Generally, applications for refunds filed more than 3 years from the due date of the return, without regard to extensions, or 2 years from the date the tax was paid, whichever is later, will be denied. If the refund is denied pursuant to these amended statutory provisions, there will be no credit applied to other tax periods either before or after the period for which the refund is claimed and no offsets for other liabilities of the taxpayer, including child support. A taxpayer may not voluntarily contribute a denied refund.
Where no tax return is required to be filed for a particular tax type, e.g., deeds excise under G.L. c. 64D or gasoline excise under G.L. c. 64A, applications for refunds filed later than 2 years from the date the tax was paid will be denied. For purposes of TIR 04-3, "no tax return is required to be filed" means that the tax is generally paid and assessed without the filing of a return, but does not apply to situations where a taxpayer must file a return to claim excess withholding or prove entitlement to a credit, even though he or she may be below a threshold legally requiring the filing of a return. ( See example 1, below.)
To the extent that the Department has changed a due date for a particular group of taxpayers based on special circumstances, the new limitations discussed in TIR 04-3 will run from the new due date of the return as announced by the Department. See, for example, TIRs 04-5 (Military Personnel in a Combat Zone), 03-14 (Blackout), 03-8 (Persian Gulf), 02-4 (Afghanistan), and 01-16 (9/11 attacks).
The new limitations in G.L. c. 62C, § 36, as amended, apply to applications for refunds. ( See examples 1, 2 and 4, below.) A taxpayer will receive full credit for all payments and withholding against any subsequent audit assessment for the same period. ( See example 3, below.) The new limitations on refunds do not affect the statute of limitations for filing an abatement under G.L. c. 62C, § 37. However, any refund resulting from the abatement will be subject to the new limitations. ( See example 5, below.) The new limitations do not apply to applications for refunds following a federal change pursuant to G.L. c. 62C, § 30. The new limitations also do not apply to refunds of motor fuel tax under IFTA.
Application of the New Limitations - Examples:
- Taxpayer A files his Massachusetts personal income tax return after 3 years from the due date. His income level was below the filing threshold for that tax year, so he was not required to file a personal income tax return. On his late filed return he asks for a refund of $100 in withholding. The Department will pay no refund.
- Taxpayer B files her personal income tax return after 3 years from the due date. Her self assessed personal income tax liability is $500. Taxpayer B's withholding and timely estimated payments total $600. The Department will pay no refund.
- Same facts as #2, but Taxpayer B is subsequently contacted by the Audit Division and assessed an additional personal income tax liability for the period of $50. Taxpayer B will receive full credit for her withholding and timely estimated payments of $600 against the total assessment for that period, but will not receive a refund.
- Taxpayer C files his personal income tax return after three years from the due date. He calculates his tax, interest and penalty at $100 and pays that amount with the return. In processing, the Department finds a math error and determines that the proper amount of tax, interest and penalty is $50. The remaining $50 will be refunded to Taxpayer C. The new limitation does not apply because the $100 payment is within the two year limitation in G.L. c. 62C, § 36, as amended.
- Taxpayer D files a corporate excise return after 3 years from the due date, self-assesses a tax of $2,000. After taking into account timely estimated payments, there is a balance due of tax, interest and penalty totaling $1,000 that is paid with the return. Taxpayer D subsequently discovers that certain deductions were not claimed that would have reduced the corporate excise and files an abatement application six months later. The Department determines that the proper amount of tax, interest and penalty for the period was $500. Although the abatement is approved, the taxpayer's refund is limited to $1,000, the payment made within the two years prior to filing the abatement application.
Commissioner of Revenue
April 8, 2004