When you pay more taxes (i.e., withholding taxes or estimated taxes) than the amount of taxes determined to be due an overpayment may be generated on your account for that tax type. An overpayment may also be generated if you are entitled to a refundable credit that exceeds the amount of tax due. Additionally, when you file an amended return or an abatement application to reduce the amount of tax due, and you previously paid more than what is now shown as due, an overpayment may be generated.
An overpayment claimed on a return may be applied as a credit for your next year’s tax due or you may request that it be refunded to you. An overpayment may also be offset or intercepted by the Department of Revenue and applied to another liability. However, often an overpayment is refunded directly to you.
Most refunds are claimed on an original return and will be issued automatically by the Department. For e-filed returns the turnaround time is about 4-6 weeks; but for paper returns it could take up to 10 weeks. You must claim your refund or credit within a certain time period, as further detailed below. Also, the Department of Revenue must issue refunds within a certain time period or pay interest on the amount of the refund. This page contains important information on the time limitations for claiming a refund and on the calculation of interest.
Refunds requests and limitations on the amount of a refund
Time limitations for requests for a refund or credit from an overpayment:
- No return is required: A request for a refund or credit of an overpayment of any tax where no return is required shall be made by the taxpayer within 2 years from the time the tax was paid and shall be limited to the amount pay. Please note that a return is required to claim a withholding credit and/or a refundable credit.
- Original return was timely filed: A request for a refund or credit of an overpayment of tax where the original return was timely filed shall be made within the period permitted for filing an amended return, which is the same as the period permitted for abatement of the tax under section 37 (see below).
- Original return has not been timely: A request for a refund or credit of an overpayment of any tax where an original return has not been timely filed, shall 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, or within 2 years of the date that the tax was paid, whichever is later.
- Amended returns and Applications for Abatement: A request for a refund or credit of an overpayment of tax resulting from an amended return or an application for abatement shall be made within the period permitted for abatement of the tax under section 37. Generally, this means within three years from the date of filing of the original return, taking into account paragraph (a) of section 79 of M.G.L. c. 62C, within two years from the date the tax was assessed or deemed to be assessed, or within one year from the date that the tax was paid, whichever is later.
- Any request for a refund or credit filed beyond these deadlines shall be denied by the Commissioner.
Limitations on the Amount of a Refund or Credit:
If the taxpayer files his original return beyond 3 years from the due date of the return, taking into account any extension of time for filing the return, but within 2 years of the date that the tax was paid, the Commissioner may grant a refund or credit only up to the amount paid within 2 years.
If the three-year period for filing an amended return or an application for abatement has expired, and an amended return or application for abatement is filed within two years of an assessment or deemed assessment, the Commissioner may grant a refund or credit only up to the amount of that assessment or deemed assessment. If the time for filing an amended return or an abatement application has otherwise expired and an amended return or an application for abatement is filed within one year of a payment of a portion of an assessment or a deemed assessment, the Commissioner may grant a refund or credit only up to the amount paid within the year.
Further, even where the taxpayer files a timely amended return or application for abatement, the refund or credit amount is limited to the amount paid, or deemed paid pursuant to section 79, within three years of the date that the amended return or application for abatement is filed, taking into account any extension of time the taxpayer had for filing the tax return.
Interest calculation and rates from a refund of an overpayment of tax claimed on a return
Interest on a refund an overpayment of tax is calculated at 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 as established by statute.
DOR has a specified period of time in which it may process returns and issue refunds without payment of interest on refunds of overpayment. Generally, the payment of interest on a refund runs from the date of an overpayment or the date of the 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.
Generally, the period of time in which DOR may process returns without payment of interest on refunds of overpayment claimed on a return is 90 days.
The following examples show how DOR calculates interest on a refund claimed on a return. These examples assume that the taxpayer is entitled to the refund. In such cases, the calculation of interest is as follows:
- If a taxpayer files a return claiming a refund and DOR refunds the amount claimed within 90 days of the statutory due date or the actual filing date of the return, whichever is later, the taxpayer will not be paid any interest on the refunded amount;
- If a taxpayer files a return claiming a refund on or before the statutory due date, determined without regard to any extension of time for filing, and DOR does not refund the overpayment within 90 days of the due date for filing, the taxpayer will be paid interest on the refunded amount. A return filed before the due date is considered as being filed on the due date. In such cases, interest is paid on a refund of the overpayment from the statutory due date;
- If a taxpayer files a return claiming a refund after the statutory due date, determined without regard to any extension of time for filing, and DOR does not refund the overpayment within 90 days after the return was filed, the taxpayer will be paid interest on the refund. In such cases, interest is paid on the overpayment from the date the return is filed.
Interest from the correction of return based on third party information resulting in an overpayment
If a return requires DOR to correct information on the return and/or the tax liability reported based on information from either third party sources or DOR records, no interest accrues on refunds claimed on such returns. These incomplete or incorrect returns are not considered to be filed.
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 third 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.
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 DOR. For example, Extensions for those serving in a combat zone.
- 830 CMR 62C.26.2: Amended Returns
- 830 CMR 62C.33.1: Interest, Penalties, and Application of Payments
- 830 CMR 62C.37.1: Application for Abatement
- 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