Massachusetts has joined other states which have attempted to reduce the gap between taxes due and taxes collected by requiring most partnerships, Subchapter S corporations, and multi-member limited liability companies which are classified as partnerships under federal income tax laws (“Pass-through Entities”) to withhold tax on the income taxable to their members. The new Pass-through Entity withholding requirements are effective for tax years beginning after 2008 and will require that almost all Pass-through Entities which maintain an office in or do business in Massachusetts take some action. Failure to comply may subject a Pass-through Entity to penalties and, in the case of willful failure, fines of up to $100,000 and imprisonment. Continue reading →