Massachusetts Hourly Paycheck and Payroll Calculator

Massachusetts Hourly Paycheck Calculator

Massachusetts employers have numerous business tasks to manage —- sales, operations, and finance. One of the more important processes to manage is payroll. Massachusetts has payroll taxes and some unique payroll rules.  

Although payroll accountants and payroll software can take care of your Massachusetts payroll for you, we’ll let you know the details in case you want to have a go at it yourself.

Payroll taxes in Massachusetts

Massachusetts income tax withholding

It doesn’t matter how much you make. As of January 1, 2020, everyone pays 5% on personal income.

Your new employees should fill out Federal Form W-4, Employee’s Withholding Certificate.  Form M-4, Massachusetts Employee’s Withholding Exemption Certificate, is optional.  However, if the employee wants to claim exemptions other than federal, they must complete Form M-4 for you to compute the amount of tax to withhold from your employee’s pay.

Filing and paying Massachusetts withholding tax

Businesses with annual withholding liabilities, sales & use tax liabilities, and room occupancy excise liabilities with a combined total of $5,000 or more must file electronically.  Once you start filing electronically, you will always file electronically–even if your withholding is $0. You must file for all periods, even when no tax is due.

Whether you pay annually, quarterly, or monthly depends on how much tax you withhold from employees. 

You must also submit quarterly wage reports to verify eligibility programs such as Welfare, Workers’ Compensation, Medicaid, and Unemployment Compensation.  

Most employers must electronically submit their Federal Form W-2s to the Massachusetts Department of Revenue. Certain small employers with fewer than 50 employees may file these forms non-electronically along with Massachusetts Form M-3, Reconciliation of Massachusetts Income Taxes Withheld for Employers.

Massachusetts unemployment insurance

You will need to make quarterly contributions to fund the unemployment insurance program in Massachusetts.  The first $15,000 of an employee’s earnings each year is taxable for unemployment insurance.  Rates are generally determined by legislation. Rates for 20220 are between 0.94% and 14.37%, depending on your claims history.

In 2022, if you are a new non-construction business, you will pay an assigned rate of 2.42% for the first three years.  New construction companies have a 6.72% rate. In the fourth year, employers receive a proper experience rating used to calculate unemployment insurance rates.  

You will need to file your quarterly employment and wage detail report and pay the tax due with the Department of Unemployment Assistance.  

Federal payroll taxes

All Massachusetts employers and employees pay different types of federal payroll taxes. You are responsible for withholding and paying the following: 

Employee paid taxes

• Federal income tax 
• Additional Medicare tax

Employer-paid taxes

• Federal unemployment tax

Both employee and employer-paid taxes

• Social Security and Medicare tax

Federal income tax

You’ll use Federal Form W-4 to calculate how much federal income tax to withhold from your employees’ pay. Employees should complete this form when hired.  If your employees go through life changes, such as getting married, they should fill out a new form.  Such changes can have an impact on the amount of tax they will owe.

You’ll use the information on a W-4 along with tax tables to compute the tax withholding.  Payroll software can do the heavy lifting with the math by making the calculations for you.

Hang on to the completed W-4 forms; don’t mail them to the IRS.

Additional Medicare Tax

You may have employees who owe Additional Medicare Tax. For employees earning more than $200,000 per year, you must withhold this 0.9% tax.

Federal unemployment tax

In addition to the state unemployment tax, you must also pay federal unemployment tax. The employer pays 6% of the first $7,000 of each employee’s wage each year. There are credits available that can reduce your rate to 0.6%.

Social Security and Medicare tax

Collectively the Social Security and Medicare taxes are known as FICA, which stands for Federal Insurance Contributions Act.  For 2022, both you and the employee pay 6.2% on the first $147,000 of employees’ wages for Social Security tax and 1.45% on all wages for Medicare tax. 

Filing and paying federal payroll taxes

You’ll need to send all withheld taxes and your portion of FICA to the IRS either monthly or semi-weekly, depending on how much tax you owe. Each quarter you will need to do a summary report on Form 941. 

For federal unemployment tax, quarterly payments are required if your tax is greater than $500. If your tax is less than $500 a year, you can pay the tax when you complete your annual summary report on Form 940.

Other Massachusetts paycheck laws

Be aware of these additional Massachusetts paycheck rules.

• New hires:  You must report new or rehired employees and independent contractors through MassTaxConnect within 14 days of hire.
• Pay stubs:  Pay stubs must include:
  • the name of the employer and employee, 
  • the payment date, 
  • hours worked, 
  • hourly rate, and
  • any deductions or increases made during the pay period. 

 Electronic pay stubs are allowed, as long as the employee can print them out for free.  

• Minimum wage:  

• Overtime:  Anything over 40 hours in one week is considered overtime and it must be at least 1.5 times the regular rate of pay.
• Pay dates:  Hourly employees must be paid at least every week or every two weeks.
• Sick Time:  Most employees earn up to 40 hours of sick time.  
• Parental Leave:  If you have six or more employees, you must provide up to 8 weeks of  unpaid parental leave.
• Paid Family and Medical Leave (PFML): The PFML provides temporary income to workers who are expecting a child, have a serious illness, or need to care for a family member who is ill. You’ll pay depending on the number of employees you have. Employer rates start at 0.336% of eligible wages and employees will pay a portion of their wages too. 
• Final paychecks:  You’ll need to give final paychecks no later than the next regular payday.  If there is no regular payday, you have until the first Saturday after they quit.  If a worker is fired or laid off, you must pay them in full on their last work day.
• Workers’ compensation insurance: All businesses operating in Massachusetts must provide workers’ compensation insurance, regardless of the number of employees or hours worked.  There are exceptions for domestic employees and owners of certain businesses. 

You’re on your way to calculating your Massachusetts payroll. You can use Gusto’s Massachusetts Hourly Paycheck Calculator to get started. With just a few clicks, you’ll see how easy it is to accurately calculate your payroll taxes!