Massachusetts Tax Form 1-NR/PY - Nonresident and Part-Year Resident Income Return Instructions

General Instruction for Form 1-NR/PY

Who Must File

You must file a Massachusetts Nonresident/Part- Year Resident Income Tax Return, Massachusetts Form 1-NR/PY, if you were not a resident of Massachusetts and you received Massachusetts source income in excess of your personal exemption multiplied by the ratio of your Massachusetts income to your total income, or you were not a resident of Massachusetts for the full year and your gross income was more than $8,000 — whether received from sources inside or outside of Massachusetts.

Check the following categories to make sure you are a nonresident/part-year resident.

1. You are a full-year Resident if your legal residence (domicile) was in Massachusetts for the entire taxable year or if you maintained a permanent place of abode in Massachusetts and during the year spent more than 183 days, in the aggregate, in the state. If you fit this description, you should file Form 1, Massachusetts Resident Income Tax Return.
2. You are a Nonresident if you are not a resident of Massachusetts as defined above but received Massachusetts source income (e.g. from a job in Massachusetts). Fill in the “Nonresident” oval at the top of the form if this category applies to you.
3. You are a Part-Year Resident if, during the taxable year, you moved to Massachusetts or established a permanent place of abode here and became a resident, or you terminated your status as a Massachusetts resident to establish a residence outside the state. Fill in the “Part-year resident” oval at the top of the form if this category applies to you.
4. Complete the checklist below to determine if you are required to file Form 1-NR/PY as both a Nonresident and Part-Year Resident.

Line 1. Were you a Massachusetts resident for part of the 2008 tax year? Yes No.

Line 2. While you were not a resident of Massachusetts in tax year 2008, did you receive Massachusetts source income (e.g., from a job in Massachusetts)? Yes No.

If you answered “Yes” to line 1 only, you should file as a Part-Year Resident.

If you answered “Yes” to line 2 only, you should file as a Nonresident.

If you answered “Yes” to both line 1 and line 2, you must file both as a Nonresident and Part-Year Resident. Fill in the “Filing as both a nonresident and part-year resident” oval below the address section of the form if this category applies to you. Complete Schedule R/NR, Resident/Nonresident Worksheet, to calculate the portion of income

earned while a Nonresident and the portion of income earned while a Part-Year Resident. Schedule R/NR is included in this booklet.

For more information on Massachusetts source income, refer to the section “Filing Your Massachusetts Return.”

Important Note

At the time this booklet was printed, the IRS had not released final versions of its forms and schedules. Therefore, taxpayers should double-check references to U.S. forms and schedules within this booklet before filing their returns.

Form 1-NR/PY Checklist

• If you received a booklet in the mail, be sure to retain the four-digit Personal Identification Number (PIN) printed on the back cover. You may need it to use DOR’s Web-based and/or Interactive Voice Response (IVR) applications, such as checking the status of your refund.
• Have you entered your Social Security number( s) on Form 1-NR/PY?
• Have you completed and enclosed all four pages of Form 1-NR/PY?
• Have you completed and enclosed Schedule HC, Health Care Information? Certain part-year residents must complete Schedule HC; see the special Health Care section in this booklet for more information about Schedule HC.
• If you changed your name, did you enclose a copy of your Social Security card or driver’s license showing your new name?
• If you moved, did you leave a forwarding address with your local post office and file a Change of Address Form with the Massachusetts Department of Revenue and fill in the address change bubble on Form 1-NR/PY?
• Have you, and your spouse if married filing jointly, signed your return at the bottom of page 1 of Form 1-NR/PY?
• Have you printed all dollar amounts completely within the boxes?
• Have you marked an “X” in any form or schedule box that shows a loss?
• Have you completed Schedule DI, Dependent Information, if claiming a dependent exemption on Form 1-NR/PY, line 4b or taking a deduction/credit(s) on Form 1-NR/PY, lines 16, 17 or 45 (if applicable)?
• Have you attached with a single staple your Form(s) W-2 or 1099 to the return where indicated?
• If requesting direct deposit of your refund, did you fill in the appropriate oval (checking or savings account)?
• If making a payment, have you enclosed your check and Form PV with your return? Form PV is attached to the back of the envelope found in this booklet. Be sure to use the light blue mailing label when mailing your Form 1-NR/PY with the Form PV.
• See page 3 for the correct PO boxes if you are using a tax software product.

Major 2008 Tax Changes

Personal Exemptions Increased Massachusetts law provides that personal exemptions may increase for tax years beginning on or after January 1, 2004 if tax revenues increase. Applicable for the 2008 tax year, the personal income tax exemptions have increased from $4,125 to $4,400 for single and married filing separately filers, from $6,375 to $6,800 for head of household filers, and from $8,250 to $8,800 for joint filers.

No Tax Status/Limited Income Credit Thresholds Because the income level for No Tax Status for joint and head of household filers is based in part on the personal exemption amounts, the threshold for No Tax Status for these taxpayers has been adjusted to reflect changes to the personal exemptions. The Limited Income Credit calculation is similarly affected.

Joint Filers. No tax is imposed if the Massachusetts adjusted gross income (AGI) does not exceed $16,400 plus $1,000 per dependent. Joint filers are eligible for the Limited Income Credit if Massachusetts AGI does not exceed $28,700 plus $1,750 per dependent.

Head of Household. No tax is imposed if the Massachusetts adjusted gross income (AGI) does not exceed $14,400 plus $1,000 per dependent. Heads of household are eligible for the Limited Income Credit if Massachusetts AGI does not exceed $25,200 plus $1,750 per dependent.

Single Filers. No Tax Status for single filers is unaffected by the increase in the personal exemption amount. For single filers, no tax is imposed if the taxpayer’s Massachusetts AGI does not exceed $8,000. Single filers are eligible for the Limited Income Credit if Massachusetts AGI does not exceed $14,000.

Note: If married filing separately, you do not qualify for No Tax Status or the Limited Income Credit.

Duty to Obtain Health Insurance; Penalty for Failure to Obtain Health Insurance As a result of the Massachusetts Health Care Reform Act (the “Act”), most Massachusetts residents age 18 and over are required to have health insurance, if it is affordable to them. The Act created the Commonwealth Health Insurance Connector Authority (the Connector) to provide access to health insurance for uninsured Massachusetts residents. The Connector is also responsible for setting a schedule of affordability related to coverage, based on the percentage of income eligible to be spent on health care.

Residents who have access to affordable coverage but do not obtain the coverage may face state tax penalties pursuant to G.L. c. 111M, sec. 2. Starting with 2008, adults who can afford health insurance are now required to have coverage each month of the year, although 63-day gaps in coverage are allowed by the Act. The monthly penalties for failing to obtain affordable coverage for taxable year 2008 are set out in TIR 07-18 and are based on half of the minimum monthly insurance premium for which an individual would have qualified through the Connector.

Pursuant to its authority under the Act, the Connector issued Administrative Information Bulletin 02-08 that temporarily extends the permitted, penalty- free gap in health insurance coverage to three months (as opposed to the statutory 63-day gap). Thus, for 2008, adults who lose but then resume their coverage within three or fewer consecutive calendar months will not be subject to tax penalties. Administrative Information Bulletin 02-08 is specifically limited to calendar/tax year 2008.

Schedule HC, Health Care Information, must be completed by all full-year residents and certain part-year residents age 18 and over to notify the Department whether or not they had health insurance in each month of 2008. To assist in filling out Schedule HC, taxpayers with private insurance (either purchased on their own or obtained through an employer) or certain government insurance will receive a Form MA 1099-HC, Massachusetts Health Care Coverage, from their health insurance carrier or employer.

Taxpayers who did not have coverage for all of 2008, or had a gap in coverage of four or more consecutive months will need to determine if they had access to affordable health insurance (either through an employer, the government or on their own). The instructions to Schedule HC contain the worksheets and tables to determine whether the taxpayer had access to affordable health insurance. If it is determined that a taxpayer could have afforded health insurance, the taxpayer has the right to appeal the application of the penalty due to hardship by requesting an appeal to the Connector on the Schedule HC. For more information about the appeals process, please see the Schedule HC instructions.

For more information about the health care reform law, including DOR’s regulation at 830 CMR 111M.2.1, Health Insurance Individual Mandate; Personal Income Tax Return Requirements, or the Connector’s regulation at 956 CMR 6.00, Determining Affordability for the Individual Mandate, see the Connector’s website at www.mahealthconnec tor.org or DOR’s website at www.mass.gov/dor.

Circuit Breaker Tax Credit Increased A credit is allowed to an owner or tenant of residential property located in Massachusetts equal to the amount by which the real estate tax payment or 25% of the rent constituting real estate tax payment exceeds 10% of the taxpayer’s total income, not to exceed $930. The amount of the credit is subject to limitations based on the taxpayer’s total income and the assessed value of the real estate, which must not exceed $793,000. For tax year 2008, an eligible taxpayer’s total income cannot exceed $49,000 for an individual filing single who is not the head of household filer, $62,000 for head of household filers, and $74,000 for filing a joint return. In order to qualify for the credit, a taxpayer must be age 65 or older and must occupy the property as his or her principal residence. See TIR 08-12 for more information.

Federal Economic Stimulus Payments Public Law 110-185, § 101 authorized the Internal Revenue Service (IRS) to issue economic stimulus payments to eligible taxpayers. Beginning in April of 2008, the payments were the result of a federal credit treated as a payment against federal income tax. Since the economic stimulus payments are not included in federal gross income, they are not included in Massachusetts gross income and thus not subject to the Massachusetts personal income tax. See TIR 08-5.

New Current Code Provisions As a general rule, Massachusetts will not adopt any federal tax law changes incorporated into the Internal Revenue Code (“Code”) after January 1, 2005. However, certain specific provisions of the personal income tax automatically adopt the current Code.

Provisions of the Code adopted on a current Code basis are (i) Roth IRAs, (ii) Education IRAs, (iii) the exclusion for gain on the sale of a principal residence, (iv) trade or business expenses, (v) travel expenses, (vi) meals and entertainment expenses, (vii) the maximum deferral amount of government employees’ deferred compensation plans, (viii) deduction for health insurance costs of self- employed, (ix) medical and dental expenses, (x) annuities, and (xi) health savings accounts. See TIRs 98-8, 02-11, and 07-4 for further details on Massachusetts’ personal income tax current Code provisions.

Increased Section 179 Expensing Effective for the tax year beginning on or after January 1, 2008 and ending on or before December 31, 2008, the Economic Stimulus Act of 2008 (P.L. 110-185) increased the IRC sec. 179 election to expense property in its initial year from $128,000 to $250,000. The federal Act also increased the IRC sec. 179 overall investment limit from $510,000 to $800,000. Massachusetts adopts the increases in this expensing provision given section 179 is a trade or business expense adopted by Massachusetts on a current Code basis.

Tax-Free Distributions from Individual Retirement Accounts

Qualified Charitable Distribution from an Individual Retirement Account (“IRA”) IRC sec. 408(d)(8) The Pension Protection Act of 2006 (P.L. 109-280) allowed taxpayers age 701/2 or greater to make tax-free distributions from traditional and Roth IRAs to qualified charities for the 2006 and 2007 tax years, not to exceed $100,000 per tax year. The exclusion was extended for distributions made in tax years 2008 and 2009 by the Emergency Economic Stabilization Act of 2008 (P.L. 110-343). Massachusetts adopts this exclusion from gross income, including the extension for tax years 2008 and 2009, given this federal Code provision for IRAs is adopted by Massachusetts on a current Code basis. See TIR 06-20 and Schedule X, line 2 for further details.

New Deduction — Not Allowed Federal “Bonus” Depreciation The Economic Stimulus Act of 2008 (P.L. 110-185) provides for an additional depreciation deduction, under IRC sec. 168(k), in the placed-in-service year equal to 50% of the adjusted basis of “qualified property.” The property must be acquired after December 31, 2007 and before January 1, 2009. As of 2002 legislation, Massachusetts decoupled from bonus depreciation allowed under IRC sec. 168(k), as amended and in effect for the current year. Therefore, Massachusetts does not adopt this additional depreciation deduction. See TIRs 02-11 and 03-25 for further details.

New Exclusion — Not Allowed Mortgage Forgiveness — IRC sec. 108(a) The Mortgage Forgiveness Debt Relief Act of 2007 (P.L. 110-142) amended IRC section 108(a) byadding an exclusion for indebtedness that is discharged before January 1, 2010 and is qualified principal residence indebtedness. The Economic Stabilization Act of 2008 extended this exclusion for three years, until January 1, 2013. Massachusetts does not adopt this exclusion or the extension because they were enacted after January 1, 2005.

Extended Deductions — Not Allowed Massachusetts allows certain federal deductions based on the Internal Revenue Code as amended and in effect on January 1, 2005. Under the January 1, 2005 Code, certain federal deductions due to expire, have now been extended. Massachusetts will not adopt the extensions because they were enacted after January 1, 2005.

Tuition and Fees Deduction — IRC secs. 62(a)(18) and 222 The Emergency Economic Stabilization Act of 2008 extended the federal deduction for qualified higher education expenses to tax years 2008 and 2009. Massachusetts will not adopt this extension because it was enacted after January 1, 2005. However, there is a separate Massachusetts deduction for undergraduate tuition if the total paid exceeds 25% of the taxpayer’s Massachusetts adjusted gross income. See TIR 97-13 for additional information.

Educators Deduction — IRC sec. 62(a)(2)(D) The Emergency Economic Stabilization Act of 2008 extended the federal deduction for certain expenses paid by educators to tax years 2008 and 2009. Massachusetts will not adopt this extension because it was enacted after January 1, 2005.

Privacy Act Notice

Under the authority of 42 U.S.C. sec. 405(c)(2)(C)(i), and MGL c. 62C, sec. 5, the Department of Revenue has the right to require an individual to furnish his or her Social Security number on a state tax return. This information is mandatory. The Department of Revenue uses Social Security numbers for taxpayer identification to assist in processing and keeping track of returns and in determining and collecting the proper amount of tax due. Under MGL c. 62C, sec. 40, the taxpayer’s identifying number is required to process a refund of overpaid taxes. Although tax return information is generally confidential pursuant to MGL c. 62C, sec. 21, the Department of Revenue may disclose return information to other taxing authorities and those entities specified in MGL c. 62C, secs. 21, 22 or 23, and as otherwise authorized by law.

Common Mistakes

An incomplete or incorrect return can delay the processing of your return. Following are a number of tips to help us process your return as quickly as possible.

Note: You should not staple any items, other than any required Form(s) W-2 or 1099s, to Form 1-NR/PY. Any enclosures such as schedules, statements, Form PV, Schedule R/NR, etc. should simply be placed in the envelope along with Form 1-NR/PY when mailing.

• Missing Social Security Number(s). Be sure to enter your Social Security number(s) in the spaces provided.
• Missing Schedule HC. Certain part-year residents must have completed and enclosed Schedule HC, Health Care Information. We cannot process your return without this schedule. See the special Health Care section in this booklet for more information about Schedule HC.
• Incorrect Computation. The Department corrects many returns each year due to errors in computation. Before mailing your return, check your arithmetic to make sure the computations are correct.
• Filing Status. Be sure to fill in the correct oval in line 1, Filing Status. This line is frequently overlooked.
• Exemptions. Be sure that you specify the number of exemptions you are claiming in line 4, items b, c and d. Enter the appropriate number(s) in the small white box. Note: You must complete Schedule DI, Dependent Information, if claiming a dependent exemption in line 4b.
• Missing Pages of Form 1-NR/PY. Form 1-NR/PY is four pages. Be sure to include all four pages of the return when mailing.
• Missing Withholding Statement(s). Be sure the state copy of all Forms W-2 (Wages), W-2G (Winnings), PWH-WA (Promoter Withholding), 2G, K-1 and any Forms 1099 that show Massachusetts income tax withheld are attached with a single staple. These forms are frequently missing and must be obtained later from you in order to process the return.
• Missing Supporting Schedules. Be sure all required schedules are enclosed to support the information on your Form 1-NR/PY. These include Massachusetts Schedules HC, X, Y, Z, B, C, C-2, D, DI, E, CB and R/NR. We cannot process your return without these forms.
• Government Employee Pension Contributions.
• If you were a state, local or county employee and made contributions to a Massachusetts state or local pension plan, your total wages for state purposes will be different from the amount you report on your U.S. return. Report your total state wages from your Form(s) W-2 on Form 1-NR/PY.
• Earned Income Credit. You must have your federal earned income credit amount from your
• U.S. return or as computed by the IRS if you wish to claim the Earned Income Credit on Form 1-NR/PY. . Circuit Breaker Credit. Be sure to complete and enclose Schedule CB, Circuit Breaker Credit, if you qualify to claim this credit.
• Missing Signatures. Thousands of unsigned returns are received by the Department every year. These returns must be returned to the taxpayers for signatures. If a joint return is filed, both spouses must sign the return. Make sure signatures are on the correct lines. Remember to sign your return at the bottom of page 1 of Form 1-NR/PY.
• Missing Form PV. If you are making a payment, make certain you fill out Form PV, Massachusetts Income Tax Payment Voucher. Form PV is attached to the back of the envelope found in this booklet. Enclose Form PV and your check with your return. Be sure to use the light blue mailing label when mailing your Form 1-NR/PY with the Form PV.

Note: Go to www.mass.gov/dor and click on Web Services for Income for online payment options.

Filing Your Massachusetts Return

As a nonresident, you must file Form 1-NR/PY if your Massachusetts source income for 2008 exceeded the smaller of your apportioned personal exemption, or $8,000.

What Is Massachusetts Source Income for Nonresidents?

The term “Massachusetts source income” is used throughout this booklet to describe the types of income which are taxable to a nonresident.

A nonresident is only subject to tax on items of income derived from or effectively connected with:

• any trade, business, or employment carried on in Massachusetts (see the following section);
• participation in any lottery or wagering transaction in Massachusetts; or
• ownership of any interest in real or tangible personal property located in Massachusetts.

Some examples of the types of income taxable to a nonresident include:

• all wages, salaries, tips, bonuses, fees and other compensation which relate to activities carried on in Massachusetts, regardless of where or when the compensation is paid;
• unemployment compensation related to previous Massachusetts employment;
• profit from a business, trade, profession, partnership or S corporation conducted in Massachusetts;
• rents and royalties from real and tangible personal property located in Massachusetts or from other business activities in Massachusetts;
• gain from the sale of real or tangible personal property located in Massachusetts;
• interest and dividends, only if derived from or connected with Massachusetts business activity, or the ownership of Massachusetts real estate or tangible personal property; and
• the definition of Massachusetts source income now includes gain from the sale of a business or an interest in a business, separation, sick or vacation pay, deferred compensation, income from covenants not to compete, and nonqualified pension income that federal law allows states to tax.

Income from Massachusetts sources which is not taxed to residents is not taxed to nonresidents, e.g., interest on debt obligations of the U.S. and amounts received as Social Security and worker’s compensation.

In general, the same exemptions and deductions allowed to residents are available to nonresidents to determine taxable income. These items are allowed, however, only to the extent they relate to, or are allocable to, Massachusetts source income.

Am I Carrying on a Trade, Business or Employment in Massachusetts as a Nonresident?

A nonresident generally does not have a trade, business or employment carried on in Massachusetts if his/her presence for business in Massachusetts is casual, isolated and inconsequential. A nonresident’s presence for business will be considered casual, isolated and inconsequential if the nonresident’s business presence in Massachusetts is ancillary to the nonresident’s primary business or employment duties performed at a base of operations outside Massachusetts — for example, an occasional presence in Massachusetts for management functions, and other similar activities which are secondary to the individual’s primary out-of-state duties.

Are Military Personnel Required to File?

If you enlisted in the service as a Massachusetts resident and have not established a new domicile (legal residence) elsewhere and if your gross income is more than $8,000, you are required to file a Massachusetts income tax return. This applies even though you may be stationed outside of Massachusetts. The terms “legal residence” and “domicile” are used to denote that place where you have your permanent home and to which, whenever you are absent, you have the intention of returning. Nonresident military personnel stationed in Massachusetts may be subject to Massachusetts taxes and should file Form 1-NR/PY if they earn income from other than military sources.

Note: Massachusetts excludes from gross income compensation earned by members of the armed forces for service in a combat zone, to the same extent it is excluded under federal law.

No guidance is intended on the tax status of such pay under the laws of other states. Generally, when income is taxable in two jurisdictions, a credit for taxes paid to the other jurisdiction is allowed on the taxpayer’s return in the state of his/ her residence.

How Do I Determine My Legal Residence (Domicile)?

Your legal residence is determined by all the facts and circumstances in your case. If you have two or more residences, your legal residence is the one you regard as your true home or principal residence. You cannot choose to make your home in one place for the general purposes of life and in another for tax purposes. Your legal residence is usually the place where you maintain your most important family, social, economic, political and religious ties. A change of legal residence will not be accomplished by a temporary or protracted absence from a place; you must not intend to return.

Note: A person is also considered a resident if they maintain a permanent place of abode in Massachusetts and spend more than 183 days, in the aggregate, in the state. See Technical Information Release (TIR) 95-7 for a further explanation.

What is Gross Income for a Part-Year Resident?

As a part-year resident, you must file Form 1-NR/PY if your gross income was more than $8,000 — whether received from sources inside or outside of Massachusetts. Gross income for a part-year resident includes the following:

• all wages, salaries, tips, bonuses, fees and other compensation;
• taxable pensions and annuities;
• alimony;
• income from a business, trade, profession, partnership, S corporation, trust or estate;
• rental, royalty and REMIC income;
• unemployment compensation;
• taxable interest and dividends;
• gambling winnings;
• capital gains;
• forgiveness of debt;
• mortgage forgiveness;
• taxable portion of scholarships and fellow- ships; and
• any other income not specifically exempt.

Massachusetts gross income also includes the fol lowing which are not subject to the U.S. income tax:

• interest from obligations of states and their po- litical subdivisions, other than Massachusetts and its political subdivisions; and
• income earned by a resident from foreign employment.

Massachusetts gross income does not include:

• interest on obligations of the U.S. and U.S. territories;
• amounts received as U.S. Social Security, pub- lic welfare assistance, Veterans Administration disability payments, G.I. Bill education payments, worker’s compensation, gifts, accident or life in- surance payments, or certain payments received by Holocaust survivors; and
• compensation earned by members of the armed forces for service in a combat zone (excluded to the same extent as under federal law).

What Adjustments Must I Make as a Part-Year Resident?

Part-year residents must adjust income, deductions and exemptions when completing Form 1-NR/PY. In general, these items are reduced because all of your income will not be subject to Massachusetts tax. Your deductions and exemptions are based on the number of days you were a Massachusetts resident or the amount of income that is subject to Massachusetts tax.

Income: Lines 5 through 11, 24, 27 and 28 If you earned only a portion of the income you reported on your U.S. return while you were a Massachusetts legal resident, subtract from your U.S. income the amount earned and received while you were legally domiciled in another state or country. However, you may be required to include all income derived from Massachusetts sources earned while you were a nonresident, such as from rental property or from a trade or business, including employment, on Schedule R/NR, Resident/ Nonresident Worksheet. Such income now includes gains from the sale of a business or an interest in a business, separation, sick or vacation pay, deferred compensation, income from covenants not to compete, and nonqualified pension income that federal law allows states to tax.

Deductions: Lines 15 through 19 Most deductions are based on the actual amounts paid by you associated with the deduction for the period of time you were in Massachusetts.

Line 17 (the deduction for a dependent under age 12, or dependents age 65 or over as of December 31, 2008, or disabled dependent(s)), Schedule Y, lines 6 (Archer medical savings account (MSA) deduction), 8 (health savings account deduction), 10 (student loan interest deduction), 11 (college tuition deduction), 12 (undergraduate student loan interest deduction) and 15 (commuter deduction) are the only deductions based on the proration of the number of days you were a Massachusetts resident. For example, if you are entitled to claim one dependent under age 12, and if you lived in Massachusetts for only four months, you can claim a deduction equal to $1,200 (one-third of the $3,600 to which you are otherwise entitled). See line 2 on Form 1-NR/PY for the proration formula.

Lines 15, 16 and 18 and Schedule Y, lines 1 through 4, lines 5 (moving expenses), 7 (selfemployed health insurance deduction), 9 (qualified performing arts-related expenses, jury duty pay given to your employer, reforestation amortization, repayment of supplemental unemployment benefits under the Trade Act of 1974, employee business expenses of fee-basis state or local government officials, business expenses of National Guard Reserve members, the deduction for attorney’s fees and court costs involving certain unlawful discrimination suits and deductible expenses related to income reported on U.S. Form 1040, line 21 and Massachusetts Schedule X, line 4) and line 13 are based on the actual amounts paid or received for the period of time you were in Massachusetts. For example, you may only deduct the amount of alimony paid (Schedule Y, line 3) while you were a Massachusetts resident. Similarly, the deduction for attorney’s fees and court costs involving certain unlawful discrimination suits (Schedule Y, line 9) must be directly related to Massachusetts income as reported on Form 1-NR/PY, line 12.

Exemptions: Lines 4a through 4f Your total exemptions (line 4f) must be prorated based upon the ratio of days you were a Massachusetts resident. To adjust your exemptions, use the formula in line 2 and see line 22 instructions.

Earned Income Credit: Line 45 Your earned income credit (line 45) must be prorated based upon the ratio of days you were a Massachusetts resident. To adjust this credit, use the formula in line 2 and see line 45 instructions.

Should I Make Estimated Tax Payments in 2009?

Every taxpayer (whether a resident or nonresident) who expects to pay more than $400 in Massachusetts income taxes on income which is not covered by Massachusetts withholding must pay Massachusetts estimated taxes. See line 43 instructions for more information.

How Do I File a Decedent’s Return?

A final income tax return must be filed for a taxpayer who died during the taxable year. It must be signed and filed by his/her executor, administrator or surviving spouse for the portion of the year before the taxpayer’s death. Be sure to fill in oval 1 if the taxpayer who was listed first on last year’s income tax return is deceased, or oval 2 if the taxpayer who was listed second on last year’s income tax return is deceased. Also, enclose a statement with the refund claimant’s name and Social Security number clearly printed.

A joint return may be filed by a surviving spouse. In the case of the death of both spouses, a final return must be filed by their legal representative.

Any income received for the decedent for the taxable year after the decedent’s death, and for succeeding taxable years until the estate is completed, must be reported each year on Massachusetts Form 2, Massachusetts Fiduciary Income Tax Return.

If the decedent’s return shows a refund due, and if the Probate Court has not appointed a legal representative and none is contemplated, a Massachusetts Form M-1310, Statement of Claimant to Refund Due on Behalf of Deceased Taxpayer, must be enclosed with the return so the refund check may be made payable to the proper person.

When to File Your Return

Form 1-NR/PY is due on or before April 15, 2009.

Automatic Extension Granted if 100% Tax Due is Paid by Tax Return Due Date

If line 3 of the Extension Worksheet on page 3 is “0” and 100% of the tax due for 2008 has been paid through:

• withholding; . timely estimated payments of tax;
• credits from your 2008 return; and
• a refund from the prior tax year applied to the next year’s tax liability,

you are no longer required to file Form M-4868, Application for Automatic Extension of Time to File Massachusetts Income Tax Return. However, if you do choose to file Form M-4868 in this in- stance, you must do so electronically, via DOR’s website. See TIR 06-21 for more information.

Also, if you owe no tax or you are making a pay- ment of $5,000 or more, you are required to file your extension via the web. If you are making a payment of less than $5,000, you also have the option of filing your extension electronically. If there is a tax due with your extension, payment can be made through Electronic Funds With- drawal.

Visit www.mass.gov/dor to file via the Web.

Note: Your extension will not be valid if you fail to pay 80% of your total tax liability through with- holding, estimated tax payments or with your ex- tension. Form M-4868 is available at www.mass. gov/dor or by calling (617) 887-MDOR or toll-free in Massachusetts 1-800-392-6089.

Must I File on a Calendar Year Basis?

No. You may file on a fiscal year basis if you keep your books and records on that fiscal year basis and if you receive permission from the Commissioner of Revenue. If you file on a fiscal year basis, you must file on or before the fifteenth day of the fourth month after the end of your fiscal year. Taxpayers filing on a fiscal year basis must complete and file Form 13, Notice of Designation of Fiscal Year, available at www.mass.gov/dor or by calling (617) 887-MDOR or toll-free in Massachusetts 1-800-392-6089.

What Should I Do If I Make a Mistake or Leave Something Off My Return?

If, after filing your income tax return, you receive an additional tax statement or discover that an error was made, do not submit a second tax return. If corrections are necessary, go to www. mass.gov/dor and use DOR’s online abatement application or file Form CA-6, Application for Abatement/ Amended Return. Form CA-6 is available at www.mass.gov/dor, or you may have one mailed to you by calling (617) 887-MDOR or toll-free in Massachusetts 1-800-392-6089.

What If I am Unable to Pay?

If you are unable to pay the full amount of tax that you owe, you should pay as much of your tax liability as possible with this return. You will receive a bill from the Department for the remaining amount of tax due plus accrued interest and penalty charges. If the amount of that bill is less than $5,000 and you still cannot pay it in full, you must apply formally to the Department for a small payment agreement in order to avoid collection activity. You can apply for a small payment agreement by visiting Web Services for Income at www.mass.gov/dor.

Note: Do not mail your request for a payment agreement with your tax return. Requests can be made once a bill is received through DOR’s Web Services for Income application at www.mass. gov/dor or by calling the Department at (617) 887MDOR or toll-free in Massachusetts 1-800-3926089 using the Department’s Interaction Voice Response (IVR) system. Setting up a small payment agreement will allow you to make monthly payments within a set time period to meet your unpaid liability.

Name and Address

Print the full name, address, and Social Security number of each person filing the return in the spaces provided. Enter names as they appear on your federal return.

Social Security Number(s)

Be sure to enter your Social Security number on your return. Also, enter your Social Security number on pages 2 through 4 of Form 1-NR/PY and on page 2 of Schedules B or C, if filed. Failure to show the correct Social Security number in the space provided will delay the processing of your return. If filing jointly, list your numbers in the order they appear on your federal return. Also, be sure your employer has listed the correct Social Security number on your Form W-2. If you are married, you must list your spouse’s Social Security number even if you are filing a separate return.

Beginning January 1, 1997, each foreign person must use an identification number on any U.S. or Massachusetts tax return or refund claim filed. Certain aliens who cannot obtain Social Security numbers (SSNs) must obtain an IRS-issued individual taxpayer identification number (ITINs). This number can be obtained by filing Form W-7 with the IRS. The ITIN is not available for U.S. citizens or persons legally permitted to reside permanently or to work in the United States. These taxpayers qualify for SSNs and should obtain them from the Social Security Administration by filing Form SS-5. You may obtain Form SS-5 from your local Social Security Administration (SSA) or call the SSA at 1-800-772-1213.

Residency Status

Fill in the “Nonresident” oval if you were not a resident of Massachusetts and you received Massachusetts source income. See the section “What is Massachusetts Source Income for Nonresidents?” for an explanation of Massachusetts source income.

Fill in the “Part-year resident” oval if you were a resident of Massachusetts for less than the full year, you received Massachusetts gross income in excess of $8,000 and you did not receive Massachusetts source income while a nonresident.

Fill in the “Filing both as a nonresident and part- year resident” oval if both categories apply to you in the same tax year. See the section “Who Must File.” You must also complete and enclose with your return Schedule R/NR, Resident/Nonresident Worksheet.

Nonresident Composite Return

Massachusetts allows a partnership or an S corporation to file a composite return and make estimated tax payments as an agent on behalf of two or more qualified electing nonresident partners/ shareholders. This option is also available to professional athletic teams who may file a return on behalf of two or more qualified electing nonresident team members. Eligible members of a composite return must meet the following requirements:

• must be an individual or the estate or trust of a deceased nonresident partner;
• must not have filed a separate return in Massachusetts for the tax year in question;
• must be nonresidents for the entire taxable year;
• must not have any other Massachusetts source income;
• must elect to be included in the composite return by signing a statement; and
• must waive the right to claim deductions, exemptions and credits allowable under Ch. 62, secs. 3, 5 and 6. Taxpayers filing a nonresident composite return should enter “0” on Form 1-NR/PY, lines 20 (total deductions), 22 (exemption amount) and 35 (total credits).

Any professional athletic team that has two or more qualified electing nonresident team members may file a composite tax return as an agent for the qualified electing nonresident team members. Each electing nonresident team member must sign under penalties of perjury a statement affirmatively stating such team member's qualifications and election to file a composite return. The composite return is filed on Massachusetts Form 1-NR/PY along with the applicable schedules and attachments. The total Massachusetts gross income reported on the composite Form 1-NR/PY must be the sum of all the qualified electing nonresident members' Massachusetts source income.

Be sure to fill in the “Nonresident composite return” oval if filing this category applies to you.

Name/Address Change

If you legally changed your name or address in 2008, fill in the oval. If you changed your name, enclose a copy of your Social Security card or driver’s license showing your new name. Failure to include this documentation could delay processing of your return. If you move after filing, be sure to leave a forwarding address with your local post office and file a Change of Address Form with the Massachusetts Department of Revenue. This form is available to be filed online at www.mass.gov/dor, or by calling (617) 887-MDOR or toll-free in Massachusetts 1-800-392-6089.

Deceased Taxpayer

Be sure to fill in the appropriate oval if a taxpayer died during the taxable year. For further information, refer to the section “How Do I File a Decedent’s Return?” in the instructions.

Veterans Benefits

Fill in the appropriate oval(s) for you, and/or your spouse if married filing a joint return, if you are a veteran who served in the Armed Forces of the United States in active service as part of Operation Enduring Freedom, Operation Iraqi Freedom or Operation Noble Eagle and were discharged under honorable conditions and were domiciled for six months in Massachusetts immediately prior to entry into the Armed Forces. The Department of Revenue will then forward the name and address to the Department of Veterans’ Services and the adjutant general of the Massachusetts National Guard to verify eligibility for any benefits you may be entitled to.

Voluntary Contribution to State Election Campaign Fund (part-year residents only)

You, and your spouse if filing jointly, may volun- tarily contribute $1 each to the state Election Cam- paign Fund. The purpose of the fund is to provide limited public financing for campaigns of eligible candidates for statewide and elective office. This contribution will not change your tax or reduce your refund.

Noncustodial Parent Fill in this oval if you are a “noncustodial parent.” A noncustodial parent is defined as a person who has a minor child, but does not live with the child.

Note: If you are the biological parent of a child, but your parental rights have been terminated, you are not the noncustodial parent of that child.

Schedule TDS — Inconsistent Filing Position Penalty

Fill in the oval and attach Schedule TDS, Taxpayer Disclosure Statement, if you are disclosing any inconsistent filing positions. Schedule TDS is available on our website at www.mass.gov/dor. The inconsistent filing position penalty (see TIR 06-5, section IV) applies to taxpayers that take an inconsistent position in reporting income. These taxpayers must “disclose the inconsistency” when filing their Massachusetts return. If such inconsistency is not disclosed, the taxpayer will be subject to a penalty equal to the amount of tax attributable to the inconsistency. This penalty is in addition to any other penalties that may apply.

A taxpayer is deemed to have taken an “inconsistent position” when the taxpayer pays less tax in Massachusetts based upon an interpretation of Massachusetts law that differs from the position taken by the taxpayer in another state where the taxpayer files a return and the governing law in that other state “is the same in all material respects” as the Massachusetts law. The Commissioner may waive or abate the penalty if the inconsistency or failure to disclose was attributable to reasonable cause and not willful neglect.

Under Age 18

If you are under age 18 as of January 1, 2009, be sure to fill in the oval(s).

Note: Lines without specific instructions are considered to be self-explanatory.

Line 1. Filing Status

 Note: More than one filing status may apply to you. If so, you may wish to figure your taxes based upon more than one filing status to see which status is to your benefit.

Single Fill in the “Single” oval if you were single as of December 31, 2008. This status applies to you if, at the close of the taxable year, you fit into any of the following categories:

• you were unmarried;
• you were a widow or a widower whose spouse died before 2008; or
• you were legally separated under a final judgment of the probate court.

Please note that you are not single if: 1) you have obtained a judgment of divorce which has not yet become final; 2) you have a temporary support order; or 3) you and your spouse simply choose to live apart.

Married Filing Joint Return Fill in the “Married filing joint return” oval if you were legally married as of December 31, 2008, and you elect to file a joint return. A joint return is allowed even if only one spouse had income. Both spouses are responsible for the accuracy of all information entered on a joint return, and both must sign. If your spouse died during 2008, you may still choose to file a joint return.

Please note that a joint Form 1-NR/PY is not allowed unless each spouse is reporting income for the same resident or nonresident period. For example, John (a Massachusetts resident) and Jane (a New Hampshire resident) both work in Massachusetts. After they were married in June 2008, John moved to New Hampshire to live with Jane. They cannot file a joint return because their nonresident tax years are different. (Jane lived in New Hampshire during the entire year, but John only lived there for six months.)

Note: Same-sex spouses filing a Massachusetts joint return should combine their figures from their separate U.S. returns. See TIR 04-17 for more information.

Married Filing Separate Return Fill in the “Married filing separate return” oval if you were legally married as of December 31, 2008, but you elect to file separately. Enter your spouse’s Social Security number in the space provided.

Head of Household Fill in the “Head of household” oval if you qualify to file this status federally. This status is for unmarried people who paid over half the cost of keeping up a home for a qualifying person, such as a child who lived with you or your dependent parent. See TIR 04-17 for Massachusetts differences. Certain married people who lived apart from their spouse for the last six months of 2008 may also be able to use this status. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information, for more information.

Line 2. Part-Year Resident Proration Formula

Part-year residents must fill out the proration formula in line 2. Enter the dates you were a Massachusetts resident in the spaces provided. Then, enter the total days you were a Massachusetts resident and divide this number by 365 and carry this division out to four decimal places. Failure to do so may delay the processing of your return. This figure is used to determine the portion of certain deductions, exemptions and the earned income credit a part-year resident may be eligible for.

New — Whole Dollar Method Now Required

The Department of Revenue now requires that the whole dollar method be used for entries made on forms or schedules. For example, amounts between $1.00 and $1.49 should be entered as $1.00 and amounts between $1.50 and $2.00 should be entered as $2.00. However, calculations on worksheets used to reach amounts shown on the return may be made in one of two ways: (1) round amounts before adding them up and enter the resulting total on the form, or (2) add amounts to the penny, and then round to the whole dollar for entry on the form. Either method is acceptable as long as one method is used consistently throughout the return.

Line 3. Total U.S. Income

Enter the amount of your total income before adjustments from your U.S. return — U.S. 1040, line 22; 1040A, line 15; 1040EZ, line 4; 1040NR, line 23; or 1040NR-EZ, line 7. This item is requested for administrative reasons; it is not used in the calculation of your tax.

Note: If you are filing Form 1-NR/PY as “married filing separate return” and you filed your U.S. return jointly, the amount entered in line 3 should only be the amount attributable to your portion of total U.S. income.

Line 4. Exemptions Line

4a: Personal Exemptions

Each taxpayer is entitled to claim a personal exemption. The amount of your personal exemption depends on your filing status as filled in line 1.

• If you are single or married filing a separate return, enter $4,400 in item a.
• If filing as head of household, enter $6,800 in item a.
• If married filing a joint return, enter $8,800 in item a.

Line 4b: Number of Dependents

You may claim a $1,000 exemption for each of your dependents if you claimed them on your

U.S. return. Enter in the box in item b the number of dependents you listed on U.S. Form 1040 or 1040A, line 6c or U.S. Form 1040NR, line 7c. Do not include yourself or your spouse. Then, multiply that total by $1,000 and enter the total amount in line 4b. Be sure to fill out Schedule DI, Dependent Information, if you are claiming a dependent exemption(s). Failure to do so will delay the processing of your return.

Note: In a few cases, the number of dependents claimed for Massachusetts purposes and for U.S. purposes may differ. Massachusetts allows a dependent exemption for each individual who qualifies for exemption as a dependent under sec. 151(c) of the Code. For purposes of sec. 151(c), the definition of dependent in sec. 152 is adopted. Under federal law, there are additional restrictions on the dependent exemption beyond the rules of sec. 152 that are not adopted by Massachusetts. For Massachusetts tax purposes, if an individual qualifies as a dependent under the rules of sec. 152, you can claim a dependent exemption for such a person. If you claim such a dependent in Massachusetts, increase the number reported in item b from your U.S. return by the number of such additional dependents. Also, same-sex joint filers should combine the number of dependents from their federal returns to arrive at the number of Massachusetts dependents. See TIR 04-17 for more information.

Line 4c: Age 65 or Over Before 2009

You are allowed an additional $700 exemption if you were age 65 or over before January 1, 2009. If your spouse was age 65 or over and you are filing a joint return, you may also claim a $700 exemption for your spouse. Fill in the appropriate oval(s) and enter the total number of persons age 65 or over in the small box. Then, multiply that total by $700 and enter the total amount in line 4c.

Line 4d: Blindness Exemption

You are allowed an additional $2,200 exemption if you are legally blind. If your spouse is also legally blind and you are filing a joint return, you may also claim a $2,200 exemption for your spouse. Fill in the appropriate oval(s) and enter the total number of blindness exemptions in the small box. Then, multiply that total by $2,200 and enter the total amount in line 4d.

Legal Definition of Blindness

You are legally blind and qualify for the blindness exemption if your visual acuity with correction is 20/200 or less in the better eye, or if your peripheral field of vision has been contracted to a 10-degree radius or less, regardless of visual acuity.

Line 4e: Other: Medical and Dental Expenses/Adoption Agency Fee

You may claim an exemption for medical and dental expenses paid during 2008 only if you itemized these expenses on your U.S. Form 1040, Schedule A. If you are married filing a joint U.S. Form 1040, you must file a joint Massachusetts Form 1-NR/PY to claim this exemption. Enter in line 4e, item 1 the amount reported on your U.S. Form 1040, Schedule A, line 4.

If you paid adoption fees to a licensed adoption agency during 2008, you are eligible for an exemption of the total amount of the fees paid during the year. Fees paid during 2008 to an agency licensed to place children for adoption on account of the adoption process of a minor child regardless of whether an adoption actually took place during 2008 should also be included for this exemption. Enter this amount in line 4e, item 2.

Enclose a statement showing the name and address of the licensed adoption agency and the agency fees. Add item 1 and item 2 and enter the total in line 4e.

Line 4f: Total Exemptions

Add lines 4a through 4e and enter the total in line 4f. This amount should also be entered on line 22a of Form 1-NR/PY.

Lines 5 through 11

• Income received by nonresidents is taxed only when it is from Massachusetts sources. Refer to the general instructions in this booklet for a definition of Massachusetts source income. The instructions for each of these lines will describe Massachusetts source income in more detail. For part-year residents, income received while a resident, whether from sources inside or outside of Massachusetts, is taxable.
• Your entries must agree with the appropriate amounts on your copies of Forms W-2 and 1099, and/or required schedules for lines 8 and 9. Nonresidents, if your actual Massachusetts income is not known, see the Nonresident Apportionment Worksheet in line 13 and accompanying instructions.

Note: You cannot apportion Massachusetts wages as shown on Form W-2.

5.3% Income

DOR and the IRS maintain an extensive exchange program, routinely sharing computer tapes and audit results. Discrepancies between income, deductions, and schedules reported federally and on this return, except those allowed under state law, will be identified and may result in a state audit or further investigation.

Note: If filing as both a nonresident and part-year resident, you must complete Schedule R/NR, Resident/ Nonresident Worksheet, before proceeding.

Line 5. Wages, Salaries, Tips and Other Employee Compensation

Report in line 5 total state wages from Form(s) W-2. Enter the amount(s) stated as Massachusetts wages.

Note: Part-year residents, income earned while a Massachusetts resident in another state is subject to taxation in Massachusetts.

In most cases your total wages will be the same amount reported on your U.S. 1040 or 1040A, line 7; U.S. 1040EZ, line 1; U.S. 1040NR, line 8; or U.S. 1040NR-EZ, line 3 unless:

• you or your spouse earned income from employment outside Massachusetts (nonresidents only);
• you were a Massachusetts legal resident working in a foreign country (part-year residents only);
• you were a legal resident of Massachusetts for only a part of 2008; or
• you were a state or local employee and made contributions to a Massachusetts state or local pension plan.

Differences Between Wages for Massachusetts Tax Purposes and Those Reported on Your U.S. Return

•  Nonresidents earning a portion of income from employment outside Massachusetts. If a portion of the wage income reported on your U.S. return was earned outside Massachusetts, the amount in line 5 should not include wages earned in another state or country.
•  Massachusetts legal residents working in a foreign country while a Massachusetts resident. Income earned in a foreign country is subject to taxation in Massachusetts. If you excluded part or all of the compensation earned in a foreign country on your U.S. return (under sec. 911 of the U.S. IRC), you must include any such amount in line 5 for Massachusetts tax purposes.
•  Part-year residents of Massachusetts. If you earned only a portion of the income you reported on your U.S. return while you were a Massachusetts legal resident, subtract from your U.S. wages the amount earned and received while you were legally domiciled in another state or country.
•  State or local employees contributing to pension plans. If you are a Massachusetts state, city, town or county employee and contributed to your pension plan, enter in line 5 the Form W-2 state wage amount. This amount will be greater than the U.S. amount because your pension contributions are excluded from your income for U.S. tax purposes. Contributions up to $2,000 may still be deducted in line 15a or 15b for Massachusetts tax purposes.

Line 6. Taxable Pensions and Annuities

 Nonresidents. Under Title 4 of the United States Code, section 114, payments to nonresidents from certain qualified pension plans are not subject to tax.

Qualified plans include: a qualified trust under IRC sec. 401(a) exempt from taxation under IRC sec. 501(a); simplified IRC sec. 408(k) plans; IRC sec. 403(a) annuity plans; IRC sec. 403(b) annuity contracts; IRC sec. 7701(a) (37) individual retirement plans; eligible deferred compensation plans of state and local governments and tax exempt organizations as defined by IRC sec. 457; IRC sec. 414(d) government plans; a trust or trusts described in IRC sec. 501(c) (18); and any plan, program or arrangement described in IRC sec. 3121(v)(2)(C) or any plan, program, or arrangement that is in writing, that provides for retirement payments in recognition of prior service to be made to a retired partner, and that is in effect immediately before retirement begins if payments are made at least annually and spread over the actuarial life expectancy of the beneficiaries, or if payments are spread over at least a ten-year period. Such income is also protected from state taxation if the plans are trusts under IRC sec. 401(a), but exceed limits laid down in IRC secs. 401(k), 401(m), 402(g), 403(b), 408(k) or 415 or any other limitation on contributions or benefits which may apply in the Code.

Retirement or retainer pay of a member or former member of a uniformed service computed under 10 U.S.C. chapter 71 (military pensions) received by a nonresident is also exempt.

Any income from pensions related to a Massachusetts trade, business or employment that is not derived from one of the qualified pension plans listed above is taxable. Enter in line 6 the portion of those pensions reported on your U.S. Form 1040, line 16a or U.S. Form 1040A, line 12a, that are taxable to Massachusetts nonresidents.

Part-year residents. Income from most private pensions or annuity plans is taxable in Massachusetts. You must report the taxable pension income you received while a resident of Massachusetts. Certain government pensions, however, are exempt under Massachusetts law. In general, exempt pensions include contributory pensions from the U.S. government or the Commonwealth of Massachusetts and its political subdivisions, and noncontributory military pensions. The following section describes some specific pensions which are exempt. If your pension is not exempt, you should generally enter in line 6 the taxable amount reported on your U.S. Form 1040, line 16b or U.S. Form 1040A, line 12b. In some cases, however, Massachusetts law requires an adjustment to the federal amount. Distributions from annuity, stock bonus, pension, profit-sharing or deferred payment plans or contracts described in secs. 403(b) and 404 of the U.S. IRC must be adjusted to account for your contributions that have been previously taxed. Subtract from such income (as reported on your U.S. Form 1040, line 16a or U.S. Form 1040A, line 12a) the amount of your contributions which were previously taxed by Massachusetts until the total of your taxed contributions is received. If your pension falls into this category, enter the adjusted amount in line 6 and explain briefly (in an enclosed statement) why this amount is different than the amount reported on your U.S. return. If you are receiving distributions from an IRA or Keogh plan, do not report the income here; instead, see to the instructions for Schedule X, line 2.

What pensions are exempt?

• Pension income received from a contributory annuity, pension, endowment or retirement fund of the U.S. government or the Commonwealth of Massachusetts and its political subdivisions.
• Pensions from other states or its political subdivisions which do not tax such income from Massachusetts or its political subdivisions may be eligible to be deducted from Massachusetts taxable income. This pension income, however, should be reported in line 6. Refer to Schedule Y, line 13 instructions to determine eligibility for this deduction.
• Noncontributory pension income or survivorship benefits received from the U.S. uniformed services (Army, Navy, Marine Corps, Air Force, Coast Guard, commissioned corps of the Public Health Service and National Oceanic and Atmospheric Administration) is exempt from taxation in Massachusetts.
• Massachusetts state court judges who were appointed on or after January 2, 1975 are participants in the Massachusetts contributory retirement system and their pensions are nontaxable. State court judges who were appointed prior to January 2, 1975 receive taxable noncontributory pensions.

If you retired under Chapter 32, Sections 56 through 60 of Massachusetts General Laws and are a veteran who began Massachusetts state service prior to July 1, 1939, all or part of your pension income may be subject to tax. If you elected to receive your proceeds from contributions in one lump-sum distribution, your original contributions to the retirement system are not taxable. Noncontributory pension income received after a lump-sum distribution is fully taxable and should be reported in line 6.

How do I report lump-sum distributions?

If you were an employee of the U. S., Massachusetts or one of its political subdivisions and left public employment prior to retirement, you are not required to report as income the lump-sum distribution of your previous pension contributions.

Lump-sum distributions of qualified employee benefit plans in excess of the employee’s contributions which were previously subject to Massachusetts tax (or not previously excluded from Massachusetts tax) must be reported in line 6. Generally, qualified rollovers are not taxable in Massachusetts to the extent they are not taxable on your U.S. return. Lump-sum distributions related to IRA/Keogh distributions should be reported on Schedule X, line 2.

Rollover from a Traditional IRA to a Roth IRA (Part-Year Residents Only). Taxpayers with $100,000 or less in federal adjusted gross income are allowed to make partial or complete rollovers from existing IRAs to Roth IRAs. Any taxable portion of these rollovers included in federal gross income received while a resident of Massachusetts is also included in Massachusetts gross income, except for amounts previously subject to Massachusetts personal income tax. See Schedule X, line 2 instructions for further details.

Note: Massachusetts does not tax Social Security income, therefore, you should not report such income on Massachusetts Form 1-NR/PY.

Line 7. Interest from Massachusetts Banks

 Nonresidents. Interest income is only taxable if it is related to a Massachusetts trade, business, profession, partnership or S corporation, or to the ownership of real estate or tangible personal property located in Massachusetts.

Part-year residents. While a resident of Massachusetts, interest received from any savings banks, cooperative banks, national banks, trust companies, savings and loan associations or credit unions located in Massachusetts is taxable.

Nonresidents/part-year residents, report in line 7a such interest taxable by Massachusetts.

To report interest taxable to a nonresident/part-year resident from banks located in Massachusetts, enter in line 7a all amounts of interest received or credited to these deposit accounts (term and time deposits, including certificates of deposit, savings accounts, savings shares, and NOW accounts). Combine all accounts at the same bank. Enclose a statement listing names of all savings banks, cooperative banks, national banks, trust companies, savings and loan associations or credit unions in which you have deposit accounts. In line 7b, enter the exemption amount ($200 if married filing a joint return; otherwise enter $100) and subtract this amount from line 7a. Enter the result in line 7, but not less than “0.”

Note: This exemption amount does not apply to your U.S. tax return.

Do not subtract interest forfeited or penalties charged to you for early savings withdrawal. You may be allowed to deduct these amounts on Schedule Y, line 2. All other interest, unless exempt, should be entered on Massachusetts Schedule B. The return on an IRA/Keogh is not taxable until distributed.

Lines 8, 9 and 12. If showing a loss in lines 8, 9 or 12, be sure to mark over the “X” in the box to the left. Do not use parentheses or negative signs to indicate losses.

Line 8. Business/Profession or Farm Income or Loss

 Nonresidents engaged in a business or profession in Massachusetts must complete a Massachusetts Schedule C, Profit or Loss from a Business or Profession, and enter the amount of income or loss in line 8.

Part-year residents must report the income or loss from a business or profession received while a resident of Massachusetts, whether derived from sources inside or outside of Massachusetts.

Enter the amount of such income or loss that would be reported on Massachusetts Schedule C, line 31. You must enclose Massachusetts Schedule C with this return. Also, enclose a copy of your U.S. Schedule C-EZ if substituting U.S. Schedule C-EZ for Massachusetts Schedule C. Nonresidents, if your business or profession derived income from both inside and outside Massachusetts, see the Nonresident Apportionment Worksheet instructions in line 13.

Note: U.S. Schedule C is no longer allowed as a substitute for Massachusetts Schedule C. However, you may substitute U.S. Schedule C-EZ for Massachusetts Schedule C if there are no differences between the amounts reported on U.S. Schedule C-EZ and amounts that would be reported on Massachusetts Schedule C. Be sure to write “No Massachusetts Differences” on the top of the U.S. Schedule C-EZ.

If you operate a farm as an individual or cooperative, enter the amount of income or loss from operating a farm from U.S. Schedule F, Profit or Loss from Farming, line 36. Enclose a copy of U.S. Schedule F. Complete a pro-forma U.S. Schedule F to report Massachusetts differences, such as bonus depreciation.

Line 9. Rental, Royalty, REMIC, Partnership, S Corporation, Trust Income or Loss

For tax years beginning on or after January 1, 2008, any taxpayer with income or loss reported on a Schedule E must file his or her tax return using computer-generated forms produced by third- party software. The tax return may be generated by the taxpayer or by a tax professional. The taxpayer is encouraged, but not required, to submit the return electronically. Paper forms produced using the third-party software product will contain a two-dimensional (2D) bar code and will also be accepted. If the taxpayer hires an income tax pre- parer to complete the taxpayer’s taxes, the preparer must follow the Commissioner’s electronic filing rules. See TIR 08-22 for more information.

If you do not have access to a software package when filing your 2008 income tax return, you may file your Schedule E on paper. Visit our website at www.mass.gov/dor to download a paper copy of the 2008 Schedule E (and instructions) to file with your income tax return.

Line 10a. Unemployment Compensation

Nonresidents. Enter the portion of your unemployment compensation reported on U.S. Form 1040, line 19; U.S. Form 1040A, line 13; U.S. Form 1040EZ, line 3; or U.S. Form 1040NR, line 20, related to previous Massachusetts employment. Only unemployment compensation related to previous Massachusetts employment is taxable to nonresidents. If you elected voluntary withholding of Massachusetts state income taxes on your unemployment compensation, be sure to include the amount of Massachusetts state income tax withheld as reported on Form 1099-G on Form 1-NR/PY, line 41 and attach with a single staple, where indicated on the return, Form 1099-G.

Part-year residents. Enter in line 10a the amount of unemployment compensation reported on U.S. Form 1040, line 19; U.S. Form 1040A, line 13; U.S. Form 1040EZ, line 3; or U.S. Form 1040NR, line 20, received while you were a resident of Massachusetts, whether related to employment inside or outside of Massachusetts. If you elected voluntary withholding of Massachusetts state income taxes on your unemployment compensation, be sure to include the amount of Massachusetts state income tax withheld as reported on Form 1099-G on Form 1-NR/PY, line 41 and attach with a single staple, where indicated on the return, Form 1099-G.

Note: DOR routinely matches the amounts in line 10a with files from the Division of Unemployment Assistance.

Line 10b. Massachusetts State Lottery Winnings

Enter in line 10b all winnings from the Massachusetts state lottery. Do not enter less than “0.” You may only deduct the price of your winning ticket. Lottery losses claimed as itemized deductions on U.S. Form 1040, Schedule A are not allowed on your Massachusetts return.

 Note: DOR routinely matches the amounts in line 10b with files from the Lottery Commission.

Line 11. Other Income (from Schedule X)

Alimony Received, Taxable IRA/Keogh and Roth IRA Distributions, Other Gambling Winnings, Fees and Other 5.3% Income

“Other 5.3% income” includes the items listed above and must be included on Schedule X. Enter the total from Schedule X, line 5. Not less than “0.” Be sure to enclose Schedule X with your return. Enclose an additional statement if more space is needed. Failure to enclose this schedule will delay the processing of your return. See Schedule X instructions.

Line 12. Total 5.3% Income

Add lines 5 through 11 and enter the total in line 12. Remember to subtract any losses marked with an “X” when calculating the total.

Apportionment — Nonresidents Only

Sometimes your business or employment requires you to work both inside and outside Massachusetts, but you do not know the actual amount of income you earned from working in Massachusetts. In this case, you must apportion your income so that only the correct portion (the amount attributable to Massachusetts) will be taxed by Massachusetts. Some nonresidents must use the Nonresident Apportionment Worksheet in line 13 for this purpose.

Who Cannot Apportion Income?

If you know the actual amount of your Massachusetts source income, do not apportion. Report your income taxable in Massachusetts on your Massachusetts return. Examples of nonresidents who cannot apportion include:

• an employee whose actual Massachusetts income is shown on Form W-2;
• an employee whose Form W-2 does not indicate initially his/her actual Massachusetts income but whose employer issues a corrected Form W-2 or other statement which breaks down this amount. Since your employer is required by law to withhold Massachusetts tax on your Massachusetts wages, this breakdown will be easy to obtain; and
• a self-employed person whose actual Massachusetts income is known, such as a surgeon who comes to Massachusetts to perform a specific operation for a set fee.

In the few cases when your employer fails to issue a separate Form W-2 that includes only Massachusetts earnings, you may use the Nonresident Apportionment Worksheet to adjust your earnings.

Who Must Use the Nonresident Apportionment Worksheet?

If your employment or business took you both inside and outside Massachusetts and you do not know the actual amount of income you earned in Massachusetts, you must use the Nonresident Apportionment Worksheet if you are a self-employed person or employee who is on an hourly, daily, weekly, monthly or mileage basis, or whose compensation depends upon sales, at least some of which take place outside of Massachusetts.

Note: If both you and your spouse both qualify to apportion your income or you have more than one job that is eligible for apportionment, you must complete a separate apportionment worksheet for the income that is eligible to be apportioned.

Who Can Apportion Income But Cannot Use the Nonresident Apportionment Worksheet?

If you do not know the actual amount of income you earned in Massachusetts from one business or employment, but you do not fit into any of the categories listed in the preceding section, you should not use the Nonresident Apportionment Worksheet. See the section on “Special Apportionment Methods” for your apportionment method.

Examples of nonresidents who must apportion income using one of these special methods include:

• an independent business or professional person whose income does not depend on sales, days or mileage;
• an entertainer or athlete whose income does not depend solely on receipts or winnings;
• a general or limited partner in a partnership; and
• a shareholder of an S corporation with Massachusetts source income.

Apportionment Methods

If you use the Nonresident Apportionment Worksheet, fill in the oval for the appropriate basis and then follow the instructions. If you have more than one business or employment requiring the use of the worksheet, complete and enclose one worksheet for each business or employment.

•  Working days basis. This basis should be used by employees or self-employed persons who qualify to use the Nonresident Apportionment Worksheet and who are compensated on an hourly, daily, weekly or monthly basis. The income of these taxpayers is to be allocated to Massachusetts in the proportion that the amount of time spent working in Massachusetts bears to the total working time.
•  Mileage basis. An employee or self-employed person whose compensation depends on miles traveled is taxed on that portion of total compensation received in which the miles traveled within Massachusetts bear to total miles traveled.
• Sales basis. For an employee or self-employed person whose compensation depends upon sales or commissions, taxable income includes that portion of total compensation received which the sales made inside Massachusetts bear to total sales. (For the purposes of making this allocation, all sales for which the taxpayer takes orders inside Massachusetts are attributable to this state, regardless of whether the formal acceptance of the contract of sale takes place inside or outside Massachusetts.)

Special Apportionment Methods

If you earned income both inside and outside Massachusetts from one business or employment, and your actual Massachusetts income is not known and you cannot use the Nonresident Apportionment Worksheet in line 13, use the following appropriate apportionment method.

•  Self-employed and professional persons. If you earned income from both inside and outside Massachusetts and your books do not accurately reflect your Massachusetts source income, you must use a three-factor formula to apportion your Massachusetts income. Instructions for this method of apportionment are in Massachusetts Regulation 830 CMR 62.5A.1.
•  Entertainers and professional athletes. If you are a nonresident entertainer who performed in Massachusetts and you were not paid specifically for the performance in Massachusetts, or if you are a nonresident professional athlete who took part in performances, bouts, meets, matches or games that occurred in Massachusetts and you were not paid for the specific event played in Massachusetts, you must use the apportionment formula set forth in Massachusetts Regulation 830 CMR 62.5A.1.
•  Nonresident partners. If you are a nonresident general or limited partner, you are taxed on your distributive share of the income received by the partnership to the extent that the partnership income is Massachusetts source income, determined as if the partnership were a nonresident individual. If you are entitled to apportionment, the partnership will apportion its income and notify you of your share.
•  Nonresident shareholders of an S corporation. If you are a nonresident shareholder in an S corporation, you are taxed on the distributive share of income received by the S corporation to the extent that the S corporation income is Massachusetts source income. If you qualify for apportionment, the S corporation will apportion its income and notify you of your share.

Line 13. Nonresident Apportionment Worksheet

 13a. If your income is measured by working days, enter the number of days you worked outside Massachusetts.

13b. Enter the number of days you worked inside Massachusetts. (If you spent a working day partly inside and partly outside Massachusetts, treat the day as having been spent one-half inside the state.)

13c. Enter the total days worked both inside and outside Massachusetts (the sum of lines 13a and 13b).

13d. Enter your nonworking days. Your nonworking days are those days during the year (or during the period you worked, if your job lasted less than a year) that you were not required to work, such as Saturdays, Sundays, holidays, sick days, vacation and leave with or without pay. Complete the remainder of the Nonresident Apportionment Worksheet as indicated, and enter your Massachusetts income from line 13g in the appropriate line on Form 1-NR/PY. For example, if you are apportioning your wages, enter the amount from line 13g in line 5.

If you are using the mileage or sales basis, substitute mileage or sales for working days and complete all items in the worksheet, except line 13d. Indicate what basis you are using by filling in the appropriate oval, and enter your Massachusetts income from line 13g in the appropriate line on Form 1-NR/PY.

Nonresident Deduction and Exemption Ratio

Since nonresidents are only taxed on income from Massachusetts sources, the deductions and exemptions allowed to them are limited by the amount of this income. This happens in two ways. The deductions in line 15 and Schedule Y, lines 1, 2, 4, 5, 7, 9 (certain amounts only — see Schedule Y, line 9 instructions) and 13 must be matched to specific items of income taxed on Form 1-NR/PY. Other deductions and all exemptions must be prorated by the ratio of a taxpayer’s Massachusetts source income to his/her total income.

Line 14. Nonresident Deduction and Exemption Ratio

All nonresident taxpayers must complete lines 14a to 14g to arrive at this ratio. The ratio will be used to determine what amounts, if any, you may deduct in lines 16 and 17; Schedule Y, lines 3 (alimony paid deduction), 6 (Archer medical savings account (MSA) deduction), 8 (health care accounts deduction), 10 (student loan interest deduction), 11 (college tuition deduction), 12 (undergraduate student loan interest deduction), 15 (commuter deduction); the amount of your exemptions in line 22a; and the Earned Income Credit in line 45.

Nonresidents should use the line 14g ratio to determine the amount of the deduction for attorney’s fees and court costs involving certain unlawful discrimination suits (from Schedule Y, line 9) only if it is directly related to Massachusetts income as reported on Form 1-NR/PY, line 12. If it is not directly related to income reported on Form 1-NR/PY, you are not allowed any deduction.

If married filing jointly, include in each line the income for both spouses. Enter any loss as “0.”

Note: If filing as both a nonresident and a part- year resident, be sure to read the instructions for Schedule R/NR before completing line 14. Also, enter in line 14a only the portion of Massachusetts source 5.3% income earned as a nonresident.

14a. Enter in line 14a total 5.3% income from line 12.

Note: If filing as a both a nonresident and part-year resident, enter the total of Schedule R/NR, Part 1, column D, lines 5 through 11.

14b. Enter in line 14b tax exempt Massachusetts bank interest from the smaller of line 7a or line 7b.

14c. Read the instructions for lines 24, 27 and 28. If these items apply to you, combine Schedule B, Part 1, line 7 and Part 2, line 13 (but not less than “0”) and Schedule D, line 12 (but not less than “0”), and enter the total in line 14c. If there is no entry in Schedule B, Part 1, line 7, enter the amount from Form 1-NR/PY, line 24.

Note: If filing as a both a nonresident and part-year resident, enter the total of Schedule R/NR, Part 1, column D, lines 24 (interest and dividends), 27 (certain capital gains from Schedule B) and Schedule D (long-term capital gains and losses, excluding collectibles).

14e. Enter in line 14e the total income from non- Massachusetts sources you received during the tax year covered by this return. This is the additional income that would have been reported by you if you had been a Massachusetts resident that you received from non-Massachusetts sources. This amount is often not the same as the difference between your total U.S. income reported in line 3 and your Massachusetts source income reported in line 14d, due to the differences between Massachusetts and federal tax laws.

Note: Be certain not to include any amounts already reported in line 14d.

To reconcile the two amounts, the following types of income included in the U.S. total income (Form 1-NR/PY, line 3), but not taxable in Massachusetts should be subtracted from the U.S. total before completing line 14e:

• Social Security and Tier I Railroad Retirement benefits;
• pensions from contributory retirement plans of the U.S., or Massachusetts and its political subdivisions;
• pension income from the U.S. military;
• U.S. bond interest;
• state tax refunds; and
• Keogh and 403(b) distributions related to contributions previously taxed by Massachusetts.

Income from the following categories which is not included in U.S. total income (Form 1-NR/PY, line 3) must be added back to calculate the total income that would be reported as Massachusetts income had the taxpayer been a Massachusetts resident in line 14e:

• bond interest from other states;
• up to $80,000 in foreign-earned income;
• contributions to a pension plan by Massachusetts state or local employees; and
• net operating loss carryforward.

14f. Add line 14d and line 14e. If your total income in line 3 exceeds the amount reported in line 14f by more than 10%, you should enclose a statement explaining the reasons for the difference.

Note: If filing as a both a nonresident and part- year resident, enter Schedule R/NR, Part 1, column C Total.

14g. Divide line 14d by line 14f. Carry this division out to four decimal places. Failure to do so may delay the processing of your return. Enter the result in line 14g. This is your ratio for deductions and exemptions. It represents the relationship of your Massachusetts source income to your total income.

Deductions

Lines 15 through 19

Massachusetts allowable deductions differ from “Itemized Deductions” on Schedule A of U.S. Form 1040. You may claim only the deductions specified on Massachusetts Form 1-NR/PY, lines 15 through 18 and Schedule Y.

Line 15. Amount Paid to Social Security (FICA), Medicare, Railroad, U.S., Massachusetts Retirement Systems

Nonresidents, if as a condition of Massachusetts business or employment, you have paid into any of the retirement systems listed above during 2008, you may deduct those contributions, up to a maximum of $2,000. Part-year residents may deduct contributions attributable to business or employment while a Massachusetts resident, up to a maximum of $2,000.

Enter in lines 15a and 15b the amount you, and your spouse if filing jointly, paid to Social Security (FICA), Medicare or Railroad Retirement and the U.S. or Massachusetts Retirement Systems during 2008 as shown on your Form W-2 that is directly related to income taxable by Massachusetts included in line 12, but not more than $2,000 each. Payment amounts may not be combined or transferred from one spouse to the other. Be sure to add any amount of Medicare tax withheld as shown on Form W-2 and any amount of self-employment tax as reported on your U.S. Form 1040 to the amount of Social Security tax withheld, the total not to exceed $2,000 per person.

Note: Medicare premiums deducted from your Social Security or retirement payments are not deductible.

Payments to an IRA, Keogh, Simplified Employee Pension plan (SEP) or Savings Incentive Match Plan for Employees (SIMPLE) Account are not deductible for Massachusetts income tax purposes.

Lines 16 and 17

Massachusetts law allows an option for deducting expenses related to dependent children. Please read instructions for both lines 16 and 17 to determine if you qualify and to decide which deduction is better for you. You cannot claim a deduction in both lines 16 and 17.

Line 16. Child Under Age 13, or Disabled Dependent/Spouse Care Expenses

Massachusetts allows taxpayers to exceed the federal limit on employment-related expenses for the care of a qualified child under the age of 13, a disabled dependent or a disabled spouse. The maximum deduction is $4,800 for one qualifying individual, and $9,600 for two or more qualifying individuals. Complete the following worksheet to calculate your Massachusetts child or disabled dependent/ spouse care expense deduction.

Note: You cannot claim this deduction if married filing a separate U.S. 1040 or 1040A return. If you are filing a joint U.S. 1040 or 1040A return but are married filing separately for Massachusetts purposes, either spouse may claim the deduction for expenses he or she incurred, but their combined deduction cannot exceed $4,800 for one qualifying individual or $9,600 for two or more qualifying individuals.

Taxpayers who received dependent care benefits should complete a pro forma U.S. Form 2441 or U.S. Form 1040A, Schedule 2. When completing this pro forma form taxpayers should enter $4,800 (or $9,600 for two or more qualifying persons) in line 31 of U.S. Form 2441 or line 23 of U.S. Form 1040A, Schedule 2. The amount from this pro forma Form 2441, line 35 or U.S. Form 1040A, Schedule 2, line 27 should then be entered in line 1 of the following worksheet.

Note: Same-sex joint filers should complete a pro forma U.S. Form 2441 or U.S. Form 1040A, Schedule 2. In addition to changing the maximum amount of the deduction allowed on U.S. Form 2441 or U.S. Form 1040A, Schedule 2 (see preceding paragraph), same-sex spouses should prepare the pro forma federal forms as though they were filing a joint federal return. See TIR 04-17 for more information.

If you choose to take a deduction in line 16, you may not take the deduction in line 17.

Line 16 Worksheet — Child Under 13 or Disabled Dependent/Spouse Care Deduction

Use this worksheet to calculate your Massachusetts child under age 13 or disabled dependent/ spouse care deduction.

Part-year residents, enter amounts paid while a Massachusetts resident.

1. Enter the amount of qualified expenses you incurred and paid in 2008 for a qualifying person( s). This amount may exceed the federal limit of $3,000 for one qualifying person or $6,000 for two or more persons. However, do not enter more than $4,800 for one qualifying person or $9,600 for two or more persons	________
2. Enter the amount from U.S. Form 2441, line 4, or U.S. Form 1040A, Schedule 2, line 4	________
3. Enter the amount from U.S. Form 2441, line 5, or U.S. Form 1040A, Schedule 2, line 5	________
4. Enter the smallest of line 1, 2 or 3	________
5. If you paid 2007 expenses in 2008, enter the amount of the allowed 2007 expenses used to compute the credit on U.S. Form 2441, line 9, or U.S. Form 1040A, Schedule 2, line 9. Otherwise, enter “0”	________
6. Add lines 4 and 5. Not to exceed more than $4,800 for one qualifying person or $9,600 for two or more persons	________
7. Part-year residents, enter here the amount from line 6 and in Form 1-NR/PY, line 16; nonresidents, multiply line 6 by Form 1-NR/PY, line 14g and enter the result here and in Form 1-NR/PY, line 16	________

Line 17. Dependent Member(s) of Household Under Age 12, or Dependents Age 65 or Over (not you or your spouse) as of December 31, 2008, or Disabled Dependent

You may deduct $3,600 for a dependent member of household, or $7,200 for two or more dependents, under age 12, or dependent age 65 or over (not you or your spouse) as of December 31, 2008, or disabled dependent. Enter the number of qualified dependents in line 17a, not to exceed two, and multiply that amount by $3,600. Enter the result in line 17. Only if single, head of household or married filing jointly. You cannot claim this deduction if married filing a separate return.

Note: You may claim an amount in line 17 only if there is no entry in line 16.

• Nonresidents, multiply this amount by line 14g and enter the result in line 17 of Form 1-NR/PY.

Part-year residents, multiply this amount by line 2 and enter the result in line 17 of Form 1-NR/PY.

Line 18. Rental Deduction

 Nonresidents are allowed a deduction equal to 50% of the rent they pay, up to a maximum of $3,000, for their principal residence only if it is located in Massachusetts and is their sole residence. (Non-Massachusetts rent is never deductible.) Many nonresidents rent a house or apartment in Massachusetts, but few qualify for this deduction. This is because the house or apartment rented here is not their principal residence. Only those nonresidents who rented a house or apartment in Massachusetts and have no family home or other dwelling to which they normally return (or to which they could return in the future) in any other state or country, can claim this deduction. Complete line 18 only if you filled in the “no” oval below line 18. Enter the total amount of qualified rent paid by you during 2008 in line 18a. Divide line 18a by 2 and enter the result, or $3,000 ($1,500 if married filing a separate return) — whichever is smaller — in line 18. Part-year residents are entitled to the rental deduction equal to 50% for the rent they paid during 2008 (up to a maximum of $3,000 per return) for their principle residence while a resident of Massachusetts. Enter the total amount of qualified rent paid by you during 2008 in line 18a. Divide line 18a by 2 and enter the result, or $3,000 ($1,500 if married filing a separate return) — whichever is smaller — in line 18.

Note: This deduction does not apply to your U.S. tax return.

How Do I Calculate My Rental Deduction If I Am Married Filing Separately?

If a husband and wife file separate returns, they are each entitled to a rental deduction equal to 50% of the rent each pays, not to exceed $1,500 per return. However, a married couple filing separately may allocate the rent deduction differently, provided the amount taken by each spouse does not exceed 50% of the rent actually paid by that spouse, and provided their combined rental deductions do not exceed $3,000. If this results in one spouse claiming a deduction in excess of $1,500, that spouse must enclose with his/her return a statement signed by the other spouse indicating consent to the allocation. The statement must contain the name, address and Social Security number of the consenting spouse and the amount of rental deduction taken by that spouse.

Line 19. Other Deductions (from Schedule Y)

Enter the total from Schedule Y, line 16. Be sure to enclose Schedule Y with your return. Failure to do so will delay the processing of your return.

Line 22. Exemption Amount

Enter amount from Exemption Section, line 4, item f in line 22a.

Nonresidents. Prorate your exemptions using the ratio of your Massachusetts income to your total income by multiplying line 22a by line 14g and entering the result in line 22. This amount represents your prorated exemptions.

Part-year residents. Prorate your total exemptions claimed on Form 1-NR/PY by multiplying line 22a by line 2 and entering the result in line 22. This amount represents your prorated exemptions as a part-year resident.

Line 23. 5.3% Income After Exemptions

Subtract line 22 from line 21. Enter the result in line 23, but not less than “0.”

If line 22 exceeds line 21 and you received interest income (other than interest from Massachusetts banks), dividends or capital gain income, complete the worksheet for Schedule B, line 36 and Schedule D, line 19, if applicable. All others proceed to line 24.

Line 24. Interest and Dividend Income

If you have any interest income other than interest from deposits in banks located in Massachusetts, dividend income in excess of $1,500, certain capital gains or losses, or any adjustments to interest income (other than interest from Massachusetts banks), you must complete Schedule B. Be sure to enclose Massachusetts Schedule B. To determine if you need to file Schedule B, refer to the Schedule B instructions of this booklet.

Enter in line 24 the amount from Schedule B, line 38. If not required to file Schedule B, enter dividend income of $1,500 or less (from U.S. Form 1040 or 1040A, line 9a) in line 24.

Line 25. Total Taxable 5.3% Income

Add line 23 and line 24.

Tax on 5.3% Income

Line 26. 5.3% Tax

Based upon the amount in line 25, find the proper amount of tax from the table at the back of this booklet. Enter the tax in line 26. If line 25 is more than $24,000, multiply the amount in line 25 by .053 and enter the result in line 26. You must use the tax table if line 25 is $24,000 or less.

Note: Personal income tax forms must provide an election to voluntarily pay tax at a rate of 5.85% on taxable income which would otherwise be taxed at a rate of 5.3%. The election to pay tax at the rate of 5.85% does not apply to items of income taxed at 12% (short-term capital gains and gains on collectibles). If choosing the optional 5.85% tax rate, multiply line 25 and Schedule D, line 20 by .0585 and fill in the oval.

12% Income and Tax

Line 27. 12% Income from Certain Capital Gains

Enter in line 27a the amount from Schedule B, line 39. Multiply this amount by .12 (12%) and enter the tax in line 27. Be sure to enclose Massachusetts Schedule B. To determine if you need to file Schedule B, refer to the Schedule B instructions of this booklet.

Long-Term Capital Gain Tax

Line 28. Schedule D (Long-Term Capital Gains and Losses Excluding Collectibles)

Enter in line 28 the amount from Schedule D, line 21, but not less than “0.” To determine if you need to file Schedule D, refer to the Schedule D instructions of this booklet.

Schedule B, Line 36 and Schedule D, Line 19 Worksheet — Exemptions from Interest and Dividend Income, 12% Income and Long-Term Capital Gain Income (Only if Single, Head of Household, or Married Filing Jointly)

If your total exemptions in line 22 are more than the amount of your 5.3% income after deductions in line 21, the excess may be applied against all your interest and dividend income and income taxed at 12%. Any remaining excess amount may then be applied against all your long-term capital gain income. Complete the following worksheet only if line 21 is less than line 22 to determine if you qualify for the excess exemption. Enter all losses as “0.”

1. Enter amount from Schedule B, line 35. Not less than “0”.	________
2. Enter amount from Form 1-NR/PY, line 22	________
3. Enter amount from Form 1-NR/PY, line 21	________
4. Subtract line 3 from line 2. If “0” or less, you do not qualify for this exemption. Omit remainder of worksheet	________
5. Excess exemptions applied against interest and dividend income and 12% income. If line 1 is larger than line 4, enter line 4 here and in Schedule B, line 36. If line 4 is equal to or larger than line 1, enter line 1 here and in Schedule B, line 36. Complete lines 6 through 8	________
6. Subtract line 5 from line 4. If “0,” omit remainder of worksheet	________
7. Enter Schedule D, line 18. Not less than “0”	________
8. Excess exemptions applied against long-term capital gain income. If line 7 is larger than line 6, enter line 6 here and in Schedule D, line 19. If line 6 is equal to or larger than line 7, enter line 7 here and in Schedule D, line 19	________

Excess Exemptions If excess exemptions were used in calculating lines 24, 27 or 28 (see Schedule B, line 36 and/or Schedule D, line 19), be sure to fill in the oval in line 28.

Line 29. Credit Recapture Amount

If any Brownfields Credit (BC), Economic Opportunity Area Credit (EOA) or Low-Income Housing Credit (LIH) or Historic Rehabilitation Credit (HR) property is disposed of or ceases to be in qualified use prior to the end of its useful life, the difference between the credit taken and the total credit allowed for actual use must be added back to your tax on Form 1-NR/PY. Complete and enclose Schedule H-2, Credit Recapture. Schedule H-2 is available at www.mass.gov/dor or by calling (617) 887-MDOR or toll-free in Massachusetts 1-800-392-6089.

Massachusetts AGI

No Tax Status — Single, Married Filing a Joint Return or Head of Household Only

If your Massachusetts Adjusted Gross Income (Massachusetts AGI) was $8,000 or less if single, $14,400 or less plus $1,000 per dependent if head of household, or $16,400 or less plus $1,000 per dependent if married filing a joint return, you qualify for No Tax Status and are not required to pay any Massachusetts income taxes.

To see if you may qualify for No Tax Status, complete Schedule NTS-L-NR/PY. See Schedule NTS-L-NR/PY instructions.

Massachusetts Adjusted Gross Income for No Tax Status and Limited Income Credit Massachusetts Adjusted Gross Income (Mass- achusetts AGI) is not the same as taxable income. Massachusetts AGI includes:

• wages, salaries, tips; . taxable pensions and annuities;
• pension income from another state or political subdivision before any deduction;
• taxable IRA/Keogh and Roth IRA distributions;
• fees and unemployment compensation;
• income or loss from a business or profession;
• income or loss from partnerships, S corpora- tions and trusts;
• rents, royalties and REMIC income;
• alimony and other 5.3% income;
• interest from Massachusetts banks before ex- emptions; and
• other interest, dividends, and capital gains.

Line 30. No Tax Status

If you qualify for No Tax Status, fill in the oval in line 30, enter “0” in line 31 and omit lines 32 through 35. Also, enter “0” in line 36 and complete Form 1-NR/PY. However, if there is an amount entered in line 29, Credit Recapture Amount, enter that amount in line 31 and complete lines 33 through 35.

Note: If married filing separately you do not qualify for No Tax Status or the Limited Income Credit.

Line 32. Limited Income Credit — Single, Married Filing a Joint Return or Head of Household Only

If you do not qualify for No Tax Status, but you are single and your Massachusetts AGI is between $8,000 and $14,000, or if you are filing as head of household and your Massachusetts AGI is between $14,400 and $25,200 plus $1,750 per dependent, or if you are married filing a joint return and your Massachusetts AGI is between $16,400 and $28,700 plus $1,750 per dependent, you may qualify for the Limited Income Credit. This credit is an alternative tax calculation that can result in a significant tax reduction for people whose income is close to the No Tax Status threshold. Be sure to complete Schedule NTS-L-NR/PY to see if you may qualify for this credit.

Line 33. Other Credits (from Schedule Z, Part I)

Lead Paint Credit, Economic Opportunity Area Credit, Full Employment Credit, Septic Credit, Brownfields Credit, Low-Income Housing Credit, Historic Rehabilitation Credit, Film Incentive Credit and Medical Device Credit

“Other credits” include the items listed above and must be included on Schedule Z, Part I. Nonresidents and part-year residents, enter the total from Schedule Z, line 10 on Form 1-NR/PY, line 33. Be sure to enclose Schedule Z with your return. Failure to do so will delay the processing of your return.

Line 34. Credits for Part-Year Residents Only (from Schedule Z, Part II)

Credit for Income Tax Paid to Another State or Jurisdiction and Solar Wind and Energy Credit

“Credits for part-year residents only” include the items listed above and must be included on Schedule Z, Part 2. Part-year residents, enter the total from Schedule Z, line 13 on Form 1-NR/PY, line 34. Be sure to enclose Schedule Z with your return. Failure to do so will delay the processing of your return.

Line 37. Voluntary Contributions

You may contribute any amount to the following funds. Remember, these amounts are added to your tax. They increase the amount of your payment or reduce the amount of your refund.

a. Endangered Wildlife Conservation: The Natural Heritage and Endangered Species Fund is administered by the Division of Fisheries and Wildlife. Contributions are used to protect and restore rare and endangered wildlife and plants, and their habitats. This fund has helped restore and conserve in the Commonwealth populations of the Bald Eagle, Hessel's Hairstreak Butterfly, the Redbelly Turtle and the Plymouth Gentian.

b. Organ Transplant Fund: The Organ Transplant Fund is administered by the Massachusetts Department of Public Health. All contributions received by the Fund assist patients with the costs of medications without which they might lose their transplanted organs.

c. Massachusetts AIDS Fund: The Massachusetts AIDS Fund is administered by the Massachusetts Department of Public Health. Contributions are used for research, experimental treatment and education related to Acquired Immune Deficiency Syndrome (AIDS). Massachusetts residents living with AIDS receive experimental treatment through clinical trials which are wholly supported with this Fund. The Fund also educates people with AIDS about treatment options and how to gain access to medication and experimental treatment.

d. Massachusetts United States Olympic Fund: Contributions to this fund are used to assist Massachusetts residents in paying all or part of any costs associated with the development, maintenance and operation of the United States Olympic Team participating in the Olympics and the United States Paralympic Team participating in the Paralympics.

e. Massachusetts Military Family Relief Fund: The Massachusetts Military Family Relief Fund Is administered by the Friends of Massachusetts National Guard and Reserve Families. Contributions to this fund are used to help members of the Massachusetts National Guard and Massachusetts residents who are members of the reserves of the armed forces of the United States and who have been called to active duty after the September 11, 2001 terrorist attacks, and their families, to defray the costs of food, housing, utilities, medical services, and other expenses.

Add items a, b, c, d and e and enter the total in line 37.

Line 38. Massachusetts Use Tax Due On Out-of-State Purchases Made in 2008 (part-year residents only)

A 5% Massachusetts use tax is due on your taxable purchases, made while a Massachusetts resident, of tangible personal property purchased for use in Massachusetts on which you did not pay Massachusetts sales or use tax. These include, but are not limited to, purchases made out-ofstate, on the Internet or from a catalog, where no Massachusetts sales tax was paid. The use tax does not apply to out-of-state purchases that are exempt from the sales tax (for example, clothing that costs $175 or less). Examples of taxable items include computers, furniture, jewelry, cameras, appliances, and any other item that is not exempt. Generally, anyone who pays a sales or use tax to another state or territory of the United States on tangible personal property to be used in Massachusetts is entitled to a credit against the Massachusetts use tax, up to 5%. This credit is allowed for sales or use tax paid to another state only if that state has a corresponding credit similar to the Massachusetts credit. See TIR 03-1 for more information.

Taxpayers may use the following table to self-report a “safe-harbor” amount of use tax based on their Massachusetts adjusted gross income. A taxpayer may pay this amount in lieu of the actual amount of use tax that would otherwise be due with respect to such purchases. Individual taxpayers electing to report use tax under this method will not be assessed additional use tax on audit, even if the actual amount of use tax due would have been greater than the amount from the schedule.

The estimated liability applies only to purchases of any individual items each having a total sales price of less than $1,000. For each taxable item purchased at a sales price of $1,000 or greater, the actual use tax liability for each purchase must be added to the amount of the estimated liability derived from the following table. See TIR 04-26.

Mass. AGI per return*	Use tax liability
$ 0–$ 25,000	$ 0
25,001 – 40,000	15
40,001 – 60,000	25
60,001 – 80,000	35
80,001 – 100,000	45
Above $100,000	Multiply Mass. AGI* by .0005
Line 10 of Schedule NTS-L-NR/PY.

Prepare and retain with your records a list of your out-of-state purchases in 2008 that are subject to the Massachusetts use tax. Complete the following worksheet to calculate your use tax if you are not self-reporting a safe-harbor amount. For more information about use tax, visit DOR’s website at www.mass.gov/dor.

Form 1-NR/PY, Line 38 Worksheet-Use Tax Due on Out-of-State Purchases (Part-Year Residents Only)

1. Total of purchases in 2008, made while aMassachusetts resident, subject to Massachusetts use tax	________
2. Use tax. Multiply line 1 by .05 (5%)	________
3. Credit for sales/use tax paid to other states or jurisdictions. Add the amount of any sales/use tax paid to another state or jurisdiction, or 5% of the sales price, whichever is less, on each purchase reported in line 1	________
4. Total amount due. Subtract line 3 from line 2. Not less than “0.” Enter the result here and on Form 1-NR/PY, line 38	________

Line 39. Health Care Penalty (part-year residents only)

If you are subject to the Health Care Penalty for 2008 and are not appealing the application of the penalty, enter the penalty amount from line 8 of the Penalty Worksheet on page HC-7 in line 39a for you and/or line 39b for your spouse.

Note: If married filing a joint return and both you and your spouse are subject to the penalty, separate Penalty Worksheets must be filled out to calculate the separate penalty amounts for you and your spouse, using your married filing jointly income.

Line 41. Massachusetts Income Tax Withheld

This represents all income taxes withheld for the Commonwealth of Massachusetts as indicated on your copies of Forms W-2, W-2G, PWH-WA (Promoter Withholding), 2G, K-1 and certain 1099s, if applicable. Enter the total of all Massachusetts with- holdings in line 41. Attach, with a single staple, state copies to your return; otherwise, your claim of amounts withheld will not be allowed. If you have lost any state copy, ask the payer for a duplicate. Copies of 1099s need only be attached if they show an amount for Massachusetts tax withheld.

Line 42. 2007 Overpayment Applied to Your 2008 Estimated Tax

Include the exact amount of any 2007 overpayment you applied to your 2008 estimated taxes. This amount can be found on your 2007 Massachusetts Form 1-NR/PY, line 49 or Form 1, line 44. Do not include any 2007 refund in this line.

Line 43. 2008 Massachusetts Estimated Tax Payments

If you paid Massachusetts estimated income taxes for 2008, enter in line 43 the total of all Massachu- setts estimated tax payments, but do not include the amount entered in line 42. Be sure to include any last quarter (of 2008) payment made on or be- fore January 15, 2009.

Every taxpayer (whether a resident or nonresident) who expects to pay more than $400 in Massachu- setts income taxes on income which is not covered by Massachusetts withholding must pay Mass- achusetts estimated taxes. Estimated tax payments can be made online by using Web Services for In- come by visiting www.mass.gov/dor or by Filing Form 1-ES.

Income which is not subject to withholding includes:

• salaries or wages earned in Massachusetts where the employer is not subject to Massachu- setts withholding;
• unemployment compensation (if you did not elect voluntary Massachusetts withholding);
• taxable REMIC income;
• dividends and interest, including interest from Massachusetts banks;
• gains from capital assets;
• income from an individual trade, business, pro- fession, partnership or S corporation;
• income from any estate or trust not taxed directly;
• lottery or gambling winnings;
• certain pensions;
• rental income and royalty income;
• alimony received (part-year residents only);
• illegal income; and
• any other income received taxable in Mass- achusetts from which Massachusetts tax will not be withheld.

Generally, the first payment must be filed on or before April 15 of the taxable year. The estimated tax may be paid in full with the first payment voucher or in four installments on or before April 15, June 15, September 15 of the current taxable year and January 15 of the following year.

If you wish to verify estimated tax payments that have already been made, check the Estimated Tax Payment History Application at www.mass.gov/dor. You will need to know the amount of last year’s refund or balance due to access your account.

You may request your employer to withhold additional amounts from your salary on Form M-4, Massachusetts Employee’s Withholding Exemption Certificate to cover the taxes on other income so that you do not have to file and pay estimated taxes.

If 80% of the tax is not paid throughout the year through withholding and/or estimated payments, a penalty may be imposed.

Line 44. Payments Made with Extension

If you filed an Application for Automatic Six- Month Extension of Time to File Massachusetts Income Tax Return, Massachusetts Form M-4868, for 2008 on or before April 15, 2009, enter in line 44 the amount you paid with Form M-4868. Enclose a copy of Massachusetts Form M-4868 with your return.

Line 45. Earned Income Credit

The earned income credit is a tax credit for certain taxpayers who work and/or have earned income under $41,646. Taxpayers who qualify for and claim the federal earned income credit are allowed a refundable credit equal to 15% of the federal amount. If the credit due the taxpayer exceeds the amount of the total income tax payable for the year by the taxpayer, the excess amount of the credit will be refunded to the taxpayer without interest. Enter in line 45a the federal earned income credit amount from your U.S. Form 1040, line 64a, 1040A, line 40a; or 1040EZ, line 8a. Multiply this amount by .15 (15%) and enter the result in the line provided. Nonresidents, multiply this amount by line 14g; part-year residents multiply this amount by line 2. Enter the result in line 45. If you choose to have the IRS compute your federal earned income credit, wait until the IRS notifies you of that amount before making an entry in line 45. If you have not received your earned income credit amount as computed by the IRS by April 15, 2009, you may file Massachusetts Form M-4868, Application for Automatic Six-Month Extension of Time to File Massachusetts Income Tax Return. See page 3 for information about filing your extension via the Web. For more information about the federal earned income tax credit, see IRS Publication 596, available at www.irs.gov. Be sure to fill out Schedule DI, Dependent Information, if you are claiming this credit for one or more qualifying children/ dependents. Failure to do so will delay the processing of your return.

Line 46. Senior Circuit Breaker Credit (part-year residents only)

Certain senior citizens in Massachusetts may be eligible to claim a refundable credit on their state income taxes for the real estate taxes paid on the Massachusetts residential property they own or rent and which they occupy as their principal residence. The maximum credit allowed is $930 for the tax year beginning January 1, 2008. If the credit due the taxpayer exceeds the amount of the total income tax payable for the year by the taxpayer, the excess amount of the credit will be refunded to the taxpayer without interest. To determine if you qualify for this credit, refer to Schedule CB, Senior Circuit Breaker Credit and instructions. Schedule CB is available on DOR’s website at www.mass. gov/dor or by calling (617) 887-MDOR, or toll-free in Massachusetts 1-800-392-6089.

If you qualify for this credit and you are a homeowner, enter the amount from Schedule CB, Circuit Breaker Credit, line 17; if you are a renter, enter the amount from line 21. Be sure to complete and enclose Schedule CB with your return.

Line 47. Refundable Film Credit

Motion picture production companies qualify to elect a refundable film credit if they have not transferred or carried forward a portion of the film credit for the production/certificate number to be refunded. Transferees of the film credit do not qualify for the refundable film credit. Transferees should claim their film credit on Schedule Z, line 8.

Note: If an election to refund the film credit for a production/certificate number is made, the entire film credit remaining after reducing tax liability and other credits will be refunded at 90%. A motion picture production company that elects to claim a refund of the film credit is not permitted to seek a partial refund and a partial transfer or carryover of the credit. However, the refund can be applied as an estimated payment for the subsequent tax year.

Enter in line 47 any amount of refundable film credit from Schedule RFC, Refundable Film Credit, line 5.

Refund Amount

Line 49. Overpayment

If line 40 is smaller than line 48, subtract line 40 from line 48 and enter the amount in line 49. This is the amount of your overpayment. If line 40 is larger than line 48, skip to line 52. If line 40 and line 48 are equal, enter “0” in line 51.

Line 50. Amount of Overpayment You Want Applied to Your 2009 Massachusetts Estimated Taxes

Enter the amount of your 2008 overpayment you wish to apply to your 2009 Massachusetts estimated taxes. Once an election is made to apply your overpayment to your 2009 estimated tax, it cannot be refunded later or applied to any additional tax you may owe for 2008. The amount entered in this line can only be claimed as a credit on your 2009 Massachusetts return.

Line 51. Refund Amount

Subtract line 50 from line 49. Enter the result in line 51. This is the amount of your refund.

Note: Your state tax refund may be taxable on your U.S. tax return if you deducted state income tax paid as an itemized deduction on U.S. Schedule A.

Direct Deposit: You may elect to have your refund deposited directly into your savings or checking account. Check with your financial institution to make sure that it accepts direct deposit and verify the routing transit number (RTN) of the issuing financial institution. If we are unable to honor your request for a direct deposit, a paper check will be sent to you.

The routing number of your financial institution is nine digits and begins with 01 through 12 or 21 through 32. The account number can be up to 17 characters (both numbers and letters). Omit hyphens, spaces and special symbols. Enter the number from left to right and leave any unused boxes blank. You must enter the routing number and the account number in the spaces provided in line 51 if you are requesting direct deposit. Failure to do so will result in your request for direct deposit being denied. See sample check for location of this information.

Tax Due

Line 52. Tax Due

If line 40 is larger than line 48, subtract line 48 from line 40, and enter the result in line 52. This is the amount of tax you owe with your return. Pay in full with your return. Make your check or money order payable to Commonwealth of Massachusetts and write your Social Security number on the front of your check or money order in the lower left corner. Complete and remove Form PV, Massachusetts Income Tax Payment Voucher, attached to the back of the envelope found in this booklet. Enclose the check and Form PV with your return. Form PV must be included with your check to ensure proper crediting of your account. Be sure to use the light blue mailing label when mailing Form 1-NR/PY with Form PV.

Failure to file or failure to pay the proper amount of tax when due will result in an increasing amount of interest and penalties. It is advantageous to file when your return is due even if you are unable to make full payment.

If you owe any interest, penalty or addition for the underpayment of estimated taxes, add those amounts to the tax you owe and enter the total amount in line 52.

What Are the Interest and Penalties?

Interest: If you fail to pay the tax when due, interest will be charged. For further information, see TIR 92-6 or call the Customer Service Bureau at (617) 887-MDOR or toll-free in Massachusetts at 1-800-392-6089. Penalty for Late Payment: The penalty for late payment is 1% of the tax due per month (or fraction thereof), up to a maximum of 25%.

Penalty for Failure to File: The penalty for failure to file a tax return by the due date is 1% of the tax due per month (or fraction thereof), up to a maximum of 25%. If you were required to file a tax return for income received in any prior year and you did not file, you must file for that prior year.

Penalty for Protested (“Bad”) Check: If your check is not honored by your bank because of insufficient funds or any other reason, a penalty may be added of $30 or the amount of the check, whichever is less.

Addition for Underpayment of Estimated Taxes: You will generally be subject to this addition to tax if you did not have withholding and/or estimated tax payments equal to 80% of the total tax liability required to be paid and your 2008 tax due after credits and withholding is greater than $400. If you failed to meet this requirement, you must complete and attach Massachusetts Form M-2210 to calculate the amount you must add to line 52. The 80% requirement is reduced to 662/3% for individuals who receive two-thirds of their income from fishing or farming.

Most taxpayers who qualify for an exception had either a tax due of $400 or less or withholding and/or estimated payments equal to their tax liability for the previous year. If you qualify for an exception, fill in the oval marked “EX” under line 52 on Form 1-NR/PY and enclose Massachusetts Form M-2210. You do not have to complete Form M-2210 if the balance due with your return is $400 or less. Form M-2210 is available by visiting www.mass.gov/dor or at any Massachusetts Department of Revenue location.

Penalty for Failure to Report Federal Change: If the U.S. Internal Revenue Service changes your income for a prior year (generally through audit), file an online application for abatement/amended return at www.mass.gov/dor within one year of the final federal determination to avoid this penalty. This penalty is equal to 10% of the additional tax due or $100, whichever is smaller. If the change indicates a refund, file an online application for abatement/amended return within one year, including acceptance of an amended federal return by the Internal Revenue Service. Form CA-6, Application for Abatement, can also be downloaded from DOR’s website at www.mass.gov/dor.

Sign Here

Now that you have completed Form 1-NR/PY, sign your name at the bottom of page 1 of Form 1-NR/PY. Your spouse must also sign if this is a joint return. Write the date you signed the return.

Note: Be sure to include all four pages of Form 1-NR/PY and if applicable, Schedule HC.

Attach to your Form 1-NR/PY, with a single staple, all state copies of your Forms W-2, W-2G, PWH-WA, 2G, K-1 and any Forms 1099 which included Massachusetts withholding. If making a payment, be sure to enclose Form PV with your Form 1-NR/PY. Form PV is attached to the back of the envelope found in this booklet. Be sure to use the light blue mailing label when mailing your Form 1-NR/PY with the Form PV. Form PV must be included with your check to ensure proper crediting of your account. Make your check or money order payable to Commonwealth of Massachusetts, and be sure to sign the check and write your Social Security number on it. Be sure to include all four pages of Form 1-NR/PY. Also, enclose all required Massachusetts forms and schedules. Do not staple your forms together.

Paid Preparer Must Sign Your Return

Generally, anyone you pay to prepare your return must sign it in the space provided. Tax return pre- parers are authorized to sign the return by means of a rubber stamp, mechanical device, or computer

software program, which must include either a facsimile or printed name of the preparer. Preparers are personally responsible for affixing their signatures to returns. Preparers must also provide their Social Security Number (SSN) or Preparer Tax Identification Number (PTIN) and Employer Identification Number (EIN) in the spaces provided. The preparer must give you a copy of the return for your records. Someone who prepares your return but does not charge you should not sign your return.

Paid Preparer Authorization

If you want to allow the Massachusetts Department of Revenue (DOR) to discuss your 2008 tax return with the paid preparer who signed it, fill in the “Yes” oval in the signature area of the return. This authorization applies only to the individual whose signature appears in the “Paid Preparer” section of your return. It does not apply to the firm, if any, shown in that section.

If you fill in the “Yes” oval, you, and your spouse if filing a joint return, are authorizing DOR to call the paid preparer to answer any questions that may arise during the processing of your return. You are also authorizing the paid preparer to:

• give DOR any information that is missing from your return;
• call DOR for information about the processing of your return or the status of your refund or payment( s); and
• respond to certain DOR notices that you have shared with the preparer about math errors, offsets and return preparation. The notices will not be sent to the preparer.

You are not authorizing the paid preparer to receive any refund check, bind you to anything (including any additional tax liability), or otherwise represent you before DOR. If you want to expand the paid preparer’s authorization, see Form M-2848, Power of Attorney and Declaration of Representative.

The authorization cannot be revoked. However, the authorization will automatically end no later than the due date (without regard to extensions) for filing your 2009 tax return. This is April 15, 2010 for most people.

E-File Opt Out

For tax years beginning on or after January 1, 2005, income tax return preparers who completed 100 or more original Massachusetts Forms 1 and 1-NR-PY, including those E-filed, during the previous calendar year are required to use electronic means to file all personal income tax returns, unless the taxpayer specifically directs on the paper form that the filing be on paper and signs Form EFO, Personal Income Tax Declaration of Paper Filing. Fill in oval if you do not want your preparer to file your return electronically. See TIR 04-30 for more information.

Mailing

If you are expecting a refund or if you have no tax due, use the white mailing label on the back of the envelope that came with this booklet. If you do not have one, mail Form 1-NR/PY to: Massachusetts Department of Revenue, PO Box 7000, Boston, MA 02204. 

If you have a tax due, use the light blue mailing label on the back of the envelope that came with this booklet. If you do not have one, mail Form 1-NR/PY to: Massachusetts Department of Revenue, PO Box 7003, Boston, MA 02204

Note: If using a tax software product, be sure to use the correct PO box. See page 3.

Note: Schedule lines without specific instructions are considered to be self-explanatory. Be sure to list on each schedule the name and Social Security number that appears first on Form 1-NR/PY. Do not cut or separate schedules.