Independent contractor taxes in Massachusetts: freelancer tax management guide

The freedom to work directly with clients without having an employer dictate what to do or how to do it is one of the main attractions of working as an independent contractor. You also have the flexibility to work where and when you want.

Whether your clients are local or worldwide, calculating and withholding taxes can be a tedious task. If you live in the US State of Massachusetts, for example, you’ll have to follow both federal laws and state laws when it comes to taxation. Taxes can be complicated to file and pay, so you should consider consulting a tax expert before filing taxes on your own.

In this comprehensive guide, you’ll learn about Massachusetts independent contractor taxes: what they are, how to file taxes, and how to pay state and federal taxes if you are an independent contractor living in Massachusetts.

How do independent contractor taxes work in Massachusetts?

Independent contractors in Massachusetts owe federal income taxes as well as state income taxes, which they file and pay before the same deadline as their federal taxes. 

In addition to the federal income tax based on your income bracket and deductions, you will also owe federal self-employment taxes. This payment covers your FICA taxes, which pay for social security, old-age, survivor benefits, disability insurance, Medicaid, and Medicare. 

Employers pay half of the FICA taxes for employees. As a self-employed contractor, you pay both the employer half and the employee half of the FICA taxes. This tax is 15.3% (12.4% for social security and 2.9% for Medicare). 

In addition to federal taxes such as federal income tax and self-employment tax, self-employed independent contractors in Massachusetts must file and pay Massachusetts state income taxes. Your state income tax is based on all of your earned income for the tax year. 

The state income tax rate in Massachusetts is a flat rate of 5%. This is a tax levied on all earned income, wages, and tips. There is no additional self-employment tax owed by self-employed Massachusetts residents other than the federal self-employment tax. 

How do independent contractors pay taxes in Massachusetts?

In the US, independent contractors are subject to tax filing and payment obligations just like employees. If you reside in Massachusetts, you must also file and pay state taxes in that state based on all of your income earned. 

Employers do not withhold taxes, so contractors should make estimated payments for both state and federal income taxes. To avoid penalties, estimated payments must be made quarterly. Massachusetts taxpayers who expect to owe more than $400 in state income taxes for the tax year must pay estimated tax payments.

To calculate what your estimated payment should be, take your previous year’s tax liability and divide by four. When you file your annual taxes, the estimated taxes will be taken into account when calculating any taxes you may owe.

You can file your state tax return online. Filing is free if you meet certain qualifications. You can make payments online for Massachusetts state taxes by ACH debit or credit card. You can file your federal taxes online, as well. 

If you have a physical nexus in Massachusetts, such as an office, and you sell products, you need to report sales taxes. State sales tax is 6.25% on taxable products sold. If you offered services as an independent contractor and did not sell products, you don’t need to file and pay sales taxes because services are generally exempt from sales taxes.

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How to file Massachusetts self-employment taxes: step-by-step guide

Below are the steps for filing federal taxes as well as Massachusetts state taxes online.

1. Add up your income

Add up all of the income in Form 1099 that you received for the tax year. Also, include all of your invoices that were not reported as Form 1099 payments. Subtract from that total any eligible deductions, such as equipment or materials you purchased for your business. The result will be your taxable income that you will input in tax forms or in tax software.

2. File your federal income tax return

As a Massachusetts resident, you will owe both federal and state taxes. Filing your federal taxes involves putting your income on Form 1040 and Form 1040 Schedule C Profit of a Business. Because you are a self-employed contractor, you’ll also need to file Form 1040-ES Estimated Tax for Individuals. 

3. File your Massachusetts state tax return

You can file your Massachusetts state tax return online. The Mass.gov website has a section for approved self-prepared tax software options. If you use tax software, the program can assist you and ask questions about your income and any possible deductions.

4. Pay your federal and state tax liabilities

Estimated payments you’ve made each quarter of the tax year may have largely covered your tax liability if you estimated correctly. If you overpaid, then you’ll be owed a tax refund. If you underpaid your taxes, you’ll owe taxes and need to make a payment. 

What is an independent contractor according to Massachusetts law?

According to the IRS, employee classification is mostly based on how much control the worker has over their work and how it is done, as well as how much dependence the worker has on the company paying them:

• Does the company provide tools and supplies?

• Does the company control where the worker works?

• Does the company stipulate how the worker works?

• Does the worker receive a regular paycheck?

• Is the worker reimbursed for supplies and materials?

• Are there benefits such as vacation and insurance given to the worker?

• Is there a written contract that explicitly states it is an employment contract?

Answers to these questions can determine if a worker should be classified as an employee or a contractor. A worker who can choose how and when they work is considered more independent and would likely not be classified as an employee. 

According to Massachusetts law, if an employer wants to treat a worker as an independent contractor rather than an employee, they must pass a three-part test and show that the work:

• Is performed without the control or direction of the company

• Is performed outside the usual course of the company’s business

• Is performed by someone who has an independent business established to do that kind of work

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The dangers of contractor misclassification in Massachusetts

Employers must correctly classify their workers to ensure fair compensation and avoid penalties. 

Proper classification is also essential because state and federal anti-discrimination laws apply to employees. 

Misclassifying a worker as an independent contractor when they should be an employee is illegal under both Massachusetts and federal law. Employers who misclassify workers may be required to pay owed wages or overtime. In Massachusetts, such misclassification can result in civil penalties and even criminal prosecution, with the severity of the penalties depending on the nature and frequency of the violations. 

For more information on employee classification, read Remote’s expert misclassification guide. 

How do I ask the company I’m working with to convert me to an employee?

There may be several reasons that you might want to convert to an employee. 

• The total compensation may be higher as an employee

• The employer may offer you benefits, such as health insurance.

• The employer may offer paid vacation time. 

• You may achieve a better work/life balance. 

• There is a more steady income. 

The employer can also have good reasons to hire you. Hiring you as an employee can help them maintain compliance, avoid misclassification risks, and retain you as a valuable worker. 

A global employer of record like Remote can easily help your employer convert you to an employee. Remote can help you get on an employer’s payroll as a remote employee so you can start earning a steady paycheck remotely. 

How do I get paid as an independent contractor in Massachusetts?

As a contractor, you must invoice each client for each job completed during the previous billing period to be paid. The customer then pays the invoice via bank transfer, paper check, or payment processing platform. You can send out routine invoices and receive payments regularly, such as once per month, when you use a contractor management system.

One of the easiest ways to manage payments as an independent contractor is by partnering with Remote and using our contractor management system. This is how it works:

1. You'll be onboarded as a contractor.

2. You and your client sign legally compliant contracts.

3. You submit your invoices through the Remote platform.

4. The client will submit payments.

5. You'll receive your payments.

Learn more about how to invoice as a freelancer in our simple guide.

How Remote makes life easy for contractors and their clients 

Whether you’re struggling with getting paid or filing tax forms, Remote’s reliable contractor management system for freelancers or contractors can help!

Here's how Remote can help.

• International payments: Remote simplifies receiving payments in multiple countries, allowing freelancers to work from anywhere while enabling companies to easily pay in the currency of their choice.

• Localized contracts and advice: Remote’s team of international experts can support contracts, taxes, and labor laws, ensuring both workers and companies are protected from risk and liability.

• Automated invoicing: Automation streamlines the payment process, delivering accurate invoices to companies and ensuring contractors are paid promptly.

• Tax management: Whether you're based in Massachusetts or elsewhere, Remote ensures tax collections and payments comply with local regulations, giving peace of mind to both contractors and companies.

Get started as an independent contractor in Massachusetts with Remote

​​If you’re getting started as a contractor in Massachusetts, you’ll have to comply with state and federal laws, understand tax obligations, and make sure you get paid on time. 

To make your life easier, check out Remote’s Freelancer Hub — a simple, intuitive, all-in-one platform to manage your clients, contractors, invoices, and payments in one place. We help you collaborate with global clients while ensuring compliance with local and federal laws. Remote makes it easier to manage your business, receive payments, and grow. 

Learn more about how Remote makes contractor management effortless or get started today and kickstart your freelance career! 

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