In March of 2012 a court ruling caused a significant Massachusetts tax law change. Prior to the change, RI Temporary Disability Insurance payments (often referred to as TDI and SDI), were not deductible under a 1977 Letter Ruling. As a result of the change, thousands of employees who reside in Massachusetts but have worked in Rhode Island between the years of 2008 and the current year are eligible for refunds.
How do you I know if I paid TDI? TDI, also reported as SDI, is reported in Box 14 of your Form W2.
The tax is calculated based on the employee’s wages. The TDI payments are placed in a Fund and used by the state to provide relief for the disabled and unemployed. Payments are used to defray the cost of government in Rhode Island by assisting the state in providing income to qualified disabled and unemployed residents. Therefore, the payments are, by definition, a state income tax and are hence eligible as a credit on your home state return.
Retroactive implementation: The refund for RI TDI is available for all open tax years. Therefore, you can apply for a refund for amounts paid all the way back to 2008. However, time is running out. The 2008 tax year closes as of the upcoming filing deadline: for Massachusetts as of April 17, 2012. When that deadline passes 2009 and 2010 tax years remain open for amendment until their statutes run out in upcoming years.
Can I claim the credit on my 2011 Return? Unfortunately you cannot simply claim a credit for previous years on your 2011 return.
How Can I get my money back? If you utilize the services of a professional, they will be able to amend prior year returns for you. The Massachusetts Department of Revenue is suggesting an abatement of tax online at: http://www.mass.gov/dor/forms/electronic-ca-6-notice.html
To file online you will have to set up an account and then follow the steps indicated. Our office has used the online service and found the process easy to follow and quite efficient. You may also file a paper Application for Abatement/Amended Return, Form CA-6 which can be found in the Forms section at www.mass.gov/dor.
How is my refund calculated? The computation of the credit is based on comparing the Massachusetts income tax on income reported to Rhode Island to the actual tax plus TDI paid to Rhode Island; the credit is limited to the smaller of these two amounts. To recalculate the credit, the TDI should be included as part of the total tax paid to Rhode Island.
Rhode Island employees residing in Massachusetts are the most likely beneficiaries of this law change. However, other states that have similar disability insurance funds include NewYork, New Jersey, Illinois, California, Hawaii and Puerto Rico. Therefore, Massachusetts residents that have worked in any of these states may also be affected and should review their tax returns.
Hi,
ReplyDeleteI am waiting for the abatements, which I filed on April 11, 2012. My question is - Has anyone seen any money from this yet? Thanks.
This was a statement released by the Massachusetts Department of Revenue on the refunds:
DeleteREFUNDS OF RI DISABILITY FOR MA RESIDENTS: The Massachusetts Department of Revenue has issued a statement regarding personal income tax abatements requested due to the credit for taxes paid to another jurisdiction, specifically insurance fund payments made pursuant to Rhode Island law ("RISDI"). The department has received over 30,000 abatement claims on this issue. The department has noted a number of common errors. In many cases, the credit has been calculated incorrectly by claiming the amount paid to the RISDI fund as the amount of the requested abatement. This is not a refundable credit. If the Massachusetts income tax for the period was zero, there is no allowable credit for taxes paid to another jurisdiction. The allowable credit is the lesser of the Massachusetts income tax on the income reported to Rhode Island compared with the actual income tax paid to Rhode Island plus the RISDI. Based upon the significant number of abatements and the amount of time needed for the staff to recalculate the allowable credit for all applicable tax years, the length of time to process these abatements has significantly increased. To help address this backlog and time delay, the department has reassigned staff to assist in working these abatement cases. The department processes and completes abatement claims on a first-in, first-out basis. Based upon the high volume of claims received, the processing time is approximately six months.
Well, at least they notified someone. I applied on line, would not be that hard to put a notice/update on the DOR site. Unless I missed it, but, many thanks for clearing this up. Much obliged.
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