Facts: In the course of issuing hundreds of thousands of tax refunds per year, situations occasionally a rise where the Department issues a refund to a taxpayer in excess of the proper amount or where the taxpayer is not entitled any refund amount. When this occurs, the refund is called an erroneous refund. This Directive explains the steps that the Department will follow to recover an erroneous refund from a taxpayer.

Issue 1: How does the Department notify a taxpayer that an erroneous refund has been made?

Directive 1: The Department will send the taxpayer a letter instructing the taxpayer to repay the erroneous refund within 30 days from the date on the Department's letter. If the taxpayer fails to repay the erroneous refund within 30 days, the Department will issue a notice billing the taxpayer for the amount of the erroneous refund and accrued interest, as discussed below.

Issue 2: When does the Department charge interest on an erroneous refund?

Directive 2: No interest will be charged on an erroneous refund if the taxpayer repays the amount to the Department within thirty days from the date on the Department's letter. However, if the amount is not repaid (either postmarked by U.S. mail or its equivalent, or received by the Department) on or before the thirtieth day, interest will be charged on and after the thirty-first day to the date of repayment. Interest will accrue at the rate established for underpayments overpayments pursuant to G.L. c. 62C, § 32.

/s/Mitchell Adams
Mitchell Adams
Commissioner of Revenue

MA:HMP:ecl

April 26, 1994

DOR-D 94-7