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CCH Axcess Tax

Massachusetts Deviations Requiring Entries

The following differences between the Massachusetts income tax return and the federal income tax return are not taken into account and require specific accountant entries.

If Schedule C loss carryovers for Massachusetts are different from federal, enter the Massachusetts suspended loss carryovers on federal Business > Loss Carryovers.

If the small business exemption from sales taxwas claimed during 2019, enter the number of employees on September 1, 2019, on federalBusiness > State.

Schedule C Abandoned Building Renovation Deduction. To claim this deduction on Massachusetts Schedule C, enter the deduction amount as other expenses on federal Business > Expenses with a code of "ST" in the State Use field. This entry will not affect the federal Schedule C.

Schedule C Items Withdrawn for Personal Use. To list these purchases separately on Massachusetts Schedule C, enter the total amount withdrawn for personal use as other expenses on federal Business > Expenses with a code of "MA" in the State Use field. This entry will not affect the federal Schedule C.

If interest (other than from Massachusetts banks) and dividends are included in gross receipts on Schedule C, enter the interest and dividends on federal Business > State, State Use field.

If Schedule F loss carryovers for Massachusetts are different from federal, enter the Massachusetts suspended loss carryovers on federal Farm / 4835 > Loss Carryovers, State Carryover field.

Child and Dependent Care Expenses. Federal 2441 - Child and Dependent Care Expenses worksheet. Use FS and State codes to handle deviations between federal and Massachusetts child and dependent care expenses.

Child Care Allowance. Federal General > General. If the dependent is age 65 or over as of December 31, 2019, a disabled dependent qualifying for the child care allowance or is the dependent of a noncustodial parent, enter a "2" in the State Usefield on federal General > General.

Alimony Paid. Federal Other Adjustments > Alimony Paid. If filing both as a nonresident and a part-year resident, use FS and State code entries to report the amounts paid during the Massachusetts resident period only.

At Risk Carryovers. Use federal Passthrough > At-Risk Carryovers to handle deviations between federal and Massachusetts at risk carryovers.

Employee Business Expenses. Federal Employee Business Expenses worksheet. Deviations between federal and Massachusetts may be handled through the use of FS codes or by using special input on Massachusetts Employee Business Expense Deduction worksheet.

Wages and Salaries. Use FS and State codes or State Wages (if different) fields to handle deviations between federal and Massachusetts wage and salary income.

Taxable Pensions and Annuities. If all or part of pension and annuity income entered on federal IRA's, Pensions and Annuities worksheet is not taxable in Massachusetts, enter Code "F" for the federal amount and Code "S" for the state amount. Explain any such difference in taxability on Massachusetts Pensions and Annuities worksheet.

Use the "X if public retirement" fields on federal IRA's, Pensions and Annuities worksheets to exclude pension income from Form 1 or Form 1-NR/PY. If a portion of the income is taxable, enter the taxable portion in the State Amount fields.

Pension Distributions Treated as Keogh Distributions. Enter Code "22" in the State Use Code field on federal IRA's, Pensions and Annuities worksheets if the distributions should be treated as Keogh distributions for Massachusetts purposes. Make entries on Income/Deductions > IRA/Keogh Distributions for Keogh distributions previously taxed by Massachusetts and total amounts distributed to date.

Tier II Railroad Retirement Benefits. Federal IRA's, Pensions and Annuities > Distributions from Pensions, Annuities and IRAs. If a "5" is entered in the State Use Code field, the federally taxable benefits are not included in taxable pensions/annuities on the Massachusetts return.

Savings/Loans, Banks and Others, and Seller Financed Mortgage Interest. The information entered on federal Interest worksheet and Passthrough > Interest and Dividends in State Amount 1 fields is used to enter the portion of total interest income treated as other than Massachusetts bank interest.

Federal Passthrough > Activity may be used to enter interest from all partnership, S corporation and estate or trust distributionstaxable as Massachusetts bank interest at 5.1% for inclusion in 5.1% income. Distributions other than Massachusetts bank interest should not be entered onPassthrough > Activity section and must be on Passthrough > Interest and Dividend section using the Amount field and the State Amount field. If the interest entered is included in ordinary income from partnerships, S corporations or estates and trusts, enter "S" in the FS code field and use the following codes in the State Percent field for amounts to be deducted from Schedule E income.

These codes are valid for "S" coded entries only, and should be used only if the interest income is included in the "blank" or "F" coded Schedule E income. Interest income with an FS code of "S" is included on Massachusetts Schedule B, "Other Interest and Dividends Not Included Above."

Enter tax exempt interest, such as municipal bond interest, received from Massachusetts or its political subdivisions in the State Nontaxable fields on federal Interest and Dividends worksheets. Amounts entered in these State Nontaxable fields are excluded from the Massachusetts return.

Enter tax exempt interest that is taxable to Massachusetts in the State Taxable fields on federal Interest and Dividends worksheets.

If tax exempt interest reported on 1099-DIV includes both amounts from Massachusetts and amounts from other states, enter the Dividend Income Source once, the amount from Massachusetts in the State Nontaxable box and the remaining amount in the State Taxable box.

Enter tax exempt interest received from a passthrough entity in the Interest and Dividends worksheet. For tax exempt interest received from Massachusetts or its political subdivisions use Code "9" or "16." Amounts entered in conjunction with Codes "9" and "16" are excluded from the Massachusetts return. For tax exempt interest taxable to Massachusetts use Code "10" or "17."

If an installment sale is fully taxable by Massachusetts in the current year or a prior installment sale was fully taxed by Massachusetts in a previous year, make these entries:

• Enter blank or "S" in the FS code field on federal Installment Sales worksheet;
• Enter "MA" on federal Installment Sales worksheet, State Use 1 field.

Future year receipts from Massachusetts income are excluded for these sales.

To treat installment sales as installment sales on the Massachusetts return, make these entries:

• Enter blank or "S" in the FS code field on federal Installment Sales worksheet;
• Do not enter "MA" on federal Installment Sales worksheet, State Use 1 field.

Farm Partnership Income/Other Partnership Income. If farm partnership distributions or other partnership distributions contain interest which should be segregated for Massachusetts income tax purposes, enter the federal amount with a blank FS code. Enter the state amount in the State if Different fields on federal Partnership Passthrough > Activity section. Do not forget to enter the interest as either Massachusetts or non-Massachusetts interest on federal Partnership Passthrough > Interest and Dividends section, with an "S" code entered in FS code and the appropriate code in the State Percent field.

If the Massachusetts taxable estate and trust income is different from the federal amount, enter the federal amount with a blank FS code. Enter the Massachusetts amount in the State if Different fields on federal Fiduciary Passthrough > Activity section. Refer also to Massachusetts Estate and Trust worksheet, for an alternative method of calculating Massachusetts estate and trust income.

If passive income from Massachusetts estates and trusts should be deducted on Massachusetts Schedule E or Schedule D, enter the amounts on federal Gains and Losses worksheets or Fiduciary Passthrough > Activity section with an "F" in the FS code field. Such income will not be included on the Massachusetts Form 8582. Enter "1" in the State Use Code field on Fiduciary Passthrough > Activity section and "MA" in the State Use 2 field on Gains and Losses worksheets.

If the S corporation distributions contain interest which should be segregated for Massachusetts income tax purposes, enter the federal amount with a blank FS code. Enter the state amount in the State if Different fields on federal S Corporation Passthrough worksheet. Do not forget to enter the interest as either Massachusetts or non-Massachusetts interest on federal S Corporation Passthrough > Interest and Dividend section with an FS code of "S" and the appropriate code in the State Percent field.

If dividends and interest are taxed directly to Massachusetts estates and trusts and should be deducted on Massachusetts Schedule B, enter the amounts on federal Interest and Dividend worksheets or Fiduciary Passthrough > Interest and Dividend section with an "F" in the FS code field. Also enter ".5" in the State Percent field on these interview forms.

If the Massachusetts resident return has a Form 8582 and a nonresident state being processed also has a Form 8582, do not code rental or K-1 income with a "blank" FS code and a State code that is not "MA." Two separate entries must be made: one with an "F" in the FS code field and the nonresident state code in the State code field, the other with an "S" in the FS code field.

Long-term Gains on Collectibles. Enter long-term gains from collectibles on Installment Sales worksheets with "MC" in the State Use 1 field; enter "MC" in State Use 2 field on Gains and Losses worksheets. Long-term capital gains from installment sales prior to 1996 are treated as collectibles for Massachusetts purposes without entering "MC" in the State Use 1 field.

Prior year Section 1231 losses entered on federal Gains and Losses > Prior Year Section 1231 Losses should be "F" coded; they do not apply to Massachusetts.

IRA and Roth IRA Distributions. Total distributions made in the tax year may be entered on federal IRAs, Pensions, and Annuities > Nondeductible IRAs; IRAs, Pensions, and Annuities > Roth IRAs; IRAs, Pensions and Annuities section, Retirement Plan Taxes section; and IRAs Pensions and Annuities section, Distributions from Pensions, Annuities and IRAs section. If an "X" is entered for an other rollover, the taxable amount instead of the gross amount will be included on the Massachusetts worksheet for the taxable IRA plan distributions.

Make entries on Massachusetts IRA/Keogh worksheet for conventional and Roth IRA distributions previously taxed by Massachusetts and total amounts distributed to date.

Massachusetts State Lottery Winnings and Other Gambling Winnings. Federal Other Income > Gambling Winnings, carry to Form 1, line 8b or Form 1-NR/PY, line 10b, "Massachusetts state lottery winnings," if a "1" is entered in the State Use 2 or State Use field; they carry to Schedule X, line 3, "Other gambling winnings," if a "2" is entered in the State Use 2 or State Use field.

If a decedent's return is being filed, the refund claimant's name must appear in the "Care Of" line of the address. Include the refund claimant's name and address on federal General > Basic Data General. Use Massachusetts Other > Statement of Claimant of Refund Due a Deceased Taxpayer to enter name, address and decedent code.

To distinguish between an estate and trust on Massachusetts Schedule E-3, enter a "1" in the "State Use - Amount" box on the federal input if the entity is an estate.