Tag Archives: massachusetts

Wrong Tax Forms Issued – Massachusetts Retirees

Wrong Tax Forms were issued on January 21, 2016 to over 50,000 Commonwealth of Massachusetts Retirees.

What happens if I file with the wrong tax forms?

About 50,000 Commonwealth of Masachusetts retirees received the wrong tax forms. An uncorrected 1099-R form would mean possible over payment of federal income taxes for retirees. Fortunately some State retirees called the office after they noticed the wrong tax forms, as tax bills were much higher than 2014. Normally, retirees who would receive refunds might have had to owe money.

The misprinted forms, because of a programming error, had bad codes assigned. The correct code should have been 7, for normal distribution of benefits. Instead, Code 1 was printed. Code 1 means a premature distribution of benefits. What would this cost the retiree? A 10 % penalty. In addition, State Retirees who should have been assigned Code 2, for early distribution of benefits with exceptions, received forms erroneously marked as Code 7. You can read more about it here on the Massachusetts government website.

Fortunately, this was caught fairly early. The issue can be resolved with the IRS should retirees file the wrong tax forms. However, it can take two years.

When Can I file my paper tax returns?

The State Treasurer’s office recommends that you wait for the revised 1099-R form to come in the mail if you file with a paper tax return. First, make sure the box at the top of the 1099-R marked “Corrected” is checked off.

2015_1099-R, corrected tax form, wrong tax forms

A corrected 1099-R form will be mailed out in early February. The board is sending postcards to make sure the 50,000 Commonwealth retirees are notified of this error. You should receive a revised 1099-R statement by Tuesday, February 16th, 2016. If not, please call the Massachusetts State Retirement Board (the number is at the end of this blog).

How Do I File Electronically?

State retirees who file electronically, can go ahead and file, just use the correct codes. If you are a retired employee of the Commonwealth of Massachusetts, up to the age of 59-1/2 in 2015, you can enter Distribution Code 2 on the electronic form. Use Distribution Code 7 if you turned older than 59-1/2 in 2015. If you have any questions, you can contact the State Treasurer’s office by email at srb@tre.state.ma.us or by telephone at (800) 392-6014 or (617) 367-7770. By the way, be easy on them. Make sure that you notify the Massachusetts State Retirement Board of any change of address. The change of address form can be found here.

You can access information on how to read your 1099-R form here. Make sure the new one you receive has “Corrected” checked off on the top.

Alex Franch, BS EA  at  781.849.7200. He can answer any questions you may have regarding tax preparation and the filing of your returns. We have ultra-convenient service at any three of our locations where you can conveniently drop off your tax documentation to be prepared, Dedham, Quincy and South Weymouth. Worthtax uses a triple check accuracy system.

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Tax Filing: Jointly or Separately?

By: Alex Franch, BS EA

2015_02_12 Tax Filing Joint or SeparateMost married taxpayers know that they have the option to file jointly or separately for tax filing. The Federal income tax system prods taxpayers toward joint filing. This results in the loss of certain deductions and credits. Also, the inclusion of Social Security benefits is taxable income for those who file separately. Assuming you are better off filing a Federal joint return, when might you consider filing separately? Here are three scenarios for tax filing:

Different Residency Periods

If a taxpayer and spouse are part-year Massachusetts residents and they had different residency periods, they have to file separately on their Massachusetts return. For example, John moves to Massachusetts from Texas in February. He moved due to a new job as a snow plow operator. Marsha remains in their old state to finish out the school year with the kids. She does not move to Massachusetts until July. They are required to file separate Massachusetts tax returns. Note, they are better off in this case, since Marsha’s Texas income will be excluded from taxation in Massachusetts for her tax filing.


If a taxpayer has certain unpaid debts, they may opt to file separately. If a taxpayer is in arrears with student loans, back taxes, or child support, their spouse may benefit from filing separately. Your refund can be garnished by various government authorities, and if there is a nominal difference in tax liability, Married Filing Separately (MFS) may be the way to go. Also, if one spouse expects a tax balance in the current year, Married Filing Separately can be appropriate. For example, John and Marsha are filing a joint return. Marsha had some unemployment income and had no tax withheld. They do not expect any Federal tax liability. However, they do expect to owe Massachusetts. They can file separately on Massachusetts only so John is not liable for the taxes owed on Marsha’s unemployment income.

Squirrely Business

If your husband is Vito Corleone, our official advice is, file separately. Oh, and never ask him about his business. If a spouse has questionable business practices, that taxpayer can file separately. This shields them form the associated tax risks.

By the way, If you are stuck at home for Snowpocalypse 3.0, Vito makes for a good trilogy read.

Questions About Tax Filing?

Are you clear about your tax filing status? If you have thoughts, questions or concerns regarding how your taxes are filed, WorthTax uses a triple check accuracy system. We also go though great lengths to protect your information on secured servers. Please feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

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Tax Season is Here!

Time flies! Before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment. Learn about our client discounts here. See our locations.


How Cancellation of Debt Becomes Tax Free – Federal vs. Massachusetts

 by Cindy Toran, Tax Manager

cancelled-debtHow does cancellation of debt become tax free? Is Federal versus Massachusetts different?

Generally debt forgiveness for a borrower who is personally liable on a loan is taxable income unless one of the following exceptions applies per Federal tax law:

  1. Occurs under Title 11 bankruptcy
  2. Occurs when the taxpayer is insolvent (Debts greater than Assets)
  3. Is qualified farm indebtedness
  4. Is qualified real property business indebtedness (other than C-corporations)
  5. Is qualified principal residence acquisition debt (up to $2M for MFJ) – expired December 31, 2013

Massachusetts, however, did not adopt the exclusion for mortgage forgiveness on principal residence.  Thus, for home mortgage cancellation of debt only one of the first 4 exceptions listed above will prevent the debt forgiveness from being subject to MA income tax.


Watch Out Tom Brady, the Tax Man is Coming

by Alex Franch, Tax Specialist

As football season gets going, Tom Brady and the Patriots are almost back on top. I say almost because the Bills are ahead on the divisional record to the tiebreaker goes to the Bills right now.

Let’s consider the post-season for Tom Brady and when I say post-season, I really mean tax season. This case study applies to most professional athletes who play in multiple states, but I digress. I did a search for Mr. Brady’s contract and he seems to be making about $17 million per season just from his NFL contract. Let’s call it $1 million per game for argument sake and we will only consider the top tax rates when considering the states.

OK you fantasy football number crunchers, here we go. So far Mr. Brady has made $1M in Florida, no tax; $1M in Minnesota, top tax rate of 9.85%; and not $1M, but $3M in Mass, flat rate of 5.2%. But wait, in typical Brady fashion, he was still playing in January 2014 where he made $1M in Colorado, flat rate of 4.63% and not $1M, but $2M in, not Mass, but California, top rate of 12.3%. The internet tells me he moved from California to Massachusetts this year.

Let’s recap What Tom Brady’s Tax Return Looks Like So Far


Massachusetts part year resident: $3M income x 5.2% = $156K in taxes

Minnesota Non-Resident return: $1M income x 9.85% = $98K in taxes

California part year resident: $2M income x 12.3% = $246K in taxes

Colorado Non-Resident return: $1M income x 4.63% = $46K in taxes

But wait, he made $5M so far but he is getting taxed on $7M; that is not right. How very astute. Tom Brady will get a credit in his resident state for the taxes paid to a non-resident state. He should get the full $46k paid to Colorado as a credit to California.

But wait, he only gets back $52k out of the $98K he paid to Minnesota because the tax rate in Massachusetts is lower.



Total Income $5M, Taxes to the states $448K. Oh, he owes the IRS another $1.8M, I guess I forgot to mention that.

Now that is a flea flicker.

Only 13 more games to go. Maybe we should take this one game at a time.

. . . or one out of state rental property at a time
. . . or one out of state job at a time
. . . or one out of state K-1 at a time
. . . or one multi state business at a time

Do you have an out-of-state experience you would like to discuss? You may leave a comment below or go to our Facebook or Google Plus pages.


Moving Deductions

Got moving expenses? You may be able to get a tax deduction for them.Fragile-Moving-Box-300x168

The first step is to clear out all your stuff from your attic or basement. If some of that stuff is in good condition, consider donating it and getting a tax deduction for it rather than hauling it with you. It is all about new beginnings. Speaking of new beginnings, perhaps you landed that dream job. If you are moving for a new job, you may be able to deduct your moving expenses.

Here is what you ought to know about moving deductions:

    • The move needs to be job-related

This means you are moving for a new job, or you are moving because of business relocation

    • The timing of the move needs to be correlated with the new job

The time of your move must be closely related to the time of starting your new job or new location of your business. “Closely related,” as defined by the IRS, generally means within a year of starting your new job or relocating due to business. If you are unemployed, it is not necessary that you arrange work before heading to a new locale.

    • Unlike some other tax provisions, you actually need to work for this one

If you are a current employee, directly after your move, you must work at least full-time, 39 weeks in the first 12 months. If you are self-employed or unemployed, the above applies, plus, you must work at least 78 weeks in the first 24 months.

    • You need to satisfy the 50 mile rule

Your new workplace must be at least 50 miles farther than what your past job was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home.


So what are allowable deductions?

    • Tax deductions for travel

Expenses that you can claim are gas, oil, tolls, and parking fees. For mileage, you can either keep tabs on expenses, or you can take the standard deduction of 23.5 cents per mile.

    • Packing and moving belongings

These types of expenses are deductible. And also is the cost of shipping your pets or cars.

    • Storage cost

Any storage costs associated with your move, starting on the day you leave your former home and for the next 30 days, are tax deductible.

Welcome to Massachusetts!

If you came to Massachusetts for a new job, the tax deduction carries over to your Mass tax return. That is the consolation prize for having to file two state part-year resident tax returns. If you are leaving Massachusetts, well, you are out of luck on Mass, unless you are moving to one of these other fine welcoming states that allow a moving expense deduction.

What has been the furthest distance you were required to move either as a result of a job change? Leave your comment below or visit our Facebook or Google+ pages.


Massachusetts Retirees

Believe it or not, some retirees come to Massachusetts for their golden years. When this happens many retirees bring with them an out of state pension (and yes, pensions still exist) and every pension is treated differently. Some out of state municipal pensions such as Hawaii can be fully excluded from your Massachusetts income, others such as Idaho are fully taxable. Two of our neighbors, Maine and New York, are partially excluded. Some out of state pensions still require that you file a tax return for the source state. Retired public safety officers can receive preferential tax treatment on their Federal return. I have one thing to say about this: “Truly you have a dizzying intellect” – Wesley

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photo credit: imchrismacdonald via photopin cc


Confused about the Circuit Breaker Tax Credit?

Confused about the Circuit Breaker Tax Credit? You’re not alone. Perhaps this can help you to understand it.

This is a state income tax credit available to those over 65, who pay rent or real estate taxes, and who meet certain eligibility criteria:

  • For homeowners, this means that they must have paid at least 10% of their income to real estate taxes. Renters can count 25% of their rent as real estate payments.
  • Total income from all sources can be no more than $55,000 for a single, who is not head of household, $69,000 for a single, who is head of household, and $82,000 if filing jointly.
  • The assessed value of the home cannot exceed $700,000.
  • If married, the couple must file jointly.
  • The home or place of rent must be the primary residence.

The credit is not available to the taxpayer who:

  • Is filing married filing separately status
  • Receives a federal or state rent subsidy
  • Is renting from a landlord who is not required to pay real estate taxes
  • Is the dependent of another taxpayer

If the credit is greater than the amount of income taxes owed, the state gives a refund for the difference.

To receive this credit, a Massachusetts income tax return must be filed, whether or not the taxpayer otherwise needs to.

Your tax preparer can determine if you qualify, can calculate the credit, can ensure that all necessary forms are completed, and can help you file for up to 3 previous years if you were eligible, but didn’t apply for the Circuit Breaker credit.

Should you have any questions, feel free to contact us.


Surge in One Way Tickets to Florida?

Last January, Massachusetts’s governor Deval Patrick was in favor of the ‘tech tax’ (sales tax on computer services) saying it would help fund improvements to the State’s transportation systems. Now, however, he has had a change of heart. Apparently, technology executives got through to him.

Implemented in July, Massachusetts joined a few other states that have such a tax. With the dubious distinction of the highest tax among this group, opponents argue that having to add 6.5% to cost of sales would impact the State’s economy. Massachusetts State Representative James Lyons (R-Andover) contends that this tax “. . . is going to hurt every single taxpayer in the Commonwealth. It’s going to lead to less jobs, less economic activity and less revenue.”

With the implementation of this tax, Florida’s governor, Rick Scott, saw it as an opportunity to entice companies to Florida.  In an open letter to Massachusetts business owners, he wrote, “Summer is here and millions of people are booking their trips to Florida. This year, we are asking you to make that plane reservation a “one way”. [Read the complete letter.]

Lawmakers are now ramping up to introduce a bill that would repeal this tax.

Read more on Boston.com and CRN.com.


DOMA Ruling Leaves a Lot of Questions on the Table

I can’t say that DOMA did not make for some interesting tax strategies.  The latest from the SCOTUS makes tax filing simpler for our same sex couples here in Mass.  Let’s see what the IRS decides for some open ended questions.


What is the filing status of a same sex couple who marry in one state and live in a non-same sex marriage state?

Can a same sex couple go back and amend open tax years if it is to their benefit?

Are civil unions equal to marriage?

Maybe this is why the IRS had ‘unusually high call volume’ this morning.