Boston
Taxes and Payroll
An outline of income taxation, payroll regulations, and how taxes work in Boston.
Sections
1. Overview of Taxes in Boston, Massachusetts
Boston, as part of Massachusetts, follows the tax regulations set by the federal government and the state of Massachusetts. There are no additional city-specific taxes in Boston, but residents and workers are subject to federal and state taxes. Below are the key tax categories:
Federal Taxes
- Income Tax: The U.S. federal income tax is progressive, with rates ranging from 10% to 37% depending on your income bracket.
- Social Security Tax: A flat rate of 6.2% is deducted from employee wages (up to a wage cap of $160,200 in 2023). Employers match this contribution.
- Medicare Tax: A flat rate of 1.45% is deducted from employee wages, with no cap. High earners (income above $200,000 for single filers) pay an additional 0.9% Medicare surtax.
- Federal Unemployment Tax (FUTA): Employers pay this tax, which is 6% on the first $7,000 of an employeeโs wages, though credits can reduce the effective rate to 0.6%.
Massachusetts State Taxes
- State Income Tax: Massachusetts has a flat income tax rate of 5% on most types of income, including wages, salaries, and tips.
- State Unemployment Insurance (SUI): Employers are required to pay SUI taxes, which vary based on the employerโs experience rating. The rates for 2023 range from 0.94% to 14.37% on the first $15,000 of an employeeโs wages.
- Paid Family and Medical Leave (PFML): Massachusetts mandates contributions to the PFML program. In 2023, the total contribution rate is 0.63% of eligible wages, split between employers and employees (see details below).
Other Taxes
- Sales Tax: While not directly related to payroll, itโs worth noting that Massachusetts has a 6.25% sales tax on most goods and services.
- Property Tax: If you own property in Boston, youโll pay property taxes based on the assessed value of your property. The rate for 2023 is approximately $10.88 per $1,000 of assessed value.
2. Payroll in Boston: How It Works
Payroll in Boston follows federal and Massachusetts state laws. Employers must ensure compliance with tax withholding, reporting, and remittance requirements. Hereโs how payroll typically works:
Key Components of Payroll
- Gross Pay: The total earnings of an employee before deductions, including wages, salaries, bonuses, and overtime.
- Mandatory Deductions:
- Federal income tax withholding
- Social Security and Medicare taxes (FICA)
- Massachusetts state income tax withholding
- PFML contributions
- Voluntary Deductions (if applicable):
- Health insurance premiums
- Retirement contributions (e.g., 401(k))
- Union dues
- Net Pay: The amount the employee takes home after all deductions.
Payroll Frequency
Massachusetts law requires employers to pay employees on a weekly or biweekly basis, unless the employer has a written agreement with employees for a different pay schedule.
Minimum Wage
As of 2023, the minimum wage in Massachusetts is $15.00 per hour. Tipped employees must earn at least $6.75 per hour in base pay, with tips making up the difference to reach the $15.00 minimum.
3. Tax Filing Procedures
Both employees and employers in Boston must adhere to specific tax filing requirements and timelines.
For Employees
- Federal Tax Filing:
- File your federal income tax return using Form 1040.
- The deadline is April 15 (or the next business day if it falls on a weekend/holiday).
- State Tax Filing:
- File your Massachusetts state income tax return using Form 1 (Resident) or Form NR/PY (Nonresident/Part-Year Resident).
- The deadline is also April 15.
- W-2 Form:
- Employers must provide employees with a W-2 form by January 31 of each year, summarizing wages and taxes withheld.
For Employers
- Federal Tax Reporting:
- File quarterly payroll tax returns using Form 941.
- Deposit federal income tax, Social Security, and Medicare taxes according to the IRS deposit schedule (monthly or semi-weekly).
- State Tax Reporting:
- Register with the Massachusetts Department of Revenue (DOR) to withhold state income taxes.
- File and remit state income tax withholding and unemployment insurance contributions.
- Annual Reporting:
- File Form W-3 (Transmittal of Wage and Tax Statements) with the Social Security Administration.
- Provide employees with W-2 forms.
4. Massachusetts Paid Family and Medical Leave (PFML)
Massachusetts has a state-mandated PFML program that provides paid leave for family and medical reasons. Contributions are required from both employers and employees.
Contribution Rates (2023)
- Total contribution: 0.63% of eligible wages.
- Employers with 25+ employees:
- Employer pays 0.318%.
- Employee pays 0.312%.
- Employers with fewer than 25 employees:
- Only the employee portion (0.312%) is required.
Leave Benefits
- Eligible employees can take up to 26 weeks of paid leave per year for qualifying reasons, such as:
- Bonding with a new child.
- Caring for a family member with a serious health condition.
- Recovering from a personal serious health condition.
5. Important Timelines
- January 31: Employers must provide W-2 forms to employees.
- April 15: Deadline for filing federal and state income tax returns.
- Quarterly: Employers must file federal and state payroll tax returns (e.g., Form 941 for federal taxes).
- Ongoing: Employers must remit payroll taxes (federal and state) according to their deposit schedule.
6. Local Considerations for Boston
While Boston does not impose additional city-specific taxes, there are some local factors to consider:
- Cost of Living: Boston has a high cost of living, so employees should budget carefully for housing, transportation, and other expenses.
- Commuter Benefits: Many employers in Boston offer commuter benefits to help offset the cost of public transportation (e.g., MBTA passes).
- Workplace Laws: Massachusetts has strong worker protections, including mandatory sick leave (up to 40 hours per year for most employees).
7. Resources for Assistance
- Massachusetts Department of Revenue (DOR): www.mass.gov/dor
- Internal Revenue Service (IRS): www.irs.gov
- Massachusetts Paid Family and Medical Leave: www.mass.gov/pfml
- Boston City Government: www.boston.gov
8. Tips for Employees and Employers
- Employees:
- Ensure your employer has your correct W-4 form to withhold the right amount of federal taxes.
- Take advantage of tax-advantaged accounts like 401(k)s or HSAs to reduce taxable income.
- Employers:
- Use payroll software or a professional payroll service to ensure compliance with federal and state laws.
- Stay updated on changes to tax rates and employment laws in Massachusetts.
This guide provides a detailed overview of taxes and payroll in Boston, Massachusetts. If you have specific questions or need further assistance, feel free to ask!