- Interest Paid by DOR on Refunds of Overpayments
- Refunds - Limitations on the Amount of a Refund Resulting from an Abatement
- Due Dates Extended by DOR
- Statute of Limitations - Overview
- Table for Interest Rate on Overpayments 1993-Current (new TIR quarterly - available on TIR Table of Contents)
- Table for Interest Rates on Overpayments for 1980-1992
- Massachusetts References
Interest on an overpayment of tax is calculated at the rate of the federal short-term rate plus additional percentage points as established by statute. DOR has a specified period of time in which it may process returns without payment of interest on refunds of overpayment; i.e. payment of interest runs except from the date of overpayment or the date of filing of the return, whichever is later, to a date (to be determined by the commissioner) preceding the date of the refund check but not more than 30 days.
For returns filed on or after January 1, 2006, the period of time in which DOR may process returns without payment of interest on refunds of overpayment is 90 days.
The calculation of interest is as follows:
- No interest accrues in favor of the taxpayer if DOR refunds an overpayment within 90 days of the statutory due date or the actual filing date (whichever is later);
- If a taxpayer files a return on or before the statutory due date, determined without regard to any extension of time for filing, interest is paid on the overpayment of any tax not refunded within 90 days of the due date for filing. A return filed before the due date is considered as being filed on the due date. Interest is paid on the overpayment from the date the return is filed or the statutory due date, whichever is later;
- If a taxpayer files a return after the statutory due date, determined without regard to any extension of time for filing, interest is paid on the overpayment of any tax not refunded within 90 days after a return is filed. Interest is paid on the overpayment from the date the return is filed.
Correction of Return Based on Third Party Information Resulting in Overpayment:
For overpayments approved on or after July 1, 2003, no interest accrues on those returns that are considered not filed since they require correction of the tax liability by DOR based on information from either third party sources or DOR records.
A taxpayer's return is not considered "filed" until such return is filed on an approved form and contains: (i) the taxpayer's name, address, and identifying number and the required signature, and (ii) sufficient required information to permit the mathematical verification of the tax liability shown on the return as compared with the tax liability shown as a result of any corrections made to the return by the commissioner under Section 26(c) using any records regarding that liability or the payment thereof which are maintained by the commissioner or which are furnished to the commissioner by any third-party.
Example: DOR receives 3rd party information indicating the taxpayer overstated lottery winnings. Overpayment issued will not include any interest since taxpayer's return did not agree with third party source information.
Interest Paid on Abatements is Calculated from Date of Receipt of a Fully Substantiated Application:
For abatement applications received on or after July 1, 2003, interest is calculated from the date of receipt of a fully substantiated abatement application to the date of the refund.
For calculating interest on an overpayment, the date of overpayment is the later of 1) the date the commissioner has received a properly completed return and full payment of the tax due thereon; or 2) the date the commissioner has received a completed and substantiated written application for abatement, including any supplemental information requested from the taxpayer in support of such application.
Example 1: Taxpayer files an unsubstantiated abatement application on August 11, 2006. In response to a DOR request for additional information, taxpayer submits all documentation and DOR receives it on September 28, 2006. DOR approves the application on October 10, 2006. Interest on the overpayment is from September 28, 2006, the date of receipt of a fully substantiated application.
Example 2: Taxpayer files an unsubstantiated abatement application on May 3, 2006. In response to a DOR request for additional information, taxpayer submits all documentation and DOR receives it on August 15, 2006. DOR approves the application on August 30, 2006. Interest on the overpayment is calculated based on the old rules. See below.
Interest Rate on Overpayments is Federal Short-Term Rate Plus Two Percentage Points:
Effective July 1, 2003, the interest rate paid by DOR on overpayments of tax is the Federal short-term rate determined under Section 6621(b) of the Internal Revenue Code, as amended and in effect for the taxable year ("Federal short-term rate") plus two percentage points, simple interest.
Example: Taxpayer files a 2005 tax return on extension on October 15, 2006 showing overpayment of $500. If the overpayment is not refunded within the specified time after the return is filed, where it is filed after the last day for filing the return, then interest will accrue on the overpayment at the reduced rate.
Refunds - Limitations on the Amount of a Refund Resulting from an Abatement
Refunds Filed on or After July 1, 2011:
Chapter 68 of the Acts of 2011 made statutory changes applicable to requests for refund and applications for abatement filed on or after July 1, 2011; these amendments, however, do not apply with respect to tax periods where the statute of limitations for refund or abatement, as applicable, had expired prior to July 1, 2011.
Requests for refunds:
- no return is required: request can be made within 2 years from the time the tax was paid;
- required return was timely filed: request can be made within the period permitted for abatement for that return;
- required return has not been timely: request can be made by filing the overdue return within 3 years from the due date of the return, taking into account any extension of time for filing the return filed, within 2 years of the date that the tax was paid, whichever is later.
Limitations on the Amount of a Refund Resulting from an Abatement:
Where a refund or credit results from an abatement, the amount of such refund or credit is limited to the amount paid, or deemed paid pursuant to section 79, within 3 years of the date that the application for abatement is filed, taking into account any extension of time for filing the return.
If the taxpayer has filed a tax return and has filed an application for abatement within the next three years, the refund or credit amount is measured by and limited to the tax paid within three years before the taxpayer filed the application for abatement, plus any extension of time the taxpayer had for filing the tax return. Tax returns filed or tax payments made before the prescribed due date (determined without regard to any extension of time to file the return) are deemed filed or paid on the prescribed due date.
If the three-year period for filing an application for abatement has expired, and an application for abatement is filed within two years of an assessment, the Commissioner may grant an abatement up to the amount of that assessment. If the time for filing an abatement application has otherwise expired and an application for abatement is filed within one year of a payment of a portion of an assessment, the Commissioner may grant an abatement up to the amount of the payment.
Due Dates Extended by DOR under Special Circumstances:
To the extent that DOR has changed a due date for a particular group of taxpayers based on special circumstances, these limitations will run from the new due date of the return as announced by the Department. For example, Storms and Flooding, Military Personnel Serving in a Combat Zone, etc.
- M.G.L. Chapter 62C, Sections 26(c); 32; 40 as amended by St. 2003, c. 26, ss. 196 - 198; 40(b) as amended by St. 2002, c. 96, ss. 3, 10 and c. 364, s. 14
- M.G.L. Chapter 62, Section 36, as amended by St. 2003, c. 143, s. 2A
- 830 CMR 62C.33.1(7)(b): Interest, Penalties, and Application of Payments
- TIR 11-6: Tax Changes Contained in the Fiscal Year 2012 Budget
- TIR 04-3: New Limitations on Payment of Refunds Claimed on Late Filed Returns
- TIR 03-18: Changes to G.L. c. 62C Contained in the Fiscal Year 2004 Budget