Comprehensive Guide to Payroll Taxes in Massachusetts

As an employer with workers in Massachusetts, you need to understand which state and federal payroll taxes you must pay, or withhold from employees and remit to ensure compliance with legal requirements. This article provides a comprehensive overview of Massachusetts' payroll tax regulations.

General overview

Employers in Massachusetts are obligated to withhold and remit federal taxes on behalf of their employees such as Federal Income Tax and FICA taxes, as well as State Income Tax and Paid Family and Medical Leave (PFML). There are currently no cities with a Local Income Tax.

Employers are required to pay FICA Tax and Federal Unemployment Tax (FUTA) as well as contribute to state-administered programs such as PMFL (if eligible), Workers' Compensation Insurance, and various schemes under the Department of Unemployment Assistance.

State Income Tax (SIT)

Massachusetts employers are responsible for withholding State Income Tax (SIT) from their employees' wages. The State Income Tax rate is 5.00% for 2024. A 4% surcharge applies to annual income over USD $1 Million.

Employers must register electronically and remit State Income Tax to the Department of Revenue (DOR) from their employees through the MassTaxConnect system, Massachusetts' official online portal.

The deadline for filing varies, based on the amount of State Income Tax withheld:

• Annual filers: Employers expecting to withhold $100 or less annually must file and pay withheld taxes by the last day of January following the calendar year.
• Quarterly filers: Employers expecting to withhold more than $100 but not more than $1,200 annually must file and pay withheld taxes quarterly, by the last day of the month following each quarter.
• Monthly filers: Employers expecting to withhold more than $1,200 but not more than $25,000 annually must file and pay withheld taxes monthly, by the 15th of the following month. However, the deadline is the last day of the following month for March, June, September, and December.
• Other: Employers expecting to withhold more than $25,000 annually must pay cumulative withheld taxes of $500 or more within three business days of the end of any quarter-monthly period. You must remit any unpaid taxes by the last day of the month following each quarter.

Employers must submit Form 1: Massachusetts Resident Income Tax Return or Form 1-NR/PY: Massachusetts Nonresident/Part-Year Tax Return as relevant by April 15, or the next business day.

More information about filing and paying withheld tax is available on the Massachusetts DOR website.

Withholding and paying Paid Family and Medical Leave (PFML) in Massachusetts

As a Massachusetts employer, you're responsible for withholding Paid Family and Medical Leave (PFML) tax from your employees' paychecks each quarter. If you have 25 or more covered individuals in your Massachusetts workforce, you're also obligated to contribute to the Department of Family and Medical Leave (DFML) via the state's MassTaxConnect platform.

PFML offers eligible employees up to 26 weeks of paid leave for family or medical reasons. Covered individuals include full-time, part-time, contractor, and seasonal employees who work in Massachusetts, whether or not they live in the state.

• Employers with fewer than 25 covered individuals working in Massachusetts must withhold and remit 0.46% of eligible wages in 2024
• Employers with 25 or more covered individuals working in Massachusetts must contribute 0.88% of eligible wages on their employees' behalf. This includes the mandatory employer contribution to medical leave of 0.42% of eligible wages

If you provide a private or self-insured plan with equal or superior employee benefits to PFML, you may be eligible for an exemption from associated PFML contributions.

For more detail, refer to the DFML website.

Employer Contributions to the Department of Unemployment Assistance

Employers in Massachussetts are required to make the following contributions to the Department of Unemployment Assistance:

• State Unemployment Insurance (SUI)
• COVID-19 Recovery Assessment
• Employer Medical Assistance Contribution (EMAC)
• Workforce Training Fund (WTFP)

Every quarter, employers governed by Massachusetts unemployment law need to remit their contributions to the Department of Unemployment Assistance (DUA). After you submit your quarterly employment and wage detail report, UI Online will determine the amount due. The deadline for payments is 30 days after quarter end.

State Unemployment Insurance (SUI)

State Unemployment Insurance (SUI) is an employer-funded program which provides temporary financial support for individuals who are unemployed through no fault of their own. As a private employer in Massachusetts, you're required to pay SUI if you have one or more employees working for 1 or more days for 13 weeks within a calendar year, or if you pay wages exceeding $1,500 in any calendar quarter. Exemptions apply.

Massachusetts employers pay SUI a taxable annual base wage of $15,000 per employee. The 2024 SUI rate for new employers is 1.87%, except for those in the construction industry, who pay 3.76%. After 3 years, the Department of Unemployment Assistance (DUA) calculates an experience rating based on the reserve ratio method to determine the ongoing SUI rate for your organization.

You can manage your Massachusetts unemployment insurance through the state's online portal, which offers a convenient platform for handling UI payments and related matters.

To learn more about paying your unemployment insurance and your specific obligations, refer to the Massachusetts Department of Unemployment Assistance's information.

COVID-19 Recovery Assessment

Private-contributory, experience-rated employers in Massachusetts must contribute to the COVID-19 Recovery Assessment, to begin to recover the charges to the COVID-19 Employer Relief Account. Employers with new SUI rates are exempt, along with reimbursable and governmental employers, employers with assigned SUI rates that received zero 3-year average wages on their rate notice, and non-profit employers who have changed their payment method to contributory within the last 3 years.

Contributions due are automatically calculated for subject employers when quarterly employment and wage detail reports are filed, based on a taxable wage base of $15,000 per employee. There is no additional filing requirement.

Employer Medical Assistance Contribution (EMAC)

Employers are required to file a quarterly EMAC contribution report with the Department of Unemployment Assistance (DUA) through UI Online. If this isn't submitted, the liability amount is estimated.

Established employers in Massachusetts with 6 or more employees are required to pay an Employer Medical Assistance Contribution (EMAC), charged on the annual taxable wage base of $15,000 per employee. New employers are exempt for the first three years. In your fourth year, the EMAC rate of 0.12% is his increases to 0.24% in your fifth year, and to 0.34% in your sixth year and beyond.

Workforce Training Fund Program (WTFP)

The Workforce Training Fund Program (WTFP) supports professional development in Massachusetts. All of the state's employers contribute at a flat rate of 0.056% in 2024.

Workers’ Compensation

Workers' Compensation provides vital financial support in the event of job-related injuries or illnesses. It also provides legal protection for employees and employers. All employers in Massachusetts are required to carry Workers' Compensation (WC) Insurance, regardless of the number of hours worked or the number of employees. This includes you as the employer, if you are considered an employee of your own company. Exemptions apply.

Employers must purchase Workers' Compensation Insurance from one of the state's qualified commercial carriers. You may not self-certify.

Penalties for non-compliance are severe, including:

• A stop-work order (SWO) issued by the Department of Industrial Accidents’ (DIA) Office of Investigations to employers without adequate workers’ compensation insurance
• A minimum fine of $100 per day, including weekends and holidays, from the SWO's issue until you obtain insurance coverage and pay the fine
• If you don't appeal the SWO, your business must shut down immediately and remain closed until proof of coverage is provided to the DIA and the fines are paid. If you do appeal the SWO, the fines increase to $250 per day, but your business can remain open
• Employers issued SWOs may face criminal charges, including up to one year in prison and/or a fine of up to $1,500 upon conviction
• Uninsured employers are also subject to debarment from public contracts for three years

Simplify US payroll tax compliance with Deel

While this guide provides essential information on Massachusetts payroll taxes, payroll compliance, and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel. 

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.