|Organization:||Massachusetts Department of Revenue|
|Referenced Sources:||Massachusetts General Laws|
Personal Income Tax
Since, under Chapter 62 of the General Laws, Massachusetts items of income and deduction often differ from their federal counterparts (changes in the Internal Revenue Code enacted after November 6, 1878 are not reflected in Massachusetts gross income, for example), taxpayers reporting a net profit or loss from a business or profession should file Massachusetts Schedule C. However, taxpayers may file a copy of U.S. Schedule C in lieu of Massachusetts Schedule C if the following requirements are met:
(1) Where there are no differences between the items reported on U.S. Schedule C and the items that would be reported on Massachusetts Schedule C, "No Mass. differences" must appear below Line 34 on the copy of U.S. Schedule C.
(2) Where there are differences between the items reported on U.S. Schedule C and the items that would be reported on Massachusetts Schedule C, "Mass. statement attached" must appear below Line 34 on the copy of U.S. Schedule C, and the taxpayer must attach a reconciliation statement to the face of the copy of U.S. Schedule C. The reconciliation statement must (a) include the taxpayer's name and taxpayer identification number; (b) identify each income and deduction amount that differs under Massachusetts law from the amount shown on U.S. Scheldue C; (c) show the net total to be added to or subtracted from the U.S. Schedule C profit or loss; and (d) show the Massachusetts net profit or loss to be entered in Item 12 of Form 1 or Form 1-NR or on Form 2.
A taxpayer reporting a net profit or loss from a business or profession must file a copy of U.S. Schedule C (or U.S. Schedule F for farm income) even if Massachusetts Schedule C is filed. If U.S. Form 4562 ("Depreciation") is filed federally, a copy must also filed with the taxpayer's Massachusetts return.
The following illustrate some of the common difference that must be reflected in Massachusetts Schedule C or on the reconciliation statement attached to the copy of U.S. Schedule C:
(1) Interest on loans, notes receivable or charge accounts received in the ordinary course of business and dividends are taxable in Massachusetts at the rate of 10 per cent plus surtax. This income must be reported in Massachusetts Schedule B, Part I, Item 3, although it is shown on Lines 1 and 4b of U.S. Schedule C.
(2) For property placed in service after 1980, the deduction under the federal Accelerated Cost Recovery System is generally larger than the depreciation deduction allowed under Chapter 62.
(3) For Massachusetts income tax purposes, the windfall profit tax credit or refund is not income, and the windfall profit tax paid or accrued is not allowed as a deduction.
(4) For Massachusetts income tax purposes, the deduction for wages is not reduced by the jobs or the WIN credit.
Commissioner of Revenue
January 18, 1982