Abatements and Amended Returns

When to File Application – Prior to July 1, 2011

To Report a Decrease in Tax and/or Penalty:
Massachusetts required that a  Form CA-6 Application for Abatement/Amended Return pdf format of CA-6.pdf be received by DOR or be postmarked by the United States mail within the time limits indicated below, whichever was later:

  • Within Three Years from the Last Day for Filing the Return:
    Due date was determined without regard to any extension of time to file. Any amount of tax reflected on the original return was open for abatement.

    For example, if a taxpayer filed a 2005 Form 1 and paid the tax due by the original due date of April 15, 2006, and there was no additional assessment made with respect to the return as originally filed, the last day to submit a Form CA-6 is April 15, 2009, three years from the date the return was due. If, pursuant to a valid extension, the taxpayer had filed a 2005 return on or by October 15, 2006, an abatement could still only be requested through April 15, 2009. The six-month extension to file the original return was disregarded in determining the abatement time frame;
  • Within Two Years from the Date of Notice that the Tax Was Assessed or Deemed to be Assessed:
    If the above three-year rule had passed, only the amount of tax assessed or deemed to be assessed was open for abatement.

    For example, if after filing a 2003 Form 355, the corporation received a DOR Notice of Assessment dated October 1, 2005 for additional tax. The last day it could have submitted a Form CA-6 to abate the additional tax was October 1, 2007, two years from the Notice of Assessment dated October 1, 2005;

    Note: For all open tax periods, the two-year statute of limitations period began to run from that date printed on the Notice of Assessment form as "Notice Date." The date which appeared in the Notice of Assessment column heading "Assessment Date" was no longer the date from which the two-year statute began to run, but was considered the date upon which the tax was actually assessed for all other purposes.
  • Within One Year from the Date the Tax was Paid:
    If both the three- and two-year rule had elapsed, the abatement applied for was limited to the amount paid within one (1) year of filing the abatement application.

    For example, on December 15, 2005 the corporation paid the additional DOR assessment dated October 1, 2004. The last day it may submit a Form CA-6 to abate the tax paid was December 15, 2006, one year from the date of payment of the additional assessment.

Assessment of Interest

Interest Paid by DOR on Refunds of Overpayments of Tax on Original Returns - Prior to July 1, 2003:

  • The interest rate paid by DOR on overpayments of tax was 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 four percentage points, compounded daily;
  • Interest accrued on tax returns that required correction of the tax liability by DOR based on information from either third party sources or DOR records;
  • Interest paid on abatements was calculated from the later of 1) the due date of the applicable return without regard to extensions, 2) the date of receipt of the overpayment, or 3) the date of filing of the return.

Table for Interest Rates on Underpayments for 1980-1992

1/1/80 to 6/30/808%
7/1/80 to 1/31/8212%
2/1/82 to 12/31/8220%
1/1/83 to 6/30/8316%
7/1/83 to 12/31/9218%

Health Insurance, Penalty for Failure to Purchase

2007 Penalty
For taxable year 2007, the penalty for failing to obtain affordable coverage by December 31, 2007 was the loss of the personal exemption.


Late File, Late Pay Penalties 

Prior to July 1, 2008:

  • Late Pay Penalties on Amount Shown as Tax on the Return - 33(b):
    If any amount of tax is not paid to DOR on or before the date prescribed for payment of such tax, determined with regard to any extension of time for payment, there shall be added to the amount shown as tax on the return a penalty of one-half of one percent of the amount of such tax for each month or fraction thereof during which such failure continues not to exceed 25% percent.
  • Late Pay Penalties on Amount Required to Be Shown as Tax on the Return - 33(c):
    If any amount of tax required to be shown on a return is not shown, including an assessment made per chapter 62C, and such tax is not paid within thirty days following the date of the notice of the tax due, there shall be added to the amount of tax stated in such notice a penalty of one-half of one percent of the amount of such tax for each month or fraction thereof during which such failure continues not to exceed 25% percent.

Federal Changes

Prior to July 1, 2010:
An additional penalty of one hundred dollars ($100.00), or ten percent of the additional tax found to be due, whichever was smaller, was assessed. [AP 633]

Prior to January 1, 2004:
Changes in federal taxable income resulting from an offer in compromise or a similar agreement executed before January 1, 2004 did not constitute a final determination of a change by the federal government.

Final Determination by the Federal Government:
Prior to the law change, DOR Regulation 830 CMR 62C.30.1 already listed closing agreements as an example of a determination by the federal government. Thus closing agreements resulting in a change in federal taxable income executed prior to January 1, 2004 may also be considered final determinations.


Hearings

Prior to July 1, 2003:
Taxpayers were able to confer with DOR both prior to assessment as well as prior to abatement denial.


Limitations Periods for Taxpayers Failing to File Tax Return for Tax Years Beginning August 28, 2003 and ending January 31, 2011:

Three-Year (Thirty-Six Month) Look-back Period for Voluntary Disclosure:
To encourage voluntary disclosure and payment of delinquent tax obligations to the Commonwealth, the department limited assessments to the three most recent tax years in cases where nonresident individual taxpayers, foreign corporations and other entities voluntarily disclosed their non-filing. The three-year look back period commenced with the final day of the most recent taxable period for which the taxpayer was required to file a return as determined (without regard to extensions) at the time the taxpayer voluntarily filed some or all of its overdue returns.


Refunds of Overpayments of Tax on Original Returns - Interest Paid by DOR Prior to July 1, 2003:

  • The interest rate paid by DOR on overpayments of tax was 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 four percentage points, compounded daily;
  • Interest accrued on tax returns that required correction of the tax liability by DOR based on information from either third party sources or DOR records;
  • Interest paid on abatements was calculated from the later of 1) the due date of the applicable return without regard to extensions, 2) the date of receipt of the overpayment, or 3) the date of filing of the return.

Refunds and Overpayments When to File

For Returns Filed on or after December 4, 2003:
Generally, requests 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 was later, were denied.

For Returns Filed on or before July 1, 2011:

  • No Return Was Required to Be Filed - Two Years from Date Tax Was Paid and Assessed Without The Filing of A Return:
    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.
  • No Return Is Required to Be Filed - Three Years from Date Return is Filed to Claim Excess Withholding or Credit:
    Where a taxpayer files 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, applications for refunds filed later than 3 years from the due date of the return, without regard to extensions, will be denied.

Examples:

1. Taxpayers filed their 2007 Massachusetts personal income tax return. They had no requirement to file a tax return but had made a 3rd quarter estimated payment of $500 on 9/15/2007. The last day for filing their return to receive a refund of the $500 was 04/15/11, three years from the due date of the 2005 tax return.

2. For tax year 2006, individual had no requirement to file a tax return but discovered that she was entitled to the circuit breaker credit. Individual had until 04/15/10 to file an application for the refundable credit, three years from the due date of the 2006 tax return..

3. Taxpayer filed his 2004 Massachusetts personal income tax return on December 31, 2009. 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 asked for a refund of $200 in withholding. Since the return was filed after 3 years from the due date, DOR did not pay the refund of $200.

Impact on Audit Assessments:
These limitations only applied to applications for refunds. A taxpayer did receive full credit for all payments and withholding against any subsequent audit assessment.

Example: Taxpayer filed her 2004 personal income tax return on January 5, 2010. Her self assessed personal income tax liability plus applicable interest and penalty was $700. Her withholding and timely estimated payments totaled $950. Since the return was filed after 3 years from the due date, 4/15/08, DOR did not pay the refund of $250.

Taxpayer was subsequently assessed an additional $150 by the Audit Division. Taxpayer did receive full credit for her withholding and timely estimated payments of $950 against the total assessment ($700+$150 = $850) for that period, but still did not receive the recalculated refund of $100 ($950 - $850.)

Impact on Abatements:
These limitations on refunds do not affect the statute of limitations for filing an abatement. However, any refund resulting from the abatement will be subject to the new limitations.

Example: Taxpayer filed a 2003 personal income tax return on February 3, 2010. His self-assessed personal income tax liability plus applicable interest and penalty was $2,000. His withholding and timely estimated payments totaled $1,000 and he paid the balance due of $1,000 with his return. Taxpayer subsequently discovered that certain deductions were not claimed that would have reduced the tax and timely filed an abatement application one year later. The Department determined that the proper amount of tax, interest and penalty for the period was $500. Although the abatement was approved, the taxpayer's refund was limited to the $1,000 payment made with the return which was within the two year limitation.

Note: These limitations do not apply to applications for refunds following a federal change. The new limitations also do not apply to refunds of motor fuel tax under IFTA.

Impact on DOR Adjustments:
Any refund resulting from a DOR adjustment will not be subject to the new limitations.

Example: Taxpayer files his 2002 personal income tax return on March 10, 2007. 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. The new limitation does not apply because a refund was not requested on the return and because the $100 payment is within the two year limitation.


Massachusetts References