Massachusetts Taxing Information
The Massachusetts Department of Revenue Collections Bureau is responsible for collecting delinquent taxes owed to the Commonwealth of Massachusetts. To make sure that everyone is following the same rules, DOR frequently audits taxpayers and pursues people and businesses that fail to file their tax returns. DOR has the legal authority to use a variety of collection means to collect tax debts; taxpayers who have willfully falsified their tax situations also may face criminal prosecution.
It is important to respond to all correspondence or telephone calls from the Collections Bureau or other bureaus within the Department of Revenue. Ignoring a tax bill and ensuing correspondence can result in DOR recording a notice of tax lien, issuing a notice of levy, employing collections agencies and/or seizing assets.
Interest for Past Due Taxes
Any overdue tax liability is subject to interest on the balance due. The Massachusetts interest rate for underpayments of state taxes is equal to the federal short-term rate (which can change quarterly) plus four percentage points, compounded daily. Under Massachusetts state tax code, the Department of Revenue cannot waive or decrease interest owed unless the underlying tax liability itself is abated. However, a request for waiver of a penalty can be considered if you show that failure to file a return or pay a tax in a timely manner was due to reasonable cause.
Notice of Assessment
When the Commonwealth of Massachusetts is attempting to collect a tax that is due, a bill in the form of a Notice of Assessment, which states the date of the assessment, the amount of tax assessed, any accrued penalties, as well as 30 days of interest will be sent to the taxpayer. If the amount stated on the Notice of Assessment is not paid, a Demand for Payment will be issued.
Offer in Final Settlement
One option that is available to taxpayers in certain rare circumstances where there is serious doubt as to whether the entire liability can ever be collected is called an Offer in Final Settlement which allows the Department of Revenue to accept a lesser amount than the tax liability owed.
In Massachusetts, when a taxpayer files their taxes on time but does not have sufficient funds or other assets to settle their debt, the Department of Revenue may grant additional time to pay through a short-term (generally 24 months or less) payment installment plan. DOR may refuse a payment plan if the taxpayer has a history of delinquency, has the resources to settle the liability or if the agreement jeopardizes the ultimate collection of the tax due. Until the debt has been paid in full, any liens will remain in effect.
Penalties for Late Returns or Late Payments
There may also be penalties that are automatically charged for late returns or payments. A late return will usually result in a late file penalty fee of 1 percent per month (or fraction thereof) on the unpaid tax. In addition, interest may continue to accrue on unpaid interest and penalty fees as well as on the tax due. Failure to pay the amount reported on a return, and failure to pay a deficiency assessment within 30 days of a Notice of Assessment both create a penalty of 1 percent per month (or fraction thereof) on the unpaid liability. Both late file and late pay penalties are capped at 25 percent of the unpaid tax.
A taxpayer may obtain representation any point in their dealings with the Massachusetts Department of Revenue. To do so, the taxpayer must give Power of Attorney by submitting a completed Form M-2848. A Power of Attorney will allow DOR to discuss your case with the person you designate.
Seizure of Assets
In some cases, usually after nothing else succeeds, the Department will be required to seize assets such as cars, businesses or other property. Unless there is concern that a taxpayer will hide or transfer assets to avoid seizure, DOR will usually send a certified letter warning of the impending seizure if a settlement is not reached within 10 days.