619.1. In General.
619.2. Reporting Federal Changes in Income Tax.
619.3. Reporting Federal Changes in Corporate Excise.
619.4. Reporting Federal Changes in Taxable Estate.
619.5. Additional Assessment by DOR.
619.6. Refunds and Abatements.
619.8. Penalty for Failure to Report and Pay.
619.1. In General
If the Internal Revenue Service (IRS), through audit, acceptance of an amended return, or otherwise, makes a final determination that a taxpayer's federal taxable income, federal tax credits, or federal taxable estate differs from what was originally reported, the taxpayer must inform DOR of that change. A federal determination is final if there is no right of administrative or judicial appeal. See 830 CMR 62C.30.1(2) and TIR 99-14 for more information on final determinations.
The requirement to report federal change applies to income, corporate and estate taxpayers as described below.
Similarly, if DOR adjusts a Massachusetts return in such a way as to increase federal taxable income, the taxpayer generally must inform the IRS. Contact the IRS for more information.
NOTE: The IRS and DOR routinely exchange audit information.
619.2. Reporting Federal Changes in Income Tax
If the IRS changes the federal taxable income or federal tax credits of any individual, partnership, trust or other entity that is subject to the income tax or that has partners, members, or shareholders subject to the income tax, the taxpayer must report the change and pay any additional tax due with interest within one year from the date of the final federal determination. Changes in federal taxable income or federal tax credits are reported to Massachusetts on Form CA-6, Application for Abatement - Amended Return. A copy of the IRS Form CP-2000 or the IRS Revenue Agent's Report and any other relevant documentation must be attached.
619.3. Reporting Federal Changes in Corporate Excise
If the IRS changes the federal taxable income or federal tax credits of any corporation subject to the Massachusetts corporate excise, the corporation must report that change by filing Form CA-6, Application for Abatement - Amended Return, and pay any additional tax due with interest within three months of the final federal determination. This form must be accompanied by a copy of the IRS Revenue Agent's Report and any other relevant documentation. The principal reporting corporation for a combined filing group must report any final determination with sufficient detail to attribute and allocate the federal adjustments.
619.4. Reporting Federal Changes in Taxable Estate
Federal estate tax changes must be reported within two months of a final federal determination (for example, the federal closing letter, agreed federal audit changes, agreed IRS Appeals Office changes, or Tax Court decision). An amended Form M-706 must be used to report any change. The Form M-706 is an "amended" return when the box in the upper right corner of page 1 of the return is checked. For further information regarding what constitutes a federal change, see TIR 99-14, Expanded Definition of "Federal Change." Attach a copy of the final federal determination and pay any additional Massachusetts estate tax, interest and penalty, if any, due as a result of the change.
If a refund is indicated as a result of the federal estate tax change, an Application for Abatement - Amended Return, Form CA-6, must be submitted in addition to an amended M-706.
For deaths occurring on or after January 1, 2003, the schedules of the July 1999 revision of the United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706, that are changed by the final federal determination must be amended in addition to the Amended M-706. The amended schedules must be submitted with an amended page 1, which contains the tax computation, and an amended page 3, which contains the recapitulation, of the July 1999 revision. Any federal change must relate to an entry that was reported on the July 1999 revision of the federal Form 706.
619.5. Additional Assessment by DOR
If DOR determines from a taxpayer's federal change report that the correct Massachusetts tax was not fully assessed, it will assess the additional tax with interest. DOR may assess the additional tax within one year of receipt of the taxpayer's report, regardless of the assessment limitations of G.L. c. 62C, § 26. If the taxpayer does not report the change to DOR, DOR will receive the information from the IRS and will have two years from receipt of the IRS report in which to assess the additional tax, regardless of the assessment limitations of G.L. c. 62C, § 26. The taxpayer will also be subject to a penalty as described below in 619.8. An assessment with respect to federal change is limited to changes in a taxpayer's tax liability resulting from the change in federal taxable income, federal tax credits or federal taxable estate.
619.6. Refunds and Abatements
If a taxpayer believes that as a result of a change in federal taxable income or federal taxable estate a lesser tax was due the Commonwealth than was previously assessed, the taxpayer may request an abatement under G.L. c. 62C, § 30 within one year of the final federal determination. A taxpayer requests the refund on a Form CA-6, Application for Abatement – Amended Return. Abatements under G.L. c. 62C, § 30, the federal change statute, are limited to items changed in the federal determination.
Alternatively, the taxpayer may seek an abatement under G.L. c. 62C, § 37, the general abatement statute, within the limits established under that statute. Under the general abatement remedy of G.L. c. 62C, § 37 and 830 CMR 62C.37.1, if DOR has assessed an additional tax as a result of a taxpayer's report of federal change, the taxpayer may dispute the assessment by filing an application for abatement within two years of the date of assessment, or within one year of the date of payment.
See AP 627, Applications for Abatement/Amended Returns, for more information on abatements. See TIR 99-18 regarding waiver of G.L. c. 62C, § 33(c) late‑pay penalties and suspension of involuntary collection activities under G.L. c. 62C, § 32(e) when the taxpayer disputes the assessment (or any portion thereof) administratively within DOR or with the Appellate Tax Board or Probate Court. See AP 627, sections 1 and 8, for a discussion of the time limit for filing a completed abatement application and the supporting documents needed to substantiate an abatement.
A taxpayer that owes additional tax as a result of a federal change may request that the additional tax be offset, or reduced, based on issues for the same tax type and tax year that are unrelated to the federal change. The taxpayer should attach an application justifying the offset to the report of federal change. The Commissioner will determine the taxpayer’s balance due, taking the taxpayer’s offset request into consideration.
If a taxpayer has requested an abatement as a result of a federal change, the Commissioner may offset the amount of abatement requested with any additional tax due, whether or not the additional tax is based on issues related to the change.
Offsets may reduce the assessment or abatement, as the case may be, to zero, but not below zero.
619.8. Penalty for Failure to Report and Pay
Effective July 1, 2010, failure to report a federal change and to pay any additional tax within the time limits described above will result in a penalty of 10% of the additional tax due. See TIR 10-11.
For general information on federal changes, call the Massachusetts DOR Customer Service Bureau, (617) 887-MDOR or toll-free within Massachusetts at 1 (800) 392-6089. For specific information on changes in federal taxable income or federal tax credits, contact the Bureau of Desk Audit, Federal Change Unit, P.O. Box 7020, Boston, MA 02204, (617) 887-6900. For more information on federal estate tax changes, contact Massachusetts DOR, Estate Tax Unit, P.O. Box 7023, Boston, MA 02204, or call the Customer Service Bureau estate tax information line at (617) 887-MDOR or toll-free within Massachusetts at 1 (800) 392-6089.
G.L. c. 62C, §§ 26, 30, 32(e), 33(c), 37
830 CMR 62C.30.1(2)
830 CMR 62C.37.1
AP 627, Applications for Abatement
Form CA-6, Application for Abatement – Amended Return
Form M-706, Massachusetts Estate Tax Return
Form M-706NR, Massachusetts Nonresident Estate Tax Return and Domicile Affidavit
Form 706 (Federal), United States Estate (and Generation-Skipping Transfer) Tax Return (Rev. July 1999)
Form CP-2000 (Federal)
Revenue Agent’s Report (Federal)