments for personal income taxpayers, 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 a sole proprietor's state and federal filing requirements:

  State Federal
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)
Form 1-ES
If you expect to owe more than $400 in state tax on business income
Form 1040ES
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
Form 1040
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
Schedule C
(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