Massachusetts Optional Tax Rate

[Bees Knees]

Anyone from Massachusetts?

Please explain to me, again, why your state has a flat tax rate of 5.3%. BUT, if you choose, you can pay an optional 5.85% rate instead.

Any reason for such a thing?

And if it is a way to let people contribute extra tax to help pay down your debt, why not just let people decide for themselves how much extra they want to pay? Why not 5.95%, or 6.235%, or whatever? Why do they only have the choice to pay 5.85% instead of the required rate?

[Mark Goldberg]

Massachusetts

Here is how I remember it.
A few years ago the tax rate in Ma reached its zenith at 5.85%. There was additional legislation which said over x number of years this rate would be reduced to 5%. Unfortunatley, just when the rate began to drop so did the economy. So they said, for those of you feeling badly about how many programs we have to cut, you can keep paying at the old rate.
And believe it or not some people actually do pay at the optional rate. The reason it is this way versus some other way is a class of income in Ma must be uniform for the entire year. This is why we have to amend 2002 returns with long term gains. These were taxes at two different rates in 2002.

[pog]

A frivolous question

Suppose a client chose the optional 5.85% rate on his 2004 return and, as a result, paid an additional $500 when he filed in April 2005. Where would he now deduct that $500 on the 2005 federal return? On Sch A under taxes or under charitable deductions?

(According to MA DOR 1,300 taxpayers did pay $351,000 in additional taxes at the higher voluntary rate.)

[Matt Sova]

Info left out

What the MA DOR does not say is that 1,299 of those were filed by individuals without the help of a professional and did not understand the law!!!

Matt

[Bees Knees]

Line 22 instructions say if I choose to pay the higher optional 5.85% tax rate, I must multiply line 21 and Schedule D, line 20 by 5.85% and fill in the oval. What if I want to pay even more? Do I have that option? Do I fill in another oval? Of lets say I just want to split the difference...say half way between the 5.3% rate and the 5.85% rate. Do I just fill in half the oval?