Worked Remotely while physically in MA, help with calculation to determine prorated personal exemption if filing is needed as a Non-Resident using paper form

[hellotax1111]

Hi, 

I worked remotely physically in the state of MA for about 3 weeks in 2022 and am a resident of NC, with single status no children or dependents. My tax witheld in NC where I lived in 2022. The company is a global company with offices in major metropolitan cities. 

I am very confused after reading the forms several times and have having difficulty understanding how to calculate the prorated personal exemption Massachusetts Non-Resident Tax form. I already filed my taxes for federal and NC state. However, I wanted to understand how this works by doing it by hand so I don't have to pay for the Turbotax state download just to figure out if I have to file. 

Let's say I made $70000 income on my W2 in 2022 and worked in MA for 15 days. I can say that I worked in NC for 225 days for a total of 240 working days in 2022. My W2 witheld taxes from NC for all 2022 and not MA. 

1. How do I calculate the prorated personal exemption amount? Can you please show the calculations. You can make assumptions if you don't have all the info and let us know what assumptions you are making. 

2. If I made less than $8000 in MA source income based on the days working remotely in MA does that mean I have to file or do I have to do the proprated personal exemption calculation?

3. Do the deductions for the MA prorated personal exemption calculation include Medicare and Social Security taxes witheld from the W2?

Nonresidents

If you're a nonresident with an annual Massachusetts gross income of more than either $8,000 or the prorated personal exemption, whichever is less, you must file a Massachusetts tax return.

You are an individual nonresident if you are neither a full-year or part-year resident.

Nonresidents use Form 1-NR/PY: Massachusetts Nonresident/Part-Year Tax Return.

Source: 

https://www.mass.gov/doc/2022-form-1-nrpy-massachusetts-nonresidentpart-year-tax-return/download

https://www.mass.gov/regulations/830-CMR-625a1-non-resident-income-tax

Thank you for your help

[ErnieS0]

You do not have to file a non-resident Massachusetts income tax return if worked remotely for a Massachusetts company.

Massachusetts only taxes employees who actually worked in-state.

Massachusetts says:

Massachusetts source income includes items of gross income derived from or effectively connected with any trade or business, including any employment, carried on by the taxpayer in Massachusetts, whether or not the non-resident is actively engaged in a trade or business or employment in Massachusetts in the year in which the income is received.

830 CMR 62.5A.1: Non-Resident Income Tax

[hellotax1111]

Thanks @ErnieS0 !

1. Can I ask how you know my company is a MA company? It is a global company with offices in multiple states including one in Boston.

2. Would you be able to please list out the prorated personal exemption calculation example with my case as an example so I know how to do that for future? 

[ErnieS0]

Your work location determines your state income tax, not your company’s location. Massachusetts does not tax a nonresident unless you physically worked in MA.

The personal exemption deduction is the exemption based on your filing status times the percentage of MA income. For example, if you were single, the 2022 exemption is $4,400. If your MA income was 50%, your exemption would be $2,200. 

[hellotax1111]

Hi @ErnieS0 

I did physically work in Massachusetts remotely for 3 weeks that’s what

I had mentioned in the original post. 

- For the deduction, in your example MA income is 50% of what number? Total MA plus non MA income from all sources? 

-Once I know the personal deduction prorated amount how do I determine if I need to file as a single person?

[hellotax1111]

@ErnieS0  Any update on this?

Please let me know your thoughts from my last post as I did physically work in MA for three weeks.

Ill have to maybe repost if I don’t hear from you 

[LindaS5247]

You should be filing a resident (NC) and a nonresident tax return (MA).  You should enter your nonresident state tax return first.

It is recommended to prepare the nonresident state first because your resident state will provide you a credit for the tax you pay to the nonresident state.  By preparing the nonresident state first, TurboTax can transfer the credit information to your resident state to return.  

So this should be calculated for you.

Click here for instructions on how to file your nonresident return.

Click here for information regarding filing multiple states returns

[hellotax1111]

Hi @LindaS5247  thanks for responding. For some reason Ernie is not responding anymore. 

Just confirming if you read my first post as I had three questions there. Can you please help with those?

It seems Ernie misunderstood my post so his response didn't help. 

Also, I am trying to determine if I even need to file the MA nonresident tax to begin with. If I don't make a certain income then I will not have to file. I have already filed Federal and NC tax. 

[LindaS5247]

Did you live in MA or work there from another state, remotely?  If you worked in MA and lived there for three weeks then you should file your nonresident tax return for MA. You should be filing your nonresident state return first but it sounds like you already filed.

You prorated income is determined based on an apportionment percentage as follows: For example, if your total income was $50,000 and you earned $30,000 in a second state where you moved during the year, your apportionment percentage is 30,000 divided by 50,000, or 60 percent. You generally use the apportionment percentage in one of two common methods to calculate your state income tax.

Below are screenshots of the MA Form that shows how the personal exemptions and apportionment percentage is calculated:

[hellotax1111]

Thanks @LindaS5247  for the response. 

Yes, I did see those forms as you will see I pasted the links in my original post. Posting again below. 

Yes, I worked physically in MA remotely and yes I already filed my Federal and state NC taxes. 

However, what I need help with is the ACTUAL calculation for the prorated income not the form. Because I am having difficulty interpreting the form. 

1. Can I please write out the calculation all the way through using an example?
2.  If you see in my original post,  pasted again below, if you make less than a certain amount you do NOT have to file a nonresident MA taxes. So I am trying to figure out if I do or don't have to file using the prorated income to understand how to compare it to the paragraph below. Can you please help with an example? I cannot follow the general statements. 

Nonresidents

If you're a nonresident with an annual Massachusetts gross income of more than either $8,000 or the prorated personal exemption, whichever is less, you must file a Massachusetts tax return.

You are an individual nonresident if you are neither a full-year or part-year resident.

Nonresidents use Form 1-NR/PY: Massachusetts Nonresident/Part-Year Tax Return.

Source: 

www.mass.gov/doc/2022-form-1-nrpy-massachusetts-nonresidentpart-year-tax-return/download

www.mass.gov/regulations/830-CMR-625a1-non-resident-income-tax

[TomD8]

@hellotax1111 --

I think the calculation goes like this (using the figures from your original post):

You worked 15 days in MA out of 240 total days worked.  That is a ratio of 6%.

6% of $70,000 earned is $4,200 (your "MA-gross" income)

The MA personal exemption amount if filing Single is $4,400.

6% of $4,400 is $264 (your prorated personal exemption)

Since your MA source income ($4200) exceeds your prorated personal exemption ($264), I believe you must file a non-resident MA tax return.

Does that make sense to you?

[hellotax1111]

Thanks Tom for taking the time to write it out and pay attention to the details of my original post and using the example rather than a generalization or general link. Also thanks for asking if it makes sense so that I can clarify if not.

@LindaS5247  @RobertB4444 @MaryK4 

1. Would you or a tax expert be able to confirm, deny and correct Toms example calculation?

2. Also I am not sure if the $4400 should instead be compared to $4200 and since the MA source income is less than the personal exemption than a non resident filing is not needed.

3. My W2 doesn’t have MA listed on it and I already filed my taxes. Does this have any impact and if so what?

Will appreciate if you would please answer each question separately as I am trying to learn not just get a response 

[hellotax1111]

@TomD8 

I didn’t hear back from any of the tax experts. Would you know of any other tax experts who can confirm the above questions?