Archive for the ‘Massachusetts’ Category

Massachusetts Has a New Software Sales Tax

Saturday, August 17th, 2013

Taxachusetts, er, Massachusetts has had for years a reputation of being a high tax state. Lately, Massachusetts has become a somewhat better locale (based on taxes). It’s not that Massachusetts has improved; rather, other nearby states have enacted or increased taxes. Just when you thought you could throw away the Taxachusetts label, out comes a new sales tax.

Last month, the Massachusetts legislature passed a new sales tax on computer software services. At 6.25%, it’s the highest sales tax rate on this in the country. The tax applies to all “computer software, including pre-written upgrades, which is not designed and developed by the author.” The law was effective July 31, 2013.

One website has published a piece about how confusing this new tax is. Consider:

This added levy is not only cumbersome, it’s super confusing. For example:

  • if you install software (Microsoft Office, Constant Contact, Drupal, etc.), it’s taxable
  • if your client clicks the mouse to install it, it’s not taxable
  • training your client to use this software is not taxable
  • but if you “customize” or configure the software in any way, it’s taxable
  • if you don’t actually make any changes, but just discuss them and plan them, it’s consulting and not taxable
  • if you create graphic design mockups, it’s not taxable
  • but as soon as you implement that design (i.e. program it), it becomes taxable if you’re using “prewritten” software “not developed” by you (such as WordPress)

At least, that’s how we think it works.

The Massachusetts high-tech community is up in arms over the new tax. As Christopher Anderson, president of the Massachusetts High Technology Council, said in an interview on WBZ-TV (as reported in the Boston Globe,

“When we impose a tax that no other state in the country imposes as broadly as this, it is going to have an impact on those small and midsize companies, initially, in terms of their ability to win and retain business or add or retain employees,” he said.

“In fact, a number of them are telling me they may have to shed employees just to maintain the business load they have,” Anderson added in the interview with WBZ’s Jon Keller.

Democratic state Senator Karen Spilka has filed a bill to repeal the measure. Meanwhile, Florida Governor Rick Scott has urged unhappy Massachusetts companies to consider moving to the Sunshine State. I am certain that if this tax remains law Massachusetts will see some companies move out-of-state. Taxes matter, and when a business in Massachusetts faces a confusing 6.25% tax while a business in neighboring New Hampshire doesn’t, a business owner might just move.

IRS Gives Extra Three Months for Filing and Payments to Boston-Area Taxpayers; Massachussetts Deadline Should be the Same

Wednesday, April 17th, 2013

As I’m still not really working, here’s the press release from the IRS:

WASHINGTON — The Internal Revenue Service today announced a three-month tax filing and payment extension to Boston area taxpayers and others affected by Monday’s explosions.

This relief applies to all individual taxpayers who live in Suffolk County, Mass., including the city of Boston. It also includes victims, their families, first responders, others impacted by this tragedy who live outside Suffolk County and taxpayers whose tax preparers were adversely affected.

“Our hearts go out to the people affected by this tragic event,” said IRS Acting Commissioner Steven T. Miller. “We want victims and others affected by this terrible tragedy to have the time they need to finish their individual tax returns.”

Under the relief announced today, the IRS will issue a notice giving eligible taxpayers until July 15, 2013, to file their 2012 returns and pay any taxes normally due April 15. No filing and payment penalties will be due as long as returns are filed and payments are made by July 15, 2013. By law, interest, currently at the annual rate of 3 percent compounded daily, will still apply to any payments made after the April deadline.

The IRS will automatically provide this extension to anyone living in Suffolk County. If you live in Suffolk County, no further action is necessary by taxpayers to obtain this relief. However, eligible taxpayers living outside Suffolk County can claim this relief by calling 1-866-562-5227 starting Tuesday, April 23, and identifying themselves to the IRS before filing a return or making a payment. Eligible taxpayers who receive penalty notices from the IRS can also call this number to have these penalties abated.

Eligible taxpayers who need more time to file their returns may receive an additional extension to Oct. 15, 2013, by filing Form 4868 by July 15, 2013.
Taxpayers with questions unrelated to the Boston tragedy should visit IRS.gov, or contact the regular IRS toll-free number at 1-800-829-1040.

Meanwhile, the Massachusetts Department of Revenue has extended the deadline until at least April 23rd. The press release states, “The IRS is expected to provide details on the federal extension shortly. DOR will match whatever extension the IRS announces.”

Thus, for taxpayers living in and around Boston (and individuals impacted by the bombings, including participants and first responders), they should not owe penalties. Interest, however, is statutory and cannot be waived. The Boston-area tax deadline will be Monday, July 15th.

Bad States for Gamblers

Monday, October 22nd, 2012

It’s been a while since I’ve listed out the bad states for gamblers. Here’s an updated list. Make sure you read the notes because while all of these states have tax systems that are problematic for gamblers, some impact amateurs while others impact professionals. Note that I do not cover the laws that impact gambling here (such as Washington State’s law that makes online gambling a Class C felony).

Connecticut [1]
Hawaii [2]
Illinois [1]
Indiana [1]
Massachusetts [1]
Michigan [1]
Minnesota [3]
Mississippi [4]
New York [5]
Ohio [6]
Washington [7]
West Virginia [1]
Wisconsin [1]

NOTES:

1. CT, IL, IN, MA, MI, WV, and WI do not allow gambling losses as an itemized deduction. These states’ income taxes are written so that taxpayers pay based (generally) on their federal Adjusted Gross Income (AGI). AGI includes gambling winnings but does not include gambling losses. Thus, a taxpayer who has (say) $100,000 of gambling winnings and $100,000 of gambling losses will owe state income tax on the phantom gambling winnings. (Michigan does exempt the first $300 of gambling winnings from state income tax.)

2. Hawaii has an excise tax (the General Excise and Use Tax) that’s thought of as a sales tax. It is, but it is also a tax on various professions. A professional gambler is subject to this 4% tax (an amateur gambler is not).

3. Minnesota’s state Alternative Minimum Tax (AMT) negatively impacts amateur gamblers. Because of the design of the Minnesota AMT, amateur gamblers with significant losses effectively cannot deduct those losses.

4. Mississippi only allows Mississippi gambling losses as an itemized deduction.

5. New York has a limitation on itemized deductions. If your AGI is over $500,000, you lose 50% of your itemized deductions (including gambling losses). You begin to lose itemized deductions at an AGI of $100,000.

6. Ohio currently does not allow gambling losses as an itemized deduction. However, effective January 1, 2013, gambling losses will be allowed as a deduction on state income tax returns. Unfortunately, those gambling losses will not be deductible on city or school district income tax returns, so Ohio will remain a bad state for amateur gamblers.

7. Washington state has no state income tax. However, the state does have a Business & Occupations Tax (B&O Tax). The B&O Tax has not been applied toward professional gamblers, but my reading of the law says that it could be at any time.

Today Is the Day to Prepare (Hurricane Irene)

Thursday, August 25th, 2011

If you are a resident of New Jersey, New York City/Westchester County/Long Island, Connecticut, Rhode Island, or Massachusetts, you need to drop what you’re doing and get prepared for Hurricane Irene. Now.

Maybe we’ll get lucky and Hurricane Irene will veer out to sea. However, the current forecast track map puts Irene directly over the New York metropolitan area on Sunday. Unfortunately, there is no reason to think that Irene will veer away; the recent forecast maps have moved Irene toward the west rather than the east.

Hurricanes don’t strike New York City often, and I suspect residents of the Big Apple think this might be just another storm. The effects, though, of a direct hurricane strike might be truly horrifying: Flooding the subway system for weeks to months, devastation along the Long Island shore, flooding in lower Manhattan, millions without power, etc.

If you reside in a low-lying flood-prone area in the Northeast threatened by Irene, consider taking action today. The moment that government authorities announce possible evacuations, people will panic. Buy your supplies now. The National Hurricane Center has links to preparedness guides.

Again, I am hopeful I’ll be looked at in a week as a fear-monger. I just remember the last time I saw such a map, and the disaster that occurred (Katrina). I also remember a saying from my mother: Better safe than sorry.

Edit:
Some Resources:
National Hurricane Center (Irene Home Page)
Dr. Jeff Masters’ Blog
Ryan Maue’s Twitter Feed
Brendan Loy’s Blog

And, most importantly, your local office of emergency preparedness.

Hopefully, my writing this post is much ado about nothing. I just don’t like what I’m seeing on the maps.

Cash and Carry Didn’t Work

Saturday, July 23rd, 2011

There’s nothing wrong with paying employees in cash. Indeed, in some industries it’s the norm. However, you still must withhold payroll taxes and properly report the earnings. The owners of a Massachusetts temporary agency found that out this week.

Michael Powers and John Mahan owned Commonwealth Temporary Services, Inc. in Stoughton, Massachusetts. Powers and Mahan believed that if it wasn’t written down or reported, it didn’t happen. Unfortunately for them, the US Department of Justice proved that they paid employees more than $25 million in cash and didn’t report it. They did save $7 million in taxes (and saved more on workers compensation).

But they’re not going to get to enjoy that money; they were convicted of one count of conspiracy to defraud the Internal Revenue Service and their workers compensation insurers, one count of mail fraud and two counts of false tax returns. Instead of making a little less money but complying with the law, they’ll likely pay a lot of fines and enjoy ClubFed.

As I’ve said before, the government takes trust fund taxes very seriously. This isn’t the area to mess around in.

Congressman’s Wife to Plead Guilty to Tax Charges

Wednesday, October 6th, 2010

For those who don’t watch television, listen to the radio, or get mail, yes, there’s an election in less than a month. And for one Congressman in Massachusetts, there’s some bad news.

Congressman John Tierney represents Salem and surrounding areas in the 6th Congressional District in Massachusetts. Mr. Tierney’s wife, Patrice, will plead guilty today to federal tax charges related to her helping to conceal her brother’s illegal sportsbetting business. The actual charges will be aiding and abetting filing false tax returns.

The charges stem from her brother’s operation of the Sports Offshore sportsbook. Mrs. Tierney allegedly provided incorrect information to the tax professional used by her brother, Robert Eremian. The bank account managed by Mrs. Tierney had something like $7 million, and those funds were “commission” income from “computer consulting” rather than funds from illegal gambling. (The Wire Act clearly prohibits sportsbetting in the United States except for licensed casino in areas such as Nevada.) The Eagle-Tribune notes,

Tierney released a statement yesterday saying that his wife accepts full responsibility for being “willfully blind” to her brother’s action. He said she acknowledges that she “should have done more to personally investigate the true nature of Mr. Eremian’s business activities. …”

That’s definitely the case, especially because it wasn’t Mr. Eremian’s first brush with tax trouble. Mr. Eremian pleaded guilty to tax evasion in 2002 for evading $58,422 in income tax. Today, Mr. Eremian is a fugitive.

As for Mr. Tierney, he is locked in a reelection fight. This is not a good year for Democrats in general, and even some Massachusetts Democrats face difficulties. For Mr. Tierney’s opponent, Bill Hudak, the disclosure today represents a political opportunity.

They’re Mad as Hell and They’re Not Going to Take It Any More!

Wednesday, January 20th, 2010

Many of you may remember the movie classic Network:

On Tuesday, voters in Massachusetts sent a message to politicians. Massachusetts elected a Republican Senator. To put that in perspective, the last time a Republican was elected to the Senate in Massachusetts was in 1976, nearly forty years ago.

Massachusetts elects Democrats the same as the Sun rises in the eastern sky every day. But that didn’t happen on Tuesday. The why of that has to both directly and indirectly with taxes.

Massachusetts has been known informally for years as “Taxachusetts.” Actually, the Commonwealth is no longer among the “leaders” in high taxes in the U.S. It’s not that Massachusetts has gotten better; rather, other states, California included, have gotten worse. Still, Massachusetts recently had an initiative to eliminate its income tax (it failed). The current governor, Democrat Deval Patrick, has proposed tax increases. The voters in Massachusetts haven’t shown much love for that idea.

With the Massachusetts legislature and the governship in the hands of Democrats, wouldn’t voters in liberal Massachusetts be happy? Not hardly. Now add in Congress–completely in the hands of Democrats–and a Democratic President. During the past year, they have spent like there’s no tomorrow. Massachusetts residents may be liberal, but they’re not dumb. Sooner or later the bill for that spending must come due.

The last straw was the current health care “reform” measure. It doesn’t take a genius to see the money being wasted in this legislation. To get enough votes so that it would pass the Senate, giveaways (measured in billions of dollars) were done for Louisiana, Nebraska, and Connecticut; there are probably many, many more that no one knows about. After all, the legislation runs over 2,700 pages. I, and other bloggers, have noted, “It’s unpopular, unworkable, and insane, so naturally they’re in a hurry to pass it.”

Voters in Massachusetts and elsewhere want a small, nimble government. What they see coming out of Washington and the local state house is bloated bureaucracy. If you are a politician running for office this year a message has been sent. Imagine you’re going through a tunnel, and you see a light getting brighter and brighter. For those politicians who will embrace what voters want, the tunnel is at an end. I believe that for many politicians the light is an oncoming train.

Taxachussets No Longer?

Thursday, July 10th, 2008

The Tax Foundation reported that Massachusetts voters will get the chance to vote themselves out of having an income tax this November. Question 1 on the Massachusetts Ballot will be condemned by almost every politician, newspaper, and liberal group in the Bay State.

Indeed, Governor Patrick called the proposal “irresponsible.” But the mere fact that it’s on the ballot—and Massachusetts is not an easy state to get an initiative on the ballot—shows that lots of voters are unhappy with taxes in Taxachusetts.

It will be an interesting November in Massachusetts.

No More Taxachusetts?

Sunday, December 2nd, 2007

I have a few clients in Massachusetts. We joke that it’s really “Taxachusetts.” Massachusetts’ state income tax is 5.3%, and is really more of a gross receipts income tax; few deductions are allowed. But that may change.

Citizens in Massachusetts have collected over 66,000 signatures on petitions—the first step in a drive to eliminate the state’s income tax. While there are more steps involved in the process (including collecting a second set of 11,000 signatures early next year), it’s likely that residents of the Commonwealth will have a chance to vote themselves out of the state’s income tax.

It may be a very interesting election cycle in Massachusetts. Although, as the link notes, expect lots of politicians to say, “The sky is falling.”

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