Massachusetts Tax Installment Agreements
How to Make Monthly Payments on Your MA Back Taxes
Can't afford to pay your Massachusetts state taxes in full? Luckily, in many cases, the MA DOR will allow you to set up monthly payments. To help you out, this guide provides an overview of tax payment plans in Massachusetts. Then, it explains how to apply and outlines what to expect while making payments on your tax debt.
Overview of MA Tax Payment Plans
If you owe $5,000 or less, you must pay at least $25 per month, and you can take up to 36 months to pay off the total balance. Taxpayers who owe over $5,000 must pay at least $50 per month, and the length of their payment plan varies based on the situation.
These rules apply to both business and personal income taxes. You must set up separate payment plans if you owe both business and personal taxes. You can only roll business and personal taxes into the same payment plan if you're a sole proprietor.
To qualify for a payment plan, you must receive a Notice of Assessment or a Statement of Account from the MA DOR. If you have just received a Notice of Proposed Assessment, you must wait until you receive the assessment before you can apply for a payment plan.
Similarly, if you file a state tax return and can't afford to pay, you cannot apply for the payment plan right away. You must wait until you receive the Notice of Assessment or the Statement of Account.
How to Apply for a Payment Plan on MA Back Taxes
If you owe $5,000 or less, you can apply for a payment plan online. To get started, register for an online account at MassTaxConnect. Then, sign in, navigate to the Collection Notices section, select "More," and click on "Request a Payment Plan." Or apply through the mail by filing Form 433I (Payment Agreement Application).
To set up a payment plan if you owe more than $5,000, you need to contact the MA DOR directly. In addition to speaking with someone from the DOR, you may also need to make a financial disclosure by filing Form 433I.
Alternatively, a MA tax pro can help you set up a payment plan. They know how to navigate the system and can help you get the best plan possible for your budget.
How to Fill Out MA Form 433I (Payment Agreement Application)
MA Form 433I requires information about your assets, debts, income, and expenses. It also allows you to propose your monthly payment. The MA DOR uses this information to decide whether or not to approve your payment plan. If you apply online, you will need to provide very similar information.
At the top of the form, write your proposed payment and if you want to pay weekly, bi-weekly, or monthly. Then, note your name, Social Security Number, contact details, and your spouse's information if applicable. You also must list all of your dependents and household members.
MA Form 433I also requests information about your and your spouse's income, properties, bank accounts, retirement accounts, and vehicles. If you have other assets such as stocks, bonds, life insurance with cash value, RVs, firearms, or artwork, you should also list those.
On page three of Form 433I, you need to list all your monthly income sources, followed by all your monthly expenses. Finally, you need to detail your debt obligations, such as credit cards, IRS debt, student loans, and child support.
To back up the details on your application, the MA DOR requires you to submit the following supporting documents:
- A copy of your last federal income tax return.
- Proof that all missing tax returns have been filed.
- Copies of your and your spouse's three most recent pay stubs.
- Name and account numbers of all bank and credit card accounts.
- The last months of three bank statements — if you use apps such as Venmo or Paypal, you should also include their statements.
- Proof of your housing expenses — include proof of arrears if you are behind on payments.
- Payment proposal letter that explains why you got behind and your plan for repayment.
Self-employed individuals should also include a profit-and-loss statement, their most recent credit card statements, and proof that they've been making estimated quarterly tax payments. If you're setting up a payment plan for a corporation, you should include a certificate of a corporate vote authorizing the responsible person to set up a payment agreement.
Mail Form 433I to this address:
PO Box 7021
Boston, MA 02204
After you submit the form, the MA DOR has the right to request additional supporting documents. You must comply with these requests if you want your payment plan to get approved.
How to Make Payments for MA Tax Installment Agreements
The MA DOR recommends making payments automatically through direct debit. Once the DOR approves your payment plan, sign in to MassTaxConnect to activate your payment plan and set up direct debits. Or you can authorize direct payments through the mail by filing Form EFT (Electronic Funds Authorization Form).
Alternatively, you can mail in a check or money order to make your payments. You cannot pay MA installment agreements with cash, credit cards, or debit cards.
What to Expect When Making Payments on MA Back Taxes
While you're making payments on your back taxes, the MA DOR may still issue tax liens. Liens attach to your property, and they protect the state's interest. They can make it hard to sell assets or take out loans.
Interest and some penalties will continue to accrue on your account while you make payments. If you can take out a loan or use a credit card to pay your Massachusetts back taxes, you may want to consider those options. If the interest rates are lower than the penalties and interest assessed by the state, you will save money in the long run.
The state can also intercept tax refunds when you're making payments. For instance, if you file a return with the MA DOR or the IRS while you're on a payment plan, the MA DOR can seize the refunds and apply them to your balance.
Lien Waiver Agreement for MA Back Taxes
To avoid a lien and make monthly payments, you must be able to pay off the balance within 12 months. In Massachusetts, this is called a Lien Waiver Agreement. It works just like a regular tax payment plan. You simply need to make payments large enough to pay off what you owe in a year. You also have to specifically request this agreement.
Defaulting on Massachusetts Payment Plans
If you miss a payment or don't make the full payment, your payment plan will go into default. The MA DOR will cancel your payment plan. The full balance will be due, and the DOR has the right to seize your assets, garnish your wages, or take other collection actions against you.
Your payment plan can also go into default if you don't file your returns or pay taxes when due. In this situation, you will receive a default notice. Then, to prevent the DOR from canceling your payment plan you must file all the required returns and pay the tax associated with those returns.
Get Help Setting Up a MA Tax Payment Plan
Want help setting up a MA payment plan? Not sure if a payment plan is the right option for you? Then, you need to contact a MA tax pro. These professionals have experience with the MA DOR. They can explain the options to you and help you find the best resolution for your situation.
Dealing with unpaid taxes or unfiled returns can be confusing and stressful. Get help before the MA DOR starts garnishing your wages or seizing your assets. To learn more, use TaxCure to find a MA tax pro today.