The Massachusetts corporate tax return is a document used to report the earnings of a corporation in order to pay the proper taxes.

Introduction to Massachusetts Corporate Excise Tax

Both domestic and foreign corporations in Massachusetts are typically required to pay a corporate excise tax. This tax is based on both the net worth and the income of the business. Traditional corporations are subject to the corporate excise tax, and this tax also applies to S corporations to some extent. There is no similar tax that applies to entities such as partnerships or LLCs. Almost every state will levy some tax against business income earned in the state.

A Technical Information Release (TIR) issued by the Massachusetts Department of Revenue explains legislation that has altered the date when corporate income tax returns must be filed. The filing date is now more in line with the federal due date. Tax returns for S corporations are due on the fifteenth of the third month after the end of the taxable year. C corporations will file their tax return on the fifteenth day of the fourth month after the end of the tax year.

The filing date for partnership tax returns has also been changed. Like S corporations, partnerships now must file their returns on the fifteenth day of the third month after the tax year has ended. If the partnership is filing on a yearly calendar basis, this means their returns would be due March 15th.

Massachusetts encourages all companies in the state to file their tax returns online. However, certain businesses are required to file electronically, including:

  • Companies whose annual sales and gross receipts are more than $100,000
  • Companies whose net taxable income is generated entirely in Massachusetts

Due Dates for Tax Returns

Businesses that are taxed federally as a corporation can also be taxed as a corporation in Massachusetts. If your business is unincorporated, you can elect to pay taxes either as an individual or a corporation. You can reference the TIR to learn how the changes in due dates will influence extensions for returns that are due after January 1.

Due dates for tax returns for C corporations and partnerships that are due before or on December 31, 2017, are not in line with federal dates. Previously, the Department of Revenue announced that 2016 C corporation returns that met the federal filing deadline were available for late-file penalty relief. Massachusetts also plans to waive these penalties for C corporation returns that have requested a filing extension within a month of the new due date. However, this penalty will only be waived if the extension fee has been paid.

Taxation Based on Business Structure

The legal form of a business will determine how their income will be taxed. For instance, most state-level corporations are required to pay a corporate income tax. However, certain pass-through companies are only taxed on personal income, including:

  • S corporations
  • Limited liability companies
  • Sole proprietorships
  • Partnerships

Corporate Versus Personal Income Tax Rates

Corporate income and personal income tax rates can differ from state to state. For instance, corporate tax rates will typically be between 4 percent and 9 percent. Personal income tax rates can be as low as 0 percent and as high as 9 percent.

In New Hampshire and Tennessee, individuals only pay taxes on dividend and interest income. In adding to a personal income tax or corporate income tax, many states apply a privilege tax or franchise taxes against businesses. Privilege and franchise taxes are taxes that businesses pay for the privilege of being allowed to operate in their state.

Similar to other taxes, the franchise tax that a business will pay depends on its legal form. Franchise taxes can either be based on the net worth of a business or a flat fee.

If you are personally passed income from your business, this income must be reported on your individual state tax return, regardless of your business's legal form.

Multi-State Taxation

When a business operates in multiple states, they may be required to pay taxes in each state. For instance, if you formed your business in another state but earn income in Massachusetts, your business may be taxed in this state. Multi-state taxation rules can be very complicated and difficult to understand, which is why it's important to get advice from a tax professional to make sure you are paying your required taxes.

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