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Administrative Procedure AP 612: Interest and Penalties
Table of Contents
612.1. In General
Interest and penalty charges are imposed when a taxpayer fails to file a return on time or pay a tax when due. Because a taxpayer may be subject to more than one charge at a time, a taxpayer's original liability may increase significantly with the addition of interest and penalties. For example, a taxpayer who has failed to file a return and pay the accompanying tax due will be charged interest (for information on interest rates, see AP 612.3, below), a late file penalty (1% per month or fraction thereof) and a late pay penalty (1% per month or fraction thereof). See TIR 99-18 regarding waiver of G.L. c. 62C, § 33(c) late‑pay penalties and suspension of involuntary collection activities under G.L. c. 62C, § 32(e) when the taxpayer disputes the assessment (or any portion thereof) administratively within DOR or with the Appellate Tax Board or Probate Court. See also DD 13-1 discussing the exceptions that allow the Department to proceed with collection of taxes despite a pending appeal in the case of trustee taxes imposed under G.L. cc. 62B and 64G to 64I, inclusive, where the taxes were in fact withheld by the employer or collected by the vendor and not remitted to the Department, and the presumptions that the Department will apply in determining those taxes were withheld or collected by the employer or vendor.
The following is a discussion of the different interest and penalty charges and the applicable rates. See 830 CMR 62C.33.1 for additional information.
612.2. Adjustment of Interest or Abatement of Penalties
If a taxpayer believes DOR incorrectly charged interest and penalties, the taxpayer should seek an abatement. Taxpayers should use MassTaxConnect (MTC) and follow the instructions provided for disputing a penalty assessed by DOR. Alternatively, taxpayers may file paper Form ABT, Application for Abatement. However, abatement applications filed electronically through MTC will be processed faster than paper application. Note that taxpayers that are required to file their taxes electronically must also file abatement requests electronically. See TIR 16-9 for more details.
A taxpayer who was correctly charged a penalty may apply for an abatement of the penalty if there was reasonable cause for filing or paying late. DOR will only abate a penalty if such reasonable cause is shown. For more information on applications for abatement, see AP 627. For information on abatement of penalties, see AP 633.
DOR has no authority to abate interest alone. Interest can only be reduced as a result of a tax or penalty that is being abated.
The interest rate paid on overpayments shall be the federal short-term rate determined under § 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. The rate for underpayments pursuant to G.L. c. 62C, § 32 is the federal short-term rate plus four percentage points, compounded daily. The interest rate is announced in a quarterly TIR.
612.4. Penalty for Failure to File Timely Return
A penalty is charged for failing to file a return by its due date. This penalty is 1% per month, or fraction thereof, of the unpaid tax. The total penalty charge cannot exceed 25% of the unpaid tax. See G.L. c. 62C, § 33(a).
612.5. Penalty for Failure to Pay a Tax When Due
A penalty is charged on any tax not paid when due at the rate of 1% per month, or fraction thereof, of the unpaid tax. The total penalty charge cannot exceed 25% of the unpaid tax. See G.L. c. 62C, § 33(b).
Where a taxpayer has not paid a tax when due but enters into a payment agreement with DOR, the late pay penalty may be waived. See AP 631.3 for more information on payment agreements.
612.6. Penalty for Failure to Pay Deficiency Assessment
If a taxpayer does not pay the full amount due on a Notice of Assessment related to a deficiency assessment within 30 days of the notice, a penalty will be charged at the rate of 1% per month, or fraction thereof, of the unpaid tax. The total penalty charge cannot exceed 25% of the unpaid tax. See G.L. c. 62C, § 33(c).
612.7. Penalty for Failure to File Return After Notice ("Double Assessment")
If DOR notifies a taxpayer that he or she has failed to file a return or has filed an incorrect or insufficient return, and the taxpayer fails to file a proper return within 30 days of the notice, or if DOR notifies a taxpayer that he or she has filed a fraudulent return, DOR may assess the tax at up to double the amount determined to be due. See G.L. c. 62C, § 28.
612.8. Penalty for Failure to Report Federal Change
If the federal government changes the amount of corporate or personal taxable income or federal taxable estate from what was originally reported, the change must be reported to DOR within the time limits described in AP 619, Reporting Changes in Federal Taxable Income, Federal Tax Credits, or Federal Taxable Estate. The penalty for failure to report a federal change is 10% of the additional tax. See 830 CMR 62C.30.1.
612.9. Estimated Tax Penalties-Income Tax and Corporate Excise
Individual and corporate taxpayers who fail to pay the required amount of estimated taxes by the proper due date are subject to an addition to tax. In general, where there is an underpayment of all or part of an installment of estimated tax, interest at an annual rate equivalent to the federal short‑term rate plus four percentage points will be added to the tax for the period of underpayment. See G.L. c. 62B, § 14(a) and (b) and G.L. c. 63B, § 3. Taxpayers should file Form M-2210 (Underpayment of Estimated Income Tax Return) or Form M-2220 (Underpayment of Massachusetts Estimated Tax by Corporation) when calculating the penalty or, when an exception applies, to avoid the penalty. Individual income taxpayers who received income unevenly through the year should use Form M-2210A (Annualized Income Installment Worksheet) to annualize their income.
For more information on estimated tax requirements, see AP 241, AP 331 and 830 CMR 63B.2.2.
612.10. Demand Charge
If a tax is not paid when assessed and DOR sends a taxpayer a demand for payment, a demand charge of $30 will be imposed. See G.L. c. 62C, § 46 and G.L. c. 60, § 15.
612.11. Penalty for Nonpayment of Check or Electronic Funds Transfer
If any check or electronic funds transfer sent in payment of tax or other charge is not duly paid by the taxpayer's bank, a penalty of $30 or the amount of the payment, whichever is less, will be charged. See G.L. c. 62C, § 35.
612.12. Penalty for Failure to File Wage Reports
An employer or payor of income who fails without reasonable cause to file complete and accurate wage reports or reports of new hires with DOR is subject to a penalty as follows: up to $25 per employee, contractor, or other recipient of periodic income or, if the result of a conspiracy between employer and recipient not to file the required report, $500 for each recipient. See G.L. c. 62E, § 9. For information on requirements for reporting new hires, see 830 CMR 62E.2.1.
612.13. Penalty for Failure to Withhold, File Returns or Pay Over Taxes
Employers who fail without reasonable cause to withhold taxes from their employees, file the required returns or pay over the tax to the Commonwealth are subject to a fine of $100 ‑ $5,000. See G.L. c. 62B, § 7.
612.14. Penalties for Failure to File Report of Income Paid to Persons
Any individual, corporation, partnership, association, trust, estate, organization, society, club or other entity that pays taxable income to a person and who fails to report that income to DOR is subject to a penalty of $1 for each such report not filed, up to $1,000. In addition, a payor of taxable income is subject to a fine of $25 - $500 for a failure to file with DOR without reasonable cause. See G.L. c. 62C, §§ 34 and 77. Effective for all amount paid in settlement to payees beginning with the 2017 calendar year, DOR will require third party settlement organization (“TPSO”) to report the gross amount paid in settlement to payees when the amount paid is $600 or greater and is subject to taxation under G.L. c. 62, irrespective of the number of transactions between the TPSO and the payee. See TIR 17-11.
612.15. Penalty for Failure to Give W-2s
Employers who willfully fail to give a W-2 or a correct W-2 are subject to a penalty of not more than $1,000. See G.L. c. 62C, § 73(d).
612.16. Penalties for Making False Withholding Statements
Employees who fail to make a withholding statement (W-4s) or who intentionally make a false statement or a statement without reasonable basis are subject to a penalty. See G.L. c. 62C, § 73(e) and G.L. c. 62B, § 11A.
612.17. Penalty for Fraudulent Estate Tax Returns
If underpayment of estate tax is due to fraud, a penalty of 50% of the underpayment shall be imposed. See G.L. c. 65C, § 13.
612.18. Other Penalties for Failure to File
Failure to file a partnership return may result in a penalty of $5 for every day the partnership fails to file. See G.L. c. 62C, § 34.
A promoter, including but not limited to a trade show or flea market promoter,who fails to file a required report will be liable for a penalty of $5 for every day for which the report is not filed. See G.L. c. 62C, § 34.
612.19. Penalty for Failure to File, Report or Pay Electronically
The Commissioner may impose a penalty of up to $100 for each failure to file returns, transfer data, or pay electronically as required by the Department. See G.L. c. 62C, § 33(g), TIR 04-12, TIR 16-9, DD 09-08 and DD 09-09.
612.20. Penalty for Negligent Underpayment
A taxpayer that substantially understates a tax liability or underpays taxes on any return due to negligence or disregard of Massachusetts law, including public written statements of DOR, is subject to a penalty equal to 20% of the underpayment. See G.L. c. 62C, § 35A.
612.21. Return Preparer Penalty
If a return preparer submits a tax return or abatement application reflecting a position that is not realistically sustainable on its merits, the preparer know or reasonably should have known of such position and it was not disclosed or was frivolous, the preparer may be subject to a penalty of $1,000. See G.L. c. 62C, § 35C(a).
If the preparer willfully attempts to understate a tax liability or such understatement results from the preparer’s careless, reckless, or intentional disregard of the Commonwealth’s tax laws or DOR’s public written statements, the preparer may also be subject to an additional penalty, equal to the greater of $1,000 or 10% of the tax attributable to such understatement. See G.L. c. 62C, § 35C(b). Where penalties under §§ 35C(a) and 35C(b) are applicable to the same return or claim, the penalty under paragraph (b) will be reduced by the amount of the penalty imposed under paragraph (a).
612.22. Penalty for Inconsistent Filing Position
A taxpayer who fails to disclose an inconsistent position in reporting its income subject to tax is subject to a penalty equal to the amount of tax attributable to the inconsistency. For purposes of this penalty, an inconsistent position means that the taxpayer has reported its income differently in another state in which the governing law is the same in all material respects as Massachusetts. See G.L. c. 62C, § 35D.
612.23. Penalty for Persons Promoting Abusive Tax Shelters
A person who organizes, assists in the organization of, or sells any plan or arrangement, and makes or furnishes, or causes another person to make or furnish, a knowingly false, fraudulent or deliberately misleading statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit, including the avoidance of a filing requirement may be subject to a penalty of up to $5,000 for each client to whom the statement was made. See G.L. c. 62C, § 35E.
For assistance in calculating interest and penalty charges or for an explanation of charges made, contact DOR’s Contact Center, P.O. Box 7010, Boston, MA 02204, (617) 887-MDOR or call toll-free within Massachusetts at (800) 392-6089.
G.L. c. 60, § 15
G.L. c. 62B, §§ 7, 11A, 14(a) and (b)
G.L. c. 62C, §§ 28, 30, 32, 32(e), 33(a), (b) and (c), 34, 35, 35A, 35C(a) and (b), 35D,
35E, 45A, 73(d) and (e), 77
G.L. c. 62E, § 9
G.L. c. 63B, §§ 3, 6(a)
G.L. c. 65C, § 13
I.R.C. § 6621(b)
830 CMR 62C.33.1
830 CMR 62E.2.1
830 CMR 63B.2.2
TIR quarterly interest rate updates
AP 241: Estimated Income Tax Payments
AP 331: Corporate Estimated Tax Payments
AP 619: Reporting Changes in Federal Taxable Income, Federal Tax Credits, or Federal
AP 627: Applications for Abatement
AP 631: The Collection Process
AP 633: Guidelines for the Waiver and Abatement of Penalties
Form M-2210: Underpayment of Estimated Income Tax Return
Form M-2210A: Annualized Income Installment Worksheet
Form M-2220: Underpayment of Massachusetts Estimated Tax by Corporation
Form W-2 (Federal): Wage and Tax Statement|
Form W-4 (Federal): Employee’s Withholding Allowance Certificate