Introduction to Massachusetts S Corporation Return
The Massachusetts S corporation return is prepared for calendar, fiscal and short year corporations. Using entries from the federal tax return and Massachusetts worksheets, the following forms and schedules are prepared for the Massachusetts return:
Form 355S, S Corporation Excise Return
Form 63 FI, Financial Institution Excise Return
Schedule E, Income Apportionment for a Financial Institution
Form 355SC, Domestic or Foreign Security Corporation Return
Form ABT, Application for Abatement
Form 355-7004, Application for Corporate Extension
Form 355-7004 Misc., Application for Extension of Time to File Certain Massachusetts Domestic or Foreign Corporation Excise Returns Corporation Estimated Tax Worksheet
Form 355ES, Corporation Estimated Tax Payment Vouchers
Form 355PV, Corporate Tax Payment Voucher
Form M2220, Underpayment of Massachusetts Estimated Tax by Corporations
Schedule ABI, Exceptions to the Add Back of Interest Expenses
Schedule ABIE, Exceptions to the Add Back of Intangible Expenses
Schedule E-2, Loss Carryover Deduction
Schedule F, Income Apportionment
Form F-2, Apportionment Report
Schedule FE, Report with Respect to Foreign Entities
Form EDIP, Refundable Economic Development Incentive Program Credit
To assist Taxpayers and Tax Professionals expecting taxes due, the Commonwealth of Massachusetts is providing a URL about taxes due, such as due dates and payment methods.
A copy of the federal return is provided for filing with the Massachusetts return.
An S corporation with total receipts of $6 million or more is liable for an additional excise tax. Total receipts are computed on Schedule S, Classification Information. If gross receipts total $6 million or more, net income (loss) is computed as though the S corporation were a C corporation. A Form 1120 facsimile prints to support the computation of net income (loss). The computations from the Form 1120 facsimile are used to complete Schedule E on Form 355S.
If total receipts are less than $6 million, the S corporation is not liable for the additional excise tax, and the Form 1120 facsimile does not print. Schedules E and E1 are also suppressed when total receipts are less than $6 million.
Longterm capital gain and Section 1231 prior years installment sales on federal Form 6252 that are for sales completed during 1996 and before January 1, 2002 will be included on a separate statement for the Schedule SK1. If the date sold and/or the date acquired is not entered for the installment sale, an entry on federal worksheet Income/Deductions > Installment Sales > State Use field of M0, M1, M2, M3, M4 or M5 for the appropriate holding period will be used for the Schedule SK1 statement or Schedule DIS.
The holding period code for the "State Use" entry is as follows:
M0
Asset held more than six years
M1
Asset held more than five years, but not more than six years
M2
Asset held more than four years, but not more than five years
M3
Asset held more than three years, but not more than four years
M4
Asset held more than two years, but not more than three years
M5
Asset held more than one year, but not more than two years
A composite return can be processed with an S corporation when there are at least 2 nonresident shareholders and they have no other Massachusetts source income. The "designated shareholder" information must be entered before the Form NRCR is processed. Entries for the composite return are on the Massachusetts, Composite Return worksheet. The shareholders to be included in the composite return can be selected by either the options on the Massachusetts, Composite Return worksheet or on the Shareholders worksheet > Shareholders Information section > State Information. See detailed instructions on the Massachusetts, Composite Return worksheet.
General Questions
Q. How is a composite return generated for Massachusetts nonresident shareholders?
A. The Massachusetts Form NRCR can be processed for Massachusetts nonresident shareholders if there are at least 2 nonresident individual, trust and/or estate shareholders. Either the shareholder number or the name, address, etc. of the "qualified designated shareholder" must be entered. Selecting the nonresident shareholders that are to be included in the composite return filing will not generate the composite return without the qualified designated shareholder. All applicable information to be entered for a composite return filing is on the Composite Return worksheet.
Q. Why is Form 1-NR/PY no longer available?
A. Beginning with the 2009 tax processing year, the majority of composite returns are to be filed on Form NRCR instead of Form 1-NR/PY. Only composite returns filed on behalf of members of a professional athletic team may still use Form 1-NR/PY. We are no longer supporting Form 1-NR/PY in the S Corporation product.
Q. How can I file and/or make a payment for Form NRCR, Nonresident Composite return?
A. Per TIRs 09-18 and 04-30, Form NRCR and its extension Form M-4868 must be filed and payment made electronically. The Massachusetts Department of Revenue will not accept any paper versions of theses forms. Any paper versions received will be destroyed after the Department processes any payments and the Department will continue to treat the taxpayer as a non-filer until the form is sent electronically.
Estimated payments for composite returns must also be made electronically. They must be made online at www.mass.gov/dor. Select the "For Individuals and Families" tab and in the online services box select "Web Services for Income". Under the "Make Payments" category is the option "Pay Estimated Income Tax - Composite."
Q. Why is the excise tax less than .0026 times "tangible property" or "net worth"?
A. The tax year dates entered on General > Basic Data > General are less than 12 months and the tax is prorated according to the S Corporation Excise Tax return instructions.
Q. Where can the Section 168(K) "bonus" depreciation recapture be entered?
A. The recapture is calculated by CCH Axcess and is included on Form 355S, Schedule E. An override of the calculated recapture amount can be entered on Income and Deductions > Other Adjustments and Overrides
Q. Where is the Section 168(K) "bonus" depreciation recapture on Schedule S?
A. The recapture and the depreciation difference is included in the depreciation adjustment on Schedule S, lines 24, 26 and/or 27.
Q. How can the program calculate a difference between federal and Massachusetts depreciation when Section 179 expense cost is different?
A. Enter on Income/Deductions > Business > COGS Depreciation and Amortization detail > State column or the Other Depreciation and Amortization detail > State column or the Depreciation and Amortization (Form 4562) detail sections, State column of the Rent and Royalty worksheet and Farm/4835 worksheet the "state code" and "asset number" of the asset(s) for which expense cost was elected and the Massachusetts expense cost on the corresponding line to the asset number under the column heading "Section 179/Bonus".
The Massachusetts expense cost will be carried to the "Separately stated deductions" on the Schedule SK-1.
Q. Where can the NOL carryforward be entered?
A. For tax years 2010 and later, the NOL carryforward period will gradually expand to 20 years. This is why the input has changed from the Massachusetts Corporation category, Income/Deductions worksheet, NOL Carryover section to the Income/Deductions worksheet, NOL Carryover / Carryback section.
Q. How can the Annual Report be suppressed from printing and not mentioned in the transmittal letter and filing instructions?
A. Use Other Return > Annual Reports > Suppress the Annual Report. The information on the Other Return worksheet will be saved for Pro Forma for next year.
Q. Why is Schedule S, line 11 including the difference between annualized and unannualized receipts?
A. If the tax year is a short year, the amount on Schedule S, line 12 is annualized per MA Reg. 830 CMR 62.17A.1(11). In addition to being annualized, Schedule S, line 12 should equal the sum of lines 1 through 11, therefore the difference between the annualized and unannualized receipts must be included in the other income on line 11.
Q. Why is Schedule B, line 4 zero?
A. According to the instructions printed on Schedule B on the Massachusetts website, classified manufacturers should enter zero on this line instead of the amount from Schedule A, line 1d. Therefore, Schedule B, line 4 will be zero when General > Basic Data > Type of corporation option is "Classified Manufacturing".