The corporate excise tax is imposed on businesses with annual gross receipts of $10 million or more. This includes corporations, partnerships, LLCs, S Corporations, trusts, estates, and sole proprietorships. Businesses are subject to the same rates as individuals, although there are some exemptions. For example, certain types of real estate transactions do not require payment of the corporate excise tax.
Companies with nexus in Massachusetts include those with offices, places of business, or agents here. These entities are required to file quarterly reports with the state showing taxable income. If a company does not have nexus, it pays no corporate excise tax.
Estimated Payments: Companies must pay monthly payments based on the average of their three month’s sales during the quarter. Quarterly payments are due 30 days following the end of each calendar quarter.
For tax year 2021, Massachusetts imposes a 5.0% income tax on both earned income and unearned income. This includes interest, dividends, rents, royalties, annuities, pensions, alimony, social security benefits, unemployment compensation, workers’ compensation, disability insurance payments, and veterans’ pension benefits.
A taxpayer must include his/her adjusted gross income (AGI), plus deductions allowed under federal law, on his/her Massachusetts individual income tax return. A taxpayer may deduct certain expenses incurred during the taxable year. These deductions are subject to limitations based on AGI.
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Key Actions for 2021 Tax Changes
Corporations must file quarterly reports with the state Department of Revenue starting January 1st. This includes foreign corporations that do business in New York. Foreign corporations are taxed differently from domestic companies. They pay taxes based on where they make money. Domestic corporations, however, pay taxes based on where their headquarters are located.
All corporations must file a 1096 form for every vendor who makes payments over $600 during a quarter. Companies that received gross receipts under $100,000 in 2018 are exempt from filing a 1099.
What to file
The following are some common questions we receive regarding incorporation filings. If you have additional questions, please contact us directly.
Q: I am incorporating my business in Massachusetts. Do I need to fill out a separate form for each state where I do business?
A: Yes. You must file Form 355 for every state where you conduct business.
Q: My business is incorporated in Massachusetts. Do I still need to file Form 355?
A: Yes, even if your business is incorporated in Massachusetts, you must file Form 355 for each state where you conduct business because it contains important information about your business.
Q: What happens if I incorporate in one state and do business in another?
A: You must file Forms 355 and 355SBC for both states.
Electronic funds transfer (EFT)
ACH credit and debit are two ways to make electronic payments. They both use the same technology, but they work differently.
ACH credit allows you to make transfers directly from one account to another without involving a bank. You just enter the amount you want to send into a form on the sender’s site and hit submit. Your recipient receives an email telling him/her how much money he/she has received.
Debit cards allow you to withdraw cash from ATMs. When you do, it goes straight to your checking account. If you don’t have enough money in your account, you won’t be able to access it.
There are two choices for making electronic payments for corporations: An Electronic Funds Transfer System (EFTPS) and Automated Clearing House (ACH).
An EFTPS is an automated system that companies use to file tax returns. Companies set up accounts with banks and software companies that help them process transactions. Corporations can choose whether to use ACH credit or debit.
If you decide to go with ACH credit, you can make payments to yourself or someone else. Withdrawing money from an ATM requires you to use a debit card.
A CH credit is similar to an ACH debit except that it doesn’t require a physical checkbook. Instead, you write checks against your account balance.
Key Actions for Filing Requirements
The Internal Revenue Service (IRS) recently announced that it will begin accepting applications for Free File 2018, a free online filing program that allows taxpayers to file taxes electronically without paying fees. This announcement follows several months of preparation by IRS employees and contractors. In addition to Free File, the IRS offers electronic filing options for individuals and businesses that do not qualify for Free File. If you are eligible for Free File, you can use the following steps to apply:
1. Go to www.irs.gov/freefile2018 and select “Apply Now.” You must complete the application form by April 15th.
2. After completing the application, submit it via email to [email protected]. Include your name, address, phone number, Social Security Number, taxpayer identification number, and e-mail address.
3. Once we receive your completed application, we will send you a confirmation code. Enter the code into the box on the IRS Form 1040EZ Application for Electronic Filing.
4. Print out the completed 1040EZ Application and mail it along with your payment of $25.00 to the address listed on the form.
5. When you receive your 1040EZ Application Confirmation Code, enter it into the box on the 1040EZ Application, sign the signature block, and print your W-9. Mail both documents to the address indicated on the 1040E Z Application.
6. Complete and mail your federal income tax return to the address shown on the 1040E Application.
Additional Resources for Filing Requirements
The IRS provides several resources to help taxpayers prepare their federal income tax returns. These include instructions on how to complete Form 1040, instructions on how to complete Schedule C, instructions on how to use the EZ-File program, and information about filing electronically.
Key Actions for Exemptions
If you work less than full-time, you might qualify for certain tax breaks. Here are some key actions to take.
1. Determine whether you’re eligible for an exemption.
2. Get an estimate of how much money you’ll save.
3. Decide what type of benefit you want.
4. Find out about your state’s tax laws.
5. Check with your accountant.
6. File your taxes.
Key Actions for Calculating the Corporate Excise Tax
The IRS recently announced several key actions related to calculating the corporate excise tax (CET). These include:
• A notice of proposed rulemaking to revise certain provisions of the Internal Revenue Code relating to the calculation of the CET;
• An extension of the deadline for submitting information about the use of foreign subsidiaries for purposes of determining whether a taxpayer qualifies for relief under section 901(a)(1);
• Revisions to the instructions for Form 8832, Foreign Subsidiaries Used for Business Purposes; and
• Clarification regarding the treatment of dividends received from foreign corporations.
This article provides an overview of the changes to the rules governing the calculation of the CET.
The IRS says it will begin sending out payments to taxpayers whose quarterly estimated taxes aren’t fully paid by April 15. If you owe money to Uncle Sam, here’s what you need to know about the payment schedule.
Installments are due on the fifteenth day of each month, starting with the first month following the close of the calendar year. This means that if the corporation paid $10,000 in estimated taxes on Jan. 31, 2018, it must pay the remaining balance on Feb. 14, 2019.
If the corporation pays less than the full amount owed, it will receive a refund check for the difference. However, the IRS won’t issue refunds until the next quarter begins. So if the corporation paid $5,000 on Jan. 31, but only $3,500 on Feb. 14, it will receive a check for $2,500 on May 14.
For new corporations in their first year, there will be five months in the fiscal year, meaning that the installments will vary according to the size of the unpaid balance. A corporation that owes $100,000 in estimated taxes at the end of the third quarter will owe $20,000 per month, while one that owes $1 million will owe $40,000 per month.
Documents to submit with abatement/amended tax return
Fill out the form correctly. Make sure you include all required information. If you don’t know what it is, check here. Check if there are any mistakes before submitting the return. You’ll want to make sure everything is correct before sending it off. Also, pay attention to the instructions. They might provide important tips about how to complete the return.
Additional Resources for Estimated Tax
The IRS offers several resources to help individuals prepare for their annual income taxes. These include publications such as Publication 505, Your Federal Income Tax, and Publication 940, Individual Income Tax Returns. In addition, there are many online tools available to help you complete your return. You can find additional information about filing your federal income tax returns here.
Calculating net worth
Corporations are required to report their financial status every quarter. If you want to know how much money your corporation is making, it helps to understand what assets and liabilities it owns. Assets include things like cash, buildings, equipment, vehicles, inventory, land, and intellectual property. Liabilities include debts owed to creditors, such as loans, mortgages, and taxes.
The most common way to calculate corporate net worth is called the “net worth formula.” You start by adding up all of the corporation’s assets minus all of its liabilities. Then you subtract the value of the corporation’s equity—the portion owned by shareholders—from the total.
If you’re wondering why you’d do this calculation, here’s an example. Let’s say you own a corporation that sells widgets. Your corporation has one asset, a building where it makes widgets. Another corporation owes you $100,000 for some widgets you sold it earlier. So let’s add those numbers together.
Assets | Assets – Liabilities Net Worth
Building | Building – Loan Equity
$100,000 + $100,000 $200,000
$200,000 – $100,000 net worth
Key Actions for Tangible or Intangible Property Corporation
Apportionment is done based upon the three factors listed above. When calculating apportionment, the tax base should include interests, dividends, gross receipts, etc. Apportionment is an essential concept in taxation. To calculate apportionment, you need to know how many dollars come into the state and what proportion of those dollars go to each tax jurisdiction. There are three different methods used to calculate apportionment. The first method uses the standard method. This method assumes that the property is tangible and it applies a constant value to all forms of property. The second method is called the Modified Method. This method takes into account the fact that some types of property are more expensive than others. For example, real estate is usually valued at fair market value, while personal property is often valued at cost. Finally, there is the third method. This method calculates apportionment based on the taxable income of the corporation.
The gross income tax base includes all taxable income except certain exclusions. For example, it excludes capital gains, dividends, interest, rents, royalties, annuities, pensions, alimony payments, and some other items.
Federal Tax Rates
Congress sets tax rates. In 2017, the highest marginal tax rate was 39.6% and the lowest was 10%.
Income Taxes Paid by Individuals
Individuals pay taxes on their entire income, including wages, salaries, tips, bonuses, commissions, dividends, interest, and capital gains.
Certain types of income are exempt from taxation. These include Social Security, unemployment insurance, railroad retirement, veterans’ disability compensation, alimony paid under court order, and child support.
Additional Resources for Gross Income
Gross income includes all income received without regard to source. This includes wages, salaries, tips, bonuses, dividends, rents, royalties, alimony, annuities, pensions, social security benefits, unemployment insurance payments, worker’s compensation benefits, prizes, awards, gifts, inheritances, trusts, estates, estate gains, losses, capital gains and net gain or loss from sales of property.
Interest earned on municipal bonds is included in gross receipts. However, interest earned on federal bonds is excluded from gross income because it represents a return of money invested rather than a return on investment.
Key Actions for Credits
The IRS provides several credits and deductions for individuals and corporations.
Frequently Asked Questions
What kind of tax will you owe on Massachusetts business income?
Businesses must pay corporate income tax on their total income. Businesses can deduct expenses they incur during the year as well as any depreciation taken on equipment.
How Income Taxes Are Calculated
Income taxes are calculated based on your income and the tax rate you pay. The federal government uses a progressive tax system, which means that as your income increases, so does the amount of tax you must pay.
The IRS publishes information about how to calculate your tax liability in Publication 505: Your Federal Tax Return.
Do I Have to Pay Income Tax in Massachusetts?
Yes. All businesses must pay income tax in Massachusetts.
James Rourke is a business and legal writer. He has written extensively on subjects such as contract law, company law, and intellectual property. His work has been featured in publications such as The Times, The Guardian, and Forbes. When he’s not writing, James enjoys spending time with his family and playing golf.