For example, individual U.S. citizens or permanent residents often fail to file if they live outside of the United States for an extended period of time and have not formally expatriated for U.S. immigration and tax law purposes. Their failure to file may be motivated by an attempt to save money, but it’s a mistake that exposes them to civil and criminal penalties. Ironically, their U.S. taxes due may not be substantial, since the taxes due are net after application of the foreign tax credit rules, foreign earned income exclusions, other provisions in the Internal Revenue Code allowing for a reduction of U.S. income tax, and applicable income tax treaties or conventions.

Another example, dual residents, despite taking advantage of a tie-breaker provision in an applicable treaty, may not realize that they are accountable to file FBAR and other ownership disclosure forms. These people may think, in good faith, that they were “non-resident”.

Dual residents or citizens also may fail to timely file Reports of Foreign Banks and Financial Accounts (FBARs) under the FINCEN regulations. The FBAR must be filed by any United States individual by June 30 of the year after the calendar year in which the United States individual (U.S. citizen or U.S. resident, corporation, trust, partnership or limited liability company created, organized or formed under U.S. law) has a financial interest in, or signature authority over, foreign financial accounts (FFAs) (including bank, securities and other types of accounts) where the aggregate value of the FFAs is more than $10,000 at any time during the calendar year. According to federal regulations, “signature authority” means the authority, either alone or in conjunction with another, to control the disposition of money, funds or other assets held in a financial account by direct communication to the person with whom the financial account is maintained. If you sign a signature card, you have “signature authority”.

The federal government is aware there are many people who fail to meet their personal obligations under Title 26 on federal income tax and Title 31 on FBAR reports for several years. The IRS released a fact sheet (FS-2011-13) on December 7, 2011, summarizing federal income tax return and FBAR filing requirements. The fact sheet discusses how to file a federal income tax return or FBAR and warns of potential penalties. Taxpayers who owe no U.S. income tax may not be subject to delinquency penalties for failure to file or pay.

Remember, U.S. citizens, even if also citizens of a foreign country and no matter where they reside, are required to annually file U.S. federal income tax returns reporting their income from U.S. and foreign sources. In addition, many U.S. states will try to assert tax jurisdiction over former residents who have moved abroad.

Stay up to date on federal and state tax laws by consulting with an experienced Massachusetts tax attorney.

The sales tax generally is paid to the vendor as an addition to the purchase price. The purchaser pays the sales tax to the merchant at the time of purchase; the vendor then remits the tax to the Commonwealth. For automobile and trailer sales, however, the sales tax is paid directly to the Commonwealth by the consumer.

Since August 1, 2009, the Massachusetts use tax is 6.25 percent of the sales price or rental charge on tangible personal property 1 (including mail order goods or products purchased over the Internet) or specific telecommunications services on which no sales tax, or a sales tax rate less than the 6.25 percent MA rate, was paid and which is to be used, stored or consumed in the commonwealth. The use tax, unlike the sales tax, usually is paid specifically to the state by the purchaser.

Case in point: You order household furniture for your MA enterprise or residence from an out-of-state firm and pay no MA or other state sales tax. You are compelled to pay the 6.25 percent Massachusetts use tax. The use tax applies because the items were not exposed to a sales tax in the other state and because it is for use in the commonwealth.

Concrete individual property involves electronically transferred software.Telecommunications services consist of telephone and other transmissions of data (such as beeper services, cellular telephone services and telegram services). Cable television and Internet access are exempt from the sales tax. Usually, the tax on the sale or use of telecommunications services is a tax on the transmission of messages or information by various electronic means, but not on the sale or use of data itself.

Question 1 – Sales Tax on Alcoholic Beverages

Not so long ago, alcohol purchases were tax-exempt. This changed last year, when the Senate voted to lift the exemption, opting for the statewide average of 6.25%. While the month of September always brings a rise in alcohol sales thanks to the influx of college students, most other months have found liquor store owners struggling. Formerly regular customers are crossing state lines to buy alcohol in New Hampshire, where no sales taxes are applied, and businesses have had to cut down on employees and advertising. Taxes from alcohol sales will go towards federally funded addiction recovery programs, and most supporters argue that because alcohol is not a necessity, it should not be tax exempt. Many donations have been made to campaigns supporting both sides of the issue.

Question 2 – Comprehensive Permits and Regional Planning Initiative

Question 2 revolves around a law that’s been in place for over forty years, allowing organizations building low- or moderate-income to obtain a single zoning permit, as opposed to separate permits from each agency or official with any jurisdiction over any aspect of the housing in question. Voting No on Question 2 would make no change to the standing law, which advocates claim is responsible for having created approximately 58,000 affordable homes for seniors and working- and middle-class families. Voting Yes is a vote to abrogate the current law, an action supporters believe is necessary for housing development reform.

Question 3 – Sales Tax Cut, From 6.25% to 3%

This proposed law would reduce the state sales tax by half, beginning on January 1, 2011. This is important to voters on either side, as its implementation would impact residents on a daily basis in noticeable ways. While it might cut the cost of a family’s groceries for the week, it would halve the state’s budget for public programs, and the jobs of thousands of municipal employees could be put at risk. Arguments from the Yes voters are based on lower taxes inevitably stimulating the economy, and each household keeping approximately eight hundred dollars more per year than they do now.
Almost twice the amount of residents are expected to vote this year than in the last elections.

The law now places certain responsibilities on employers to ensure that health insurance is accessible to as many individuals as possible.

Businesses are affected in many unique ways according to their size. Generally speaking, businesses with fewer than 11 full-time equivalent employees are exempt from most requirements of the law. However, their employees who live in Massachusetts are still required to have health insurance.

Small employers who wish to contribute toward their employees’ group health coverage can purchase health insurance through the Health Connector, or they can purchase through existing channels.

Businesses with 11 or more full-time equivalent employees must offer Section 125 plans to enable their employees, including employees who may not be eligible for the employer’s group health plan, to purchase health insurance on a pre-tax basis.

Those who do not may be required to pay a surcharge if their employees (or dependents of their employees) make significant use of the state’s Health Safety Net, formerly the Uncompensated Care Pool. This is called the Free Rider Surcharge.

If you’re a business owner with questions regarding health care reform as it relates to your business and its taxes, it is important that you discuss the ramifications of health care reform with an experienced business taxation legal professional. You may have several options that you did not realize were available to you.

“In FY 2009, Massachusetts’ corporate tax burden was the 8th highest in the country. This burden is 39% higher than the national average, and higher than a number of states that compete with the Commonwealth for job growth and business expansion. To cite just a few examples, compared to Massachusetts’ corporate tax burden Colorado’s is 76% lower, Connecticut’s is 63% lower, North Carolina’s is 55% lower, and Maryland’s is 40% lower. More examples are provided in the Scorecard.
In FY 2010, Massachusetts ranked the 4th worst on the Tax Foundation’s corporate tax index. The Tax Foundation, a nonpartisan, nationally-recognized tax research organization, bases its index ranking on a formula that weighs corporate income tax as well as policies governing net operating losses (NOL), credits, deductions and exemptions, and related tax base issues.”

Source: Greater Boston Chamber of Commerce Blog

Massachusetts generally adopts the federal rollover rules in IRC § 408A with certain adjustments. The regulations provide:

In the case of a distribution within the meaning of subsection (d)(3) of section 408A of the Code as amended and in effect for the taxable year, any amount included as income for federal tax purposes under said section 408A by reason of such distribution shall be included in gross income and, to the extent such distribution is included in adjusted gross income under subsection (c), shall be taken into account in determining taxable income under this chapter in the same manner as under subparagraph (A) of said subsection (d)(3) of said section 408A of said Code.

For Roth IRA conversions in 2010, unless a taxpayer elects for federal purposes to include the applicable conversion amount in gross income in 2010, the taxpayer must include the applicable Massachusetts gross income from the conversion ratably in 2011 and 2012. Thus, unless the federal election applies, none of the amount includible in Massachusetts gross income as a result of a conversion occurring in 2010 is included in Massachusetts gross income in 2010, and half of the income resulting from the conversion may be included in Massachusetts gross income in 2011 and half in 2012.

Tax Attorney Richard M. Stone is admitted to the Bar in Massachusetts, Ohio, Pennsylvania, DC, and the U.S. Tax Court. He received his J.D. from the University of Pennsylvania Law School, and his B.S. in Mathematics from Lafayette College.

Founded in 1919, the McLane Law Firm is one of New England’s premier full-service law firms with offices in Manchester, Concord and Portsmouth, New Hampshire, as well as Woburn, Massachusetts. Driven by the firm’s depth of sophisticated legal expertise and an unwavering commitment to client service, McLane has built collaborative and lasting relationships with a broad spectrum of domestic and international clients. www.mclane.com

The law, put into practice as part of a wider rewrite of corporate and business tax regulations in 2008, makes Massachusetts one of the few states to tax royalties and interest paid by local subsidiaries to their corporate parents in other countries. Taxation of the payments raises about $40 million a year in additional revenue for the state, according to rough estimates by the state Department of Revenue.

Foreign-owned corporations claim the law is equal to double taxation, given that the corporate parents must pay taxes on royalties and interest in their home country. They also say it offends the spirit of tax treaties between the US government and more than 60 other nations that are targeted at stopping double taxation.

Massachusetts legislators are looking at legislation that would repair the problem for most foreign companies, but no action is imminent.

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