Dishonored (Bounced) Check Penalty

If a check in payment of any tax, interest, penalty, fee or other charge is not paid, there shall, in addition to any other penalties, be paid as a penalty by the person who tendered such check upon notice and demand by the commissioner a penalty. For payments under $1500, the amount of the penalty is $30 or the amount of the payment, whichever is less; for payments $1500 and greater, the amount of the penalty is equal to 2% of the payment.

Reasonable Cause:
This penalty will not be imposed if the person tendered such check in good faith and with reasonable cause to believe that it would be duly paid. DOR may abate any such penalty in whole or in part.


Dishonored Electronic Funds Transfers (EFT) Payment Penalty

Effective for Electronic Funds Transfers initiated on or after January 1, 2005, the penalty for dishonored checks is extended to electronic funds transfers. If an electronic funds transfer is made in payment of a tax, and the transfer fails, the penalty will apply. The amount of the penalty is $30 or the amount of the payment, whichever is less.

Reasonable Cause:
Taxpayers who follow electronic funds transfer guidelines established and publicized by DOR, enter all required information accurately and timely, and ensure both that their bank is capable of carrying out the transaction and that funds are available for payment will not be subject to this penalty. Unforeseeable errors or system failures on the part of a taxpayer's bank or the Commonwealth of Massachusetts or its agents shall not subject taxpayers to the penalty for failed checks or electronic funds transfers.


Failure to File, Report or Pay Electronically Penalty

DOR requires certain taxpayers to file returns and to make payments of tax in such manner, format and medium as it prescribes. DOR has exercised this authority by requiring certain taxpayers to file and/or pay electronically in order to increase Department operating efficiencies and reduce the costs of maintaining both paper and electronic compliance and processing systems.

For tax years beginning on or after January 1, 2005, a taxpayer that does not comply with the prescribed method for filing, data transfer, or payment will be considered not to have made the required filing or the required payment. DOR may impose a penalty up to $100 for each improper return, document, or data transmission, and for each improper payment.

DOR may assess the penalty by issuing two notices:

  1. the first one informs taxpayers that they filed in the wrong format and sets out the filing period and tax type or filing requirement affected, the amount of the penalty, and the reason for the penalty;
  2. the second notice assesses the penalty.

Reasonable Cause:
Penalties may be waived or abated in whole or in part if the filer shows that the failure to file in the correct format is due to reasonable cause and not to willful neglect.


Health Insurance, Penalty for Failure to Purchase

Health Insurance, Massachusetts  Interaction with New Federal Penalty:
For months beginning after December 31, 2013, the federal Affordable Care Act requires that for each month of the taxable year, a nonexempt individual must have minimum essential coverage or pay a shared responsibility payment. A taxpayer’s liability for the shared responsibility payment for a month must be reported on the taxpayer’s federal income tax return for the taxable year that includes any months of noncompliance.

For tax years beginning on or after January 1, 2014, an individual who does not have health insurance meeting both the Massachusetts standard of creditable coverage and the federal standard of minimum essential coverage may be subject to both (1) the Massachusetts penalty, and (2) the federal shared responsibility payment. However, in the circumstance where a taxpayer is subject to both the Massachusetts penalty and the federal shared responsibility payment, the amount of the taxpayer’s Massachusetts penalty is reduced to account for payment of a federal shared responsibility payment. If the federal shared responsibility payment is greater than the amount that the taxpayer would owe as the Massachusetts penalty, the Massachusetts penalty is reduced to zero.  

Example: In 2014, taxpayer J failed to obtain and maintain health insurance for all 12 months. As a result, J is subject to both a federal shared responsibility payment of $95 and a Massachusetts penalty (before adjustment) of $708. After adjustment for the amount of J’s liability for the federal shared responsibility payment of $95, the amount of J’s Massachusetts penalty for 2014 is $613 ($708 - $95). 

2014 Penalty Based on Income as a Percentage of the Federal Poverty Level :

  • Individuals with incomes up to 150% of the Federal Poverty Level are not subject to any penalty for non-compliance, as those at this income level are not required to pay an enrollee premium for Commonwealth Care health insurance.
  • Penalties for individuals with incomes from 150.1 to 300% of the Federal Poverty Level will be half of the lowest priced Commonwealth Care enrollee premium that could be charged to an individual at the corresponding income level, based on the Connector's Commonwealth Care enrollee premiums as of January 1st of the year.
  • Penalties for individuals with incomes more than 300% of the Federal Poverty Level will be:
    • for individuals age 18-26: half of the lowest priced Commonwealth Choice Young Adult Plan premium without drug coverage; and
    • for individuals age 27 and above: half the lowest priced Commonwealth Choice Bronze premium with drug coverage, based on the Connector's prices for these plans as of January 1st of the year.
  • The Department anticipates issuing an updated penalty schedule for the following tax year.
  • Penalties for married couples who do not comply with the individual mandate rules (with or without children) will equal the sum of individual penalties for each spouse.

 

2014 Penalty Table

Individual
Income
Category*

150.1-200% FPL

200.1-250% FPL

250.1-300% FPL

Above 300% FPL
Age 18-30

Above 300% FPL Age 31+

Penalty

$20/month
$240/year

$39/month
$468/year

$59/month
$708/year

$58/month
$696/year

$92/month
$1,104/year

* Compare individual's annual family household income to chart immediately below to determine applicable Federal Poverty Level (FPL).

2014 Poverty Table
Family Size

150% FPL

200% FPL

250% FPL

300% FPL

1

$17,508

$23,340

$29,184

$35,016

2

$23,604

$31,464

$39,336

$47,196

3

$29,688

$39,588

$49,476

$59,376

4

$35,784

$47,700

$59,628

$71,556

5

$41,868

$55,824

$69,780

$83,736

6

$47,964

$63,948

$79,932

$95,916

7

$54,048

$72,060

$90,084

$108,096

8

$60,144

$80,184

$100,236

$120,276

For each additional person add

+6,096

+$8,124

+$10,152

+12,180

This Schedule reflects the Federal Poverty Level standards for 2014. 

Health Insurance, Massachusetts  Interaction  with New Federal Penalty

Beginning January 1, 2014, the federal Affordable Care Act instituted a federal mandate on individuals to obtain health insurance. For tax years beginning on or after January 1, 2014, if a nonexempt individual fails to obtain health insurance meeting federal standards, the person is liable for a penalty termed the “shared responsibility payment” that must be reported on his or her federal income tax return.

To provide guidance on the interaction of the Massachusetts individual mandate with the federal mandate to obtain health insurance, the Department of Revenue plans to amend its regulation, 830 CMR 111M.2.1: Health Insurance Individual Mandate; Personal Income Tax Return Requirements. In particular, these amendments would create a credit against any Massachusetts health care penalty owed for the amount of any federal health care shared responsibility payment, so as to prevent aggregated federal and state penalties.  

In the case where a taxpayer is subject to both the MA penalty and the federal shared responsibility payment, the taxpayer’s MA penalty is reduced by the amount of the federal shared responsibility payment. Also, if the federal shared responsibility payment is greater than the amount that the taxpayer would owe as the MA penalty, the MA penalty is reduced to zero.


Late File and Late Pay Penalties

Section 21 of Chapter 182 of the Acts of 2008:
Effective July 1, 2008, the rate at which late pay penalties under G.L. c. 62C, s. 33 (b) and (c) accrue are increased from one-half of one percent a month to one percent a month.

  • Late File Penalties on Amount Required to Be Shown as Tax on the Return - 33(a):
    If a return is not filed with DOR on or before its due date or within any extension of time granted by DOR, there shall be added to and become a part of the tax a penalty of 1% of the amount required to be shown as tax on the return for each month or fraction thereof during which such failure continues not to exceed 25% percent.
  • Late Pay Penalties on Amount Shown as Tax on the Return - 33(b):
    Effective July 1, 2008, 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 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):
    Effective July 1, 2008, 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 percent of the amount of such tax for each month or fraction thereof during which such failure continues not to exceed 25% percent.

Note: Tax on the return is tax after applying withholding, estimated and extension payments

File/Late Pay Penalties - Reasonable Cause:

If a taxpayer can document that the failure to file a return or to pay a tax in a timely manner is due to reasonable cause and not due to willful neglect, the penalties imposed under the statute may be abated by DOR. [AP 633]

The abatement of late interest is not discretionary and DOR does not have the authority to abate interest accrued on unpaid or late paid tax. Interest can be reduced only as a result of a tax that is being abated, or if the amount of interest charged was miscalculated.


Partnership Return Failure to File Penalty

If a partnership required to file a return under Section 7 fails to file the return within the time provided, a penalty of $5 for every day in which it is in default will be assessed.


Tax Preparers Penalty

A preparer who is "willfully" a party to a false or fraudulent return is guilty of a felony and may be fined not more than $100,000 ($500,000 for a corporate return) or 3 years imprisonment, or both plus the costs of prosecution.

A tax preparer who improperly discloses information about a taxpayer`s return may be punished by a fine of not more than $500 or by imprisonment for not more than 6 months, or both.

If a preparer makes an error, which results in the taxpayer owing additional tax, penalties or interest, there are no preparer penalties.


Where to Report on Original Tax Return; What to Enclose:

Health Insurance, Penalty for Failure to file to Purchase
 


Other Penalties

  • Enter penalty amount in the appropriate box on Mass Form 1, Line 47 or Mass Form 1-NR/PY, Line 52 and make sure amount is included in the total of either Line 47 or 52

Documentation to Submit with Abatement/Amended Tax Return:

Late file and Late Pay Penalties

  • Brief but factual explanation detailing the reasonable cause for the late filing of a return or late payment of a tax due;
  • Copy of the IRS determination (if available) Late file and Late Pay Penalties

Massachusetts References: 

Dishonored (Bounced) Check Penalty and Electronic Funds Transfers (EFT) Payment Penalty


Failure to File, Report or Pay Electronically Penalty

Health Insurance, Penalty for Failure to file to Purchase


Late File and Late Pay Penalties

Partnership Return Failure to File Penalty

Tax Preparers Penalty

  • M.G.L. Chapter 62C, Sections 73 (f)(2); 74