Massachusetts DOR Issues Tax Return Guidance for Telecommuters

 
FEB. 12, 2021

CAROLINA VARGAS
 

The Massachusetts Department of Revenue has issued draft guidance aimed at helping taxpayers who telecommuted last year because of the COVID-19 pandemic prepare their tax returns.

The February 12 draft directive says nonresidents who normally work in Massachusetts but have been telecommuting from a different location because of the pandemic will be required to pay tax on their Massachusetts-source income.

Residents who normally work in another state but have been working in Massachusetts because of the pandemic will be eligible for a credit for taxes paid to the other state if that state has similar sourcing rules, the draft says.

In October 2020, the state issued a regulation clarifying that nonresidents who normally work in the state but are working remotely because of the COVID-19 pandemic are required to continue paying the Massachusetts income tax. New Hampshire, which doesn't have an income tax, is challenging the regulation as unconstitutional.

The draft directive instructs nonresidents who telecommute to calculate “the amount of their wages that is Massachusetts source income based on either the percentage of their work days spent in Massachusetts during the period January 1 through February 29, 2020, or the apportionment percentage properly used to determine the portion of their wages from that employer that constituted Massachusetts source income as reported on their 2019 Massachusetts personal income tax return.”

Nonresident employees who do not have an exact amount of income derived from Massachusetts must apportion their income by multiplying their gross income by the fraction of in-state working days to total working days, according to the guidance.

An in-state resident is defined as having a permanent home in Massachusetts and spending more than 183 days of the year in the commonwealth. The 183-day count also is applied to the days a person spends in-state because of a "Pandemic-Related Circumstance." 

Notably, the income-sourcing rules will not apply to income earned from a new job that began after March 10, 2020, according to the directive.