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2006 Form 1-NR/PY Instructions — Before You Begin

◗ Missing Form PV. If you are making a pay-

covenants not to compete, and nonqualified pen-

How Do I Determine My

ment, make certain you fill out Form PV, Mass-

sion income that federal law allows states to tax.

Legal Residence (Domicile)?

achusetts Income Tax Payment Voucher. Form PV

Income from Massachusetts sources which is not

Your legal residence is determined by all the facts

is attached to the back of the envelope found in

taxed to residents is not taxed to nonresidents,

and circumstances in your case. If you have two

this booklet. Enclose Form PV and your check

e.g., interest on debt obligations of the U.S. and

or more residences, your legal residence is the

with your return. Be sure to use the light blue

amounts received as Social Security and worker’s

one you regard as your true home or principal res-

mailing label when mailing your Form 1-NR/PY

compensation.

idence. You cannot choose to make your home in

with the Form PV.

one place for the general purposes of life and in

In general, the same exemptions and deductions

Note: Go to and click on Web

another for tax purposes. Your legal residence is

allowed to residents are available to nonresidents

Services for Income for online payment options.

usually the place where you maintain your most

to determine taxable income. These items are al-

important family, social, economic, political and

lowed, however, only to the extent they relate to,

Filing Your

religious ties. A change of legal residence will not

or are allocable to, Massachusetts source income.

be accomplished by a temporary or protracted ab-

sence from a place; you must not intend to return.

Am I Carrying on a Trade, Business

Massachusetts

or Employment in Massachusetts

Note: A person is also considered a resident if they

Return

maintain a permanent place of abode in Massachu-

as a Nonresident?

setts and spend more than 183 days, in the aggre-

A nonresident generally does not have a trade,

gate, in the state. See Technical Information Release

As a nonresident, you must file Form 1-NR/PY if

business or employment carried on in Massachu-

(TIR) 95-7 for a further explanation.

your Massachusetts source income for 2006 ex-

setts if his/her presence for business in Mass-

ceeded the smaller of your apportioned personal

achusetts is casual, isolated and inconsequential.

What is Gross Income for a

exemption, or $8,000.

A nonresident’s presence for business will be con-

Part-Year Resident?

sidered casual, isolated and inconsequential if the

What Is Massachusetts Source

As a part-year resident, you must file Form

nonresident’s business presence in Massachu-

Income for Nonresidents?

1-NR/PY if your gross income was more than

setts is ancillary to the nonresident’s primary busi-

$8,000 — whether received from sources inside

The term “Massachusetts source income” is used

ness or employment duties performed at a base of

or outside of Massachusetts. Gross income for a

throughout this booklet to describe the types of

operations outside Massachusetts — for example,

part-year resident includes the following:

income which are taxable to a nonresident.

an occasional presence in Massachusetts for

◗ all wages, salaries, tips, bonuses, fees and other

management functions, and other similar activi-

A nonresident is only subject to tax on items of in-

compensation;

ties which are secondary to the individual’s pri-

come derived from or effectively connected with:

◗ taxable pensions and annuities;

mary out-of-state duties.

◗ any trade, business, or employment carried on

◗ alimony;

in Massachusetts (see the following section);

◗ income from a business, trade, profession,

Are Military Personnel Required to

◗ participation in any lottery or wagering transac-

partnership, S corporation, trust or estate;

File?

tion in Massachusetts; or

◗ rental, royalty and REMIC income;

If you enlisted in the service as a Massachusetts

◗ ownership of any interest in real or tangible per-

◗ unemployment compensation;

resident and have not established a new domicile

sonal property located in Massachusetts.

◗ taxable interest and dividends;

(legal residence) elsewhere and if your gross in-

Some examples of the types of income taxable to

◗ gambling winnings;

come is more than $8,000, you are required to file

a nonresident include:

◗ capital gains;

a Massachusetts income tax return. This applies

◗ all wages, salaries, tips, bonuses, fees and other

◗ taxable portion of scholarships and fellow-

even though you may be stationed outside of

compensation which relate to activities carried on

ships; and

Massachusetts. The terms “legal residence” and

in Massachusetts, regardless of where or when the

◗ any other income not specifically exempt.

“domicile” are used to denote that place where you

compensation is paid;

have your permanent home and to which, when-

◗ unemployment compensation related to previ-

Massachusetts gross income also includes the fol-

ever you are absent, you have the intention of re-

lowing which are not subject to the U.S. income tax:

ous Massachusetts employment;

◗ interest from obligations of states and their po-

turning. Nonresident military personnel stationed

◗ profit from a business, trade, profession,

in Massachusetts may be subject to Massachu-

litical subdivisions, other than Massachusetts and

partnership or S corporation conducted in

setts taxes and should file Form 1-NR/PY if they

its political subdivisions; and

Massachusetts;

◗ income earned by a resident from foreign

earn income from other than military sources.

◗ rents and royalties from real and tangible per-

employment.

sonal property located in Massachusetts or from

Note: Massachusetts excludes from gross income

other business activities in Massachusetts;

compensation earned by members of the armed

Massachusetts gross income does not include:

◗ gain from the sale of real or tangible personal

◗ interest on obligations of the U.S. and U.S.

forces for service in a combat zone, to the same

property located in Massachusetts;

extent it is excluded under federal law.

territories;

◗ interest and dividends, only if derived from or

◗ amounts received as U.S. Social Security, pub-

No guidance is intended on the tax status of such

connected with Massachusetts business activity,

lic welfare assistance, Veterans Administration

pay under the laws of other states. Generally,

or the ownership of Massachusetts real estate or

disability payments, G.I. Bill education payments,

when income is taxable in two jurisdictions, a

tangible personal property; and

worker’s compensation, gifts, accident or life in-

credit for taxes paid to the other jurisdiction is al-

◗ the definition of Massachusetts source income

surance payments, or certain payments received

lowed on the taxpayer’s return in the state of his/

now includes gain from the sale of a business or

by Holocaust survivors; and

her residence.

an interest in a business, separation, sick or vaca-

tion pay, deferred compensation, income from

Instructions For Form 1-Nr/py - Massachusetts Nonresident Or Part-Year Resident Income Tax - 2006 Page 7

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