02 January 2020 Massachusetts flat income tax rate lowered for 2020, revised income tax withholding tables released; state Form M-4 required in 2020 Massachusetts announced that due to meeting a target revenue trigger, the state's flat income tax rate drops on January 1, 2020 to 5.00%, down from 5.05% for 2019. As a result, the Department issued revised income tax withholding tables for calendar year 2020. (Circular M, Massachusetts income tax withholding tables, effective January 1, 2020.) Because the state has a flat income tax rate, the supplemental withholding rate for 2020 is also reduced to 5%. The Massachusetts Department of Revenue has also announced that new employees hired in 2020 and those who wish to change their state withholding allowances must file a Massachusetts Form M-4, Massachusetts Employee's Withholding Exemption Certificate. The Massachusetts Department of Revenue announced that since personal exemptions have been removed from the federal Form W-4 for calendar year 2020, new employees hired in 2020 and current employees who wish to change their state withholding allowances for 2020 must file the 2020 state Form M-4, Massachusetts Employee's Withholding Exemption Certificate. TheFederal Form W-4 can no longer be used as a substitute for the Massachusetts Form M-4. (Email, Massachusetts DOR news, December 2019.) Massachusetts personal exemption amounts do not rely on federal law and the process for calculating the correct Massachusetts withholding amount has not changed. Employers may continue to rely on previously submitted Forms M-4 and W-4 for current employees who do not want to adjust their withholding for 2020. As we reported in January 2019, the Massachusetts income tax rate was reduced to 5.05% for calendar year 2019, down from the 5.1% that has been in effect since 2016. (EY Payroll Newsflash Vol. 20, #009, 1-9-2019.) The 2020 tax cut is the last as provided for under 2002 legislation that gradually reduced the income tax rate by 0.05% for each tax year in which certain inflation-adjusted baseline revenue growth requirements were met. The minimum income tax rate allowed under the legislation was 5%. "Starting in January, the income tax rate will be the lowest it has been in decades, allowing Massachusetts taxpayers to be able to keep more of their hard-earned money," said Governor Charlie Baker. "Our Administration is working to keep the Commonwealth's economy strong while maintaining fiscal discipline and now we are finally making happen what voters called for almost 20 years ago." "We are pleased that the necessary revenue benchmarks have been met and the income tax rate is being fully reduced to 5%,"said Lieutenant Governor Karyn Polito. "This tax cut reflects steady economic growth and will provide a well-deserved break to Massachusetts workers." The Department follows the federal deadline of January 31 for filing Forms W-2 (and 1099 with nonemployee compensation shown in box 7). As a result, calendar year 2019 Forms W-2/1099 must be submitted by January 31, 2020. Employers filing 50 or more Forms W-2/1099, and all payroll reporting agents and third party service providers, continue to be required to file Forms W-2 and 1099 electronically over the Department's MassTaxConnect web-based application. Specifications for filing calendar year 2019 Forms W-2 may be found on the Department's website. Employers filing fewer than 50 Forms W-2/1099 may submit calendar year 2019 Forms W-2 on paper along with Form M-3, Reconciliation of Massachusetts Income Taxes Withheld for Employers by January 31, 2020. Employers filing electronically are not required to file Form M-3. For questions concerning Forms W-2 and 1099 filing requirements, contact the Department at +1 617 887 6367 or +1 800 392 6089 or see the Department's website.
Document ID: 2020-0008 | |||||||||
