Massachusetts Form 3: Fiduciary Income Tax Return

Massachusetts Form 2 is the Fiduciary Income Tax Return used by trusts and estates to report financial activity to the Commonwealth of Massachusetts. It is filed by a fiduciary, such as an executor, administrator, or trustee. This return calculates and reports any income tax owed by the estate or trust itself. The return is concerned only with income generated by the trust or estate’s assets, not the personal income of the fiduciary or beneficiaries, unless income is distributed to them.

Determining Filing Requirements for Form 2

The requirement to file a Massachusetts Form 2 depends on the residency of the trust or estate and its income.

A fiduciary for a resident estate or trust must file a return if the entity has any taxable income or if its gross income is more than $100 for the taxable year. For a nonresident estate or trust, a filing obligation is triggered if it has Massachusetts source income and its gross income exceeds $100. Massachusetts source income is income derived from sources within the state, such as from a trade or business.

Information and Documentation Needed for Form 2

A fiduciary must gather specific information to accurately complete Form 2. This includes details about the fiduciary, the entity, its beneficiaries, and all financial activities for the year.

The following documentation is required:

• The fiduciary’s full name, address, and official title.
• The estate or trust’s legal name, federal Employer Identification Number (EIN), and the date the trust was created or the decedent’s date of death.
• All federal Form 1099 statements for interest, dividends, and proceeds from broker transactions.
• Schedule K-1s if the entity received income from other partnerships, estates, or trusts.
• Detailed records of all rental income received.
• Documentation for deductions, including invoices for fiduciary compensation, legal and accounting fees, and other administrative costs.
• Official acknowledgments for any charitable contributions made.
• Beneficiaries’ full names, addresses, Social Security Numbers or Taxpayer Identification Numbers, and the exact amount of income distributed to each.

Completing the Massachusetts Form 2

The form is divided into sections for reporting income, claiming deductions, and calculating the final tax.

Income

The first section of Form 2 reports all income sources. Totals from source documents are entered on their corresponding lines. Schedules are used as worksheets to calculate totals for the main form. Schedule B is used to detail interest, dividend, and certain capital gains income, while Schedule D is used to calculate the net gain or loss from the sale of property.

Deductions

The next section of the form is for allowable deductions. The fiduciary enters expenses such as fiduciary compensation, which is detailed on Schedule H, and professional fees for accountants or lawyers. The income distribution deduction, calculated on Schedule IDD, accounts for income passed through to beneficiaries, ensuring it is not taxed at both the entity and beneficiary level.

Tax Calculation

The final section calculates the tax liability. Deductions are subtracted from total income to determine taxable income, and the tax is then computed based on the applicable Massachusetts tax rates. Any tax credits the fiduciary is eligible to claim are applied here to find the final tax due or overpayment amount.

Filing and Paying the Fiduciary Return

Once Form 2 is completed and the tax is calculated, the return must be filed and any payment submitted to the Massachusetts Department of Revenue.

Filing Methods and Payment Instructions

Filing and paying can be done through the state’s online portal, MassTaxConnect. This system allows fiduciaries to file electronically and make payments directly from a bank account, providing instant confirmation of receipt. For those who file a paper return, the completed Form 2 and all required schedules must be mailed to the address in the form’s instructions. If a payment is due, a check or money order payable to the Commonwealth of Massachusetts should be included with a Form 2-PV payment voucher.

Due Dates and Extensions

For calendar-year filers, Form 2 is due by April 15. An extension to file can be requested by submitting Form M-8736, which grants an automatic six-month extension. An extension to file is not an extension to pay. Any estimated tax due must be paid by the original April 15 deadline to avoid penalties and interest.