Massachusetts Withholding laws & HR compliance analysis

Massachusetts Withholding: What you need to know

Employers required to withhold federal income taxes must deduct and withhold Massachusetts state income taxes from wages of residents and nonresidents each pay period based on tables or the percentage method provided by the Department of Revenue (DOR). Tax must be withheld from residents’ wages for services performed either in or outside Massachusetts and from nonresidents’ wages for services performed in the state.
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Taxes must, in most cases, be withheld on wages as defined by federal law, including supplemental wages such as bonuses and commissions. Changes to the federal Internal Revenue Code are automatically adopted by Massachusetts. Thus, compensation that is subject to federal withholding is, in most cases, also subject to state withholding.
Exemptions. The wages of the following workers may not be subject to withholding for Massachusetts state taxes:
• Agricultural workers
• Full-time students earning less than $2,000 a year
• Certain commercial fishermen
• Merchant seamen
• Certain nonresident National Guard members
Each new hire must provide the employer with both a completed federal Form W-4 and a state Form M-4, “Employee's Withholding Exemption Certificate.” Unlike the federal government, Massachusetts continues to use withholding exemptions, so employees must complete both Forms M-4 and W-4 for the most accurate withholding. An employee may file a new M-4 at any time if the number of exemptions increases. An employee must file a new certificate within 10 days if the number of exemptions previously claimed decreases.
Registration. New business owners must register a business with the DOR, and an employer must obtain an Internal ...

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