Massachusetts Non-Resident Income Apportionment

[Fuz]

Prior to the pandemic, Massachusetts allowed non-residents to report only that income earned while working in Massachusetts. With the pandemic, Massachusetts passed a law that said if you were working outside the state solely due to the pandemic, you could not take advantage of that provision. See https://www.mass.gov/guides/personal-income-tax-for-nonresidents.

This provision was supposed to expire 90 days after the Governor ended the state of emergency. This occurred on June 15, 2021 (see https://www.mass.gov/info-details/covid-19-state-of-emergency).

Can anyone confirm that non-residents working from home due to the pandemic can  exclude from Massachusetts income  that income earned while working from home outside the state for roughly the last three months of 2021? There does not appear to be an update on the Massachusetts DOR web page. If so, how is this done in TurboTax?

[RaifH]

Yes, you are correct. For tax year 2021, due to Massachusetts’ COVID-19 state of emergency, all compensation paid for services performed prior to September 16, 2021, to nonresidents who would generally perform such services in Massachusetts but for a pandemic-related circumstance, will be treated as Massachusetts-source income. From September 16, 2021 through December 31, 2021 this will no longer be taxable by Massachusetts if you do not reside nor work in Massachusetts.

To apportion your income and determine how much is taxable to Massachusetts, you can look through your pay stubs to determine how much was earned Year to Date through September 15 or, if you roughly earned the same amount throughout the year multiply your entire wages by 70.411% (257 days / 365 days). 

In order to file a non-resident tax return for Massachusetts, you will want to start that tax return before you work on your resident state. After confirming nonresident status, the system will ask if you want to Apportion Your Wages? Answer Yes then for Apportionment Method, select Other and for description, enter COVID-19 Telecommuter. Enter the Massachusetts amount in the Inside field with the remaining in the Outside field.

[wt1022]

Filing Your Massachusetts Return
As a nonresident, you must file Form 1-NR/PY if your Massachusetts source income for 2021 exceeded the smaller of your apportioned personal exemption, or $8,000.

Does this mean that the amount earned outside of Mass needs to be more than $8,000 from 9/16/21-12/31/21 to qualify to apportion the out of state income?

Or does it mean that the amount earned inside Mass needs to be more than $8,000 from 9/16/21-12/31/21 to qualify to apportion the out of state income?

Or does it mean the total earned inside and outside Mass needs to be more than $8,000 from 9/16/21-12/31/21 to qualify to apportion the out of state income?

[DMarkM1]

First you must establish if you were a nonresident all year or a part-year resident of MA.  

Then, the proration formula is the number of days counted as physically working in MA divided by 365.  That ratio is then multiplied by the personal exemption amount on your MA return.  Generally, 4400 for single filers and 8800 for MFJ plus 1000 for each dependent.  The number of days counted as physically working in MA includes days up to 16 Sep that you were remote due to pandemic.  

With that in mind.  

You must file a return if you were a part-year resident and either your total income all sources in and out of MA for the year exceeded 8,000 or exceeded your prorated exemption amount.  

You must file a return if you were nonresident all year and either your MA source income only exceeded 8000 or exceeded your prorated exemption amount.  MA source income includes income earned up to 16 Sep working remote due to Pandemic.  

[wt1022]

Thank you for clarifying that the MA income needs to be over $8,000 from 1/1/21-9/16/21. I live in NH, work for a MA company and work some days remotely in NH.  My question is, can I apportion the MA income earned out of state from 1/1/21-12/31/21 or only from 9/16/21-12/31/21 when the emergency status ended.

[ErnieS0]

It depends on your working arrangements prior to the COVID-19 state of emergency declaration.

If you had no prior remote work arrangement prior to the pandemic declaration, then all your income from 1 January 2021 to 16 September 2021 is considered 100% Massachusetts income. 

If you had a prior remote work arrangement, you would apportion based on that arrangement. For example, if you worked one day from home prior to the pandemic and four days in MA, you would apportion 80% of your income as MA income even if you worked 100% in New Hampshire from Jan. to Sept.

Massachusetts says:

all compensation received for services performed by a non-resident who, immediately prior to the Massachusetts COVID-19 state of emergency was an employee engaged in performing such services in Massachusetts, and who is performing services from a location outside Massachusetts due to a Pandemic-Related Circumstance will continue to be treated as Massachusetts source income subject to personal income tax . . . and personal income tax withholding.

A non-resident employee who, prior to the Massachusetts COVID-19 state of emergency, determined Massachusetts source income by apportioning based on days spent working in Massachusetts in accordance with 830 CMR 62.5A.1(5)(a), must continue to do so based on (1) the percentage of the employee’s work days spent in Massachusetts during the period January 1 through February 29, 2020.

See TIR 20-5: Massachusetts Tax Implications of an Employee Working Remotely due to the COVID-19 Pandemi....

@wt1022