topic Calculating percentage of self-employed tax for non-resident state taxes in Get your taxes done using TurboTax

Calculating percentage of self-employed tax for non-resident state taxes

Need2Know2 — Tue, 16 Mar 2021 00:59:42 GMT

Hello everyone - I'm here with a math question!

Last year, I worked in Massachusetts as a non-resident (my domicile is in Maine), but had income from two different sources. Only one was Massachusetts-sourced. Both were independent jobs subject to self-employment tax. So now, I'm required to figure out how much of the SE tax should be allocated to Massachusetts. Actually, the Turbo Tax program is asking me to calculate the "non-Massachusetts portion of deductions," but it's showing the number of my self-employment tax, so I guess my task is to calculate the amount of tax that is NOT from Massachusetts-based income. Does that sound correct? I *think* I know how to do the calculation, but I'd like to check on here. Math whizzes, please help me!

[MA source income] divided by [total income] = [percentage]

[percentage] times [total SE tax] = [SE tax allocated to MA]

Finally, subtract the [SE tax allocated to MA] from [total SE tax] to find the non-MA portion.

Please correct me if these calculations are wrong. Also....when multiplying by total income, do I use the simple sum of both state incomes combined, OR do I use the slightly lower number of the two state incomes multiplied by 92.35% from Schedule SE?

And, am I missing anything else?

Thank you very much!

Re: Calculating percentage of self-employed tax for non-resident state taxes

MaryK4 — Tue, 16 Mar 2021 01:20:16 GMT

Your formula is correct, but you save a few steps by using the percentage of non-Mass net business income applied to total self-employment tax.

You do not have to include the 92.35% for the SE.

Re: Calculating percentage of self-employed tax for non-resident state taxes

Need2Know2 — Tue, 16 Mar 2021 15:01:43 GMT

Thank you so much!

Re: Calculating percentage of self-employed tax for non-resident state taxes

Need2Know2 — Tue, 16 Mar 2021 15:11:56 GMT

Actually, as I look at the numbers again, I realize that's why I was confused; because my SE tax is based upon the lower number of my income multiplied by 92.35%. In that case, since the SE tax is based upon a reduced number, how can I tell which part of that number is allocated to non-MA sources? I'm sorry if it's a silly question...I feel like the answer is simple, but my non-mathematical brain can't wrap itself around the concept!

Re: Calculating percentage of self-employed tax for non-resident state taxes

JohnW152 — Tue, 16 Mar 2021 15:42:16 GMT

I believe you’re over-thinking it.

As MaryK1101 suggests, the 92.35% is a ratio that applies to both Massachusetts and non-Massachusetts income, so isn’t particularly a consideration.

The formula you provided initially ([MA source income] divided…) will work just fine.

Re: Calculating percentage of self-employed tax for non-resident state taxes

Need2Know2 — Tue, 16 Mar 2021 17:59:17 GMT

Well, over-thinking is one of my downfalls... 🙂

Thank you very much for taking the time to respond! I greatly appreciate it!