Massachusetts: Tax Resolution and Collection Overview
Collections Process and Payment Options for Massachusetts Back Taxes
The Massachusetts Department of Revenue (DOR) is the state agency responsible for tax collection and administration in Massachusetts. The Department collects various taxes, including personal and corporate income, sales, and property taxes. The Department also administers tax incentives and abatements and supports local governments in administering their tax programs.
If you owe MA back taxes, you must work with the DOR to make arrangements for your tax debt. The sooner you make arrangements, the better — this agency has broad powers to enforce various collection actions. To help you out, this guide provides an overview of the tax resolution options in Massachusetts, followed by an explanation of the MA DOR tax debt collection process.
Tax Resolution Options for Massachusetts Back Taxes
The MA DOR has a variety of programs to help you pay your back taxes. If you owe MA state taxes, here are some potential resolution options. When you contact a MA tax pro, they can help you find the best resolution option for your situation.
The MA DOR offers payment plans for people who are behind. You must pay at least $25 monthly, but if you owe over $5,000, your minimum monthly payment is $50.Taxpayers who owe $5,000 or less can take up to 36 months to pay. If you owe more, there is no time limit.
An offer in compromise allows you to pay off your MA tax bill for less than you owe. To qualify, you must meet strict application criteria and provide detailed information about your financial situation. The MA DOR only accepts offers if they are $5,000 or more. If accepted, you can pay off your offer in a lump sum or in 24 monthly payments.
Hardship is when you struggle to pay for basic essentials such as food and shelter. You may also be able to get temporary hardship status if you are on unemployment or receiving government benefits.
If you qualify for hardship status, the MA DOR will pause collection actions on your account. The agency may still file tax liens against you, but it will remove levies and wage garnishments. It will also restore your driver and professional licenses and remove your name from the public MA tax debt list. You still must file and pay all returns. Interest and penalties will continue to accrue on your account.
Hardship status is not permanent. The MA DOR will periodically revisit your situation to see if you can resume payments on your tax debt. You can apply online at MassTaxConnect, by filing Form M-911 (Taxpayer's Application for Relief Due to Hardship) or by calling the MA Hardship Team at 617-867-6400.
Tax and Penalty Abatement in Massachusetts
Abatement means to reduce something. In Massachusetts, you can apply for abatement of tax and penalties. The MA DOR cannot abate interest, but if taxes or penalties are removed, the interest corresponding to those amounts will also be adjusted.
If you disagree with a penalty, a responsible person determination, or the results of an audit, you can request abatement. To apply for penalty waivers or tax abatement, go to MassTaxConnect or mail Form ABT (Application for Abatement).
You can appeal if the MA DOR denies your request for tax or penalty abatement. You must appeal within 60 days of the Notice of Abatement Determination or within six months of the date of denial. Ideally, you should appeal as soon as possible to ensure you don't miss the deadline.
If you made a mistake on your tax return, you should not use the abatement program to request relief. Instead, you should amend the return. Similarly, If you want abatement for tax incurred by your spouse, you should not use the MA abatement program. You should request innocent spouse relief. There is more information on these programs below.
Applying for Abatement by Amending a Return
If you amend your MA tax return and the changes reduce the tax you owe, the DOR will treat this as a request for abatement. By amending your return, you automatically consent to let the DOR take more than six months to review your request.
If you don't want to give the DOR this extra time, you must contact the agency in writing to withdraw your consent. Then, if the DOR doesn't process your request within six months, you will receive an automatic denial. The denial will take place the later of the day you withdraw consent or six months after you filed the amended return.
Innocent Spouse Relief in Massachusetts
Normally, when you file a joint tax return with your spouse, you are both liable for the tax owed. However, if your spouse lied on the return and the DOR sends an assessment for the unpaid tax, you may qualify for innocent spouse relief. File Form 84 (Application for Relief From Joint Income Tax Liability) to apply.
The MA DOR will consider if you are divorced and whether or not you knew (or should have known) about the understated tax. When you apply for innocent spouse relief, the MA DOR will alert the other spouse. The other spouse must complete Form M-12508 (Massachusetts Questionnaire for Non-Requesting Spouse). This form asks detailed questions about both parties' involvement in preparing the tax return.
If someone owes child support, unemployment, college expenses, or IRS back taxes, the MA DOR may seize their refund to cover these bills. In some cases, the MA DOR may end up seizing a refund from a jointly filed tax return to cover a bill due solely to one spouse. In that situation, you can apply for a refund of your portion of the tax refund. Simply file Form M-8379: (Nondebtor Spouse Claim and Allocation for Refund Due).
Appeals Process for MA Tax Disputes
In Massachusetts, you can appeal if you disagree with the tax and penalties owed. Previously, this was called a MA tax dispute. In some cases, it's called an abatement. The rules vary depending on whether the tax is pre or post-assessment.
To appeal a proposed assessment from an audit or to request a settlement based on legal issues, file Form DR-1 (Office of Appeals Form). If you receive a Notice of Intent to Assess, you have 30 days to request a pre-assessment conference to meet with an appeals officer.
If you request a settlement, you should also file Form B-37 (Special Consent Extending the Time for Assessment of Taxes). Through the appeals process, the DOR usually only accepts settlements in situations where the DOR would probably lose if the issue went to court. If you want a settlement due to financial hardship or inability to pay, you shouldn't appeal. You should use the offer in compromise (OIC) program.
To dispute tax or penalties that have already been billed, you need to file Form ABT (Application for Abatement) to dispute tax or penalties that have already been billed. This is called a post-assessment appeal. To request a settlement of assessed taxes, you also need to file Form DR-1.
You can also contact the MA Office of Appeals for penalty disputes or to appeal manufacturing classifications, responsible person determinations, or certain tax credits.
There is a time limit on appealing MA taxes. Typically, you must appeal by the latest of the following dates:
- Three years after the return was filed.
- Two years after the tax was assessed.
- One year after the tax was paid.
For instance, if a tax was assessed 18 months ago and you paid the tax yesterday, you must appeal within a year from yesterday. If you filed a return two years ago and you paid the tax one year ago, you still have a year to submit your appeal.
While the appeal is being processed, the DOR will pause most collection actions. Your account will not incur late penalties for the late payment of an audit assessment, but you will face other late penalties. Interest will continue to accrue on your account.
If you're in a payment agreement, the agreement will automatically end when you request an appeal, but you can continue to make payments if you like. If your appeal is approved, you can get a refund of your overpayments. If denied, you will need to set up a new payment plan.
You can request a hearing if the DOR doesn't agree with your appeal. Massachusetts appeal hearings are in-person in Boston, or over the phone. The appeals process can be very complicated. For best results, you should work with a tax professional.
Massachusetts Tax Amnesty Programs
An amnesty program allows you to file unfiled returns and catch up on back taxes without incurring penalties. You can't apply if fraud is involved. These programs are very rare. Massachusetts last offered amnesty programs in 2016 and 2002. At the time of writing, no Massachusetts tax amnesty programs are available.
Massachusetts Department of Revenue Collection Actions
The MA DOR uses a range of collection actions to collect unpaid back taxes. The state can seize your assets, garnish your wages, take the funds in your bank accounts, or even take away your driver's license. Here's an overview of what can happen if you don't pay your MA taxes.
Massachusetts Collection Notices
The MA DOR sends out a variety of collection notices. You will receive these notices if you have unfiled returns, unpaid taxes due to an assessment, or if you file but don't pay.
- Notice of Assessment — This notice explains your tax due plus penalties and interest. It also outlines your taxpayer rights and appeal options. If you don't appeal or make payment arrangements within 30 days, the MA DOR will continue collection actions on your account.
- Statement of Account — A follow-up to the last notice, the Statement of Account (SOA) outlines all of the tax, penalties, and interest you owe to the DOR. If you don't respond, the DOR has the right to enforce collection actions as long as 60 days have passed since the assessment.
- Final Notice or Notice of Collections — Your account has been transferred to the collections department. A collector will try to reach you.
- Notice of Levy — This notice means that DOR plans to seize (levy) your property. It stays in effect for 60 days until you pay the tax bill in full or get the levy released.
- Notice of Intent to Disclose Tax Liability — If you owe $25,000 or more and haven't made a payment for at least six months, the MA DOR can publish your name. This notice is a notification that your name is going on the public tax debtor list unless you pay the tax within 90 days.
- Notice of Intent to Suspend License — You will receive this notice if the DOR plans to suspend your driver or professional license. Usually, the DOR uses this as a last resort for people who owe a substantial amount.
You may also receive other notices from the MA DOR. Don't ignore these notices. Get help with your unpaid MA taxes as soon as possible. A tax professional can deal with the DOR for you and help you apply for tax resolution programs.
Tax Liens for Unpaid Massachusetts Taxes
The DOR can issue a tax lien if you have unpaid MA taxes. The lien attaches to all of your real and personal property. It can prevent you from selling or transferring your property, and because it's a public record, it can make it hard to get loans.
To avoid a tax lien, you should pay the tax in full. Alternatively, if you can pay the tax in monthly payments over a 12-month period, you can enter into a Lien Waiver Agreement. If you are on a longer payment plan, the MA DOR will issue a tax lien until the balance is paid in full.
Tax Levies in Massachusetts
If you have unpaid taxes, the MA DOR can seize your bank accounts, garnish your wages, and seize your business and personal assets. The DOR can also take tax refunds, gambling and lottery winnings, and other government payments.
MA DOR Tax Penalties
If you don't file your MA tax returns or if you have unpaid taxes, the DOR can assess a range of penalties. Here are the most common penalties for individual taxpayers in MA:
- Failure-to-file penalty — 1% of the unpaid tax per month, up to 25%.
- Failure-to-file after notice — Double the tax due.
- Failure-to-pay penalty — 1% of the unpaid tax per month, up to 25%.
- Penalty for filing a fraudulent return — Double the tax due.
- Failure-to-pay deficiency assessment — 1% of the unpaid tax per month, up to 25%.
- Negligence or substantial underpayment — 20% of underpaid tax.
- Failure to report federal change — 10% of the additional tax.
- Penalty for bad checks or failed electronic transfers — the greater of $30 or 2% of the payment amount.
There are other fees for not filing, paying, or depositing business taxes or tax reports. If you incur a first-time penalty, the MA DOR may waive it if you have reasonable cause. You must contact the DOR to request abatement.
The state charges interest on unpaid penalties and unpaid taxes. The interest rate adjusts quarterly. It is the federal short-term rate plus four points. It compounds daily.
Other Enforcements for Unpaid Massachusetts Taxes
If you owe a significant amount of back taxes, the MA DOR can suspend or revoke your driver's license and vehicle registration. The DOR can also take away professional licenses or certificates. To keep your license or get it reinstated, you must pay the tax in full, set up a payment agreement, or apply for hardship status.
Public Disclosure List of Delinquent Taxpayers
The MA DOR publishes a Public Disclosure list of businesses and individuals with unpaid taxes. The top 10 offenders in each category are posted directly on the DOR's website. All others are in a searchable database. You will be added to the list if you owe over $25,000 and are at least six months late.
Statute of Limitations on Massachusetts Tax Debt
Normally, the statute of limitations for tax assessments is three years from the later of the date the return was due or filed. However, if there was a substantial omission of income, the statute of limitations is six years. There is no time limit if you submit a false or fraudulent return or if you don't file.
The statute of limitations on tax debt collections is ten years from the assessment. Generally, that means that the MA DOR cannot forcibly collect taxes that are more than ten years old. However, if the MA DOR issues a tax lien, it can continue to exist beyond the 10-year deadline. This gives the DOR the right to seize the property attached to the lien, even if the 10-year collection statute has expired.
In many cases, the collection statute of limitations gets paused. For instance, if you apply for an offer in compromise, the time clock on the statute will be paused. It will restart when the DOR finishes processing your application. This is just one example. There are several other situations where the MA DOR can extend the statute.
Tax Evasion in Massachusetts
If you commit tax evasion in Massachusetts, you can face felony charges. If convicted, you can go to prison for up to five years. You may also incur a criminal penalty of up to $100,000 for individuals and up to $500,000 for corporations. You will also continue to owe the tax, penalty, and interest.
Get Help With Massachusetts Back Taxes
If you have unpaid taxes or unfiled returns in Massachusetts, you should contact a tax professional with experience in this state. Tax collection processes and resolution options vary a lot from state to state. For the best outcome, you need to work with someone experienced in your state. Get help now — contact a MA tax pro today.
When you reach out to a MA tax pro, they'll start with a free consultation. You get to explain your tax problem, and they give you an idea of the options in your situation. Then, if you decide to move forward, the tax pro will help you take care of unfiled returns, request penalty abatement, set up payment plans, or make other arrangements on your MA tax debt.