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Tax Filing Season Frequently Asked Questions

Learn about important new issues from the Department of Revenue including topics that are new this filing season, the new due date for some returns and the new advanced payment requirement.

Table of Contents

Filing Season FAQs – New May 17 deadline, PPP, and more

New May 17 deadline for individual income tax returns and payments

The deadline has been extended for both filing individual income tax returns and making payments from April 15, 2021 to May 17, 2021. 

Is the new filing and payment deadline for individuals only?

Yes. The date change does not affect taxpayers other than individuals filing personal income tax returns and making payments. Form 1, Form 1-NR/PY and Form NRCR for non-resident composite filers are included. 

Has the October 15 extension date for income tax filing changed?

No. The extension date of October 15 for personal income tax filing has not changed.

Has the date for making an extension payment changed?

Yes, the date for making an extension payment has been changed from April 15 to May 17.

What about estimated payments?

Estimated payments due April 15 are not impacted by the date change and remain due on April 15.

What if I already filed my income tax return but didn’t submit my payment?

Taxpayers who have already filed their personal income tax returns, but have not made the associated payment, will have until May 17 to make the payment. 

If I’ve scheduled a payment to be deducted from my bank account before April 15th, will DOR change the payment date now that the due date has been changed to May 17th?

No.  If you take no action, your scheduled payment will still be withdrawn from your bank account on whatever date you originally chose.   See below for information about cancelling your payment. 

Can I cancel a payment scheduled through 3rd party software?

If a payment request was submitted with an electronically-filed tax return and the payment is scheduled to be debited from a bank account on a future date, the taxpayer (or someone authorized by the taxpayer) can contact DOR to cancel the payment request before it’s processed. Contact DOR by sending a message through MassTaxConnect or by calling the contact center at 617-887-6367. The payment can only be canceled up to 4pm the night before the scheduled payment date. DOR cannot change the payment date, cancelling the payment is the only option. A new payment may be scheduled through MassTaxConnect.

If I’ve scheduled a payment using MassTaxConnect, can I cancel the payment and schedule a new one for a later date?

Payments scheduled through MassTaxConnect to be withdrawn from a checking or savings account can be cancelled through MassTaxConnect. Because you can log in to your MassTaxConnect account to schedule a payment or schedule a payment without logging in to an account, you have to cancel accordingly. See the instructions below. Once you have cancelled your payment, you may schedule a new one for a different date. NOTE: Credit card payments CANNOT be deleted once made on the third-party site.  

Cancelling a payment made from your checking or savings account through Mass Tax Connect while not logged into an account
 

You can cancel a Checking or Savings account payment request ONLY if the request has a status of Submitted. Once the status of the payment request is Processing or Processed, the payment can no longer be cancelled.

  • Go to Mass tax Connect: mass.gov/masstaxconnect  
  • Under Quick Links click on “Find a Submission
  • Enter the email address used for your payment submission and the “Confirmation Code” sent to that email address when you submitted the payment
  • On the payment screen, click on the hyperlink “Cancel
  • Click on “Yes” and your payment is cancelled
Cancelling a payment made from your checking or savings account through Mass Tax Connect while logged into an account
 

You can delete a Checking or Savings account payment request ONLY if the request has a status of Pending. Once the status of the payment request is Processing or Processed, the payment can no longer be deleted.

  • Go to Mass tax Connect: mass.gov/masstaxconnect  and login to your account
  • Once logged into MassTaxConnect, you will be taken to the Customer page
    • A third-party designee should select the ID hyperlink for the appropriate taxpayer to reach the Customer page.
  • Select the More tab.
  • Under the Submissions tab click the Search Submissions hyperlink
  • Select the Payment hyperlink for the request you wish to cancel.
  • A window will display the information for the payment selected. Verify that this is the payment you would like deleted and click the Delete Submission hyperlink.

If I file on the newly extended May 17, 2021 due date and request that my overpayment be applied to 2021 estimated tax, will the credit carryforward result in a late estimated tax payment since the first quarter 2021 estimated tax due date is still April 15, 2021?

It will not be considered a late payment as long as your overpayment is the result of excess withholding paid during 2020 or any payments made for tax year 2020 provided they were made by April 15, 2021. Under these circumstances, your credit carryforward will be determined to be a timely first quarter 2021 estimated tax payment. If your overpayment is the result of payments made after April 15, 2021, such as an extension payment made on May 17, 2021, your credit carryforward will be considered a late first quarter 2021 estimated tax payment.

Do I have until May 17, 2021 to amend my 2017 Massachusetts individual income tax return as I do for federal tax purposes? 

No, the deadline for filing an amended return for tax year 2017 Massachusetts returns seeking a refund was not extended when the 2020 return deadline was changed from April 15, 2021 to May 17, 2021. If you need to amend your tax year 2017 return to reduce your tax or seek a refund or credit, you generally have:

  • 3 years from the date you filed or the due date of the return,
  • 2 years from the date of assessment, or
  • 1 year from the date of payment, whichever is later.

The 2017 return was due on April 17, 2018. For taxpayers that filed on or before April 17, 2018, an amended return must be filed by April 17, 2021. However, because April 17, 2021 falls on a weekend, a taxpayer has until April 20, 2021, the next business day, to file the amended return.  

If I have not filed a 2017 return yet, and am due a refund, what is the deadline for me to file my 2017 return?

You have until October 15, 2021 to file a 2017 return requesting a refund that results from withholding or payments made by April 17, 2018.  Neither the federal or Massachusetts due date changes altered this deadline.

Paycheck Protection Program (PPP)

Learn how to report PPP loan forgiveness income.

What was the origin of loan forgiveness for PPP loans?

The Coronavirus Aid, Relief and Economic Security (CARES) Act established a Paycheck Protection Program (PPP) that provided loans to small businesses to pay certain business expenses. Under the CARES Act, a PPP loan recipient is eligible for loan forgiveness in an amount spent by the recipient during an 8-week period after the origination date of the loan on certain payroll, mortgage interest, rent, or utilities payments. The CARES Act also provides that any amount of cancelled indebtedness that would otherwise be includable in the gross income of the borrower under the Code for federal income tax purposes is excluded from gross income. Following enactment of the CARES Act, the IRS announced that expenses paid with forgiven PPP loan proceeds would not be deductible by businesses. The Massachusetts Department of Revenue issued guidance on the Massachusetts tax treatment of forgiven PPP loans in Technical Information Release 20-9 (TIR 20-9).

Was there an update to the decision to not allow expenses paid with PPP loans to be deductible?

Yes. Subsequently, the Consolidated Appropriations Act of 2021 (CAA 2021), provided that PPP loan recipients may deduct expenses paid for using PPP loan amounts, even if the PPP loans are ultimately forgiven.

Did Massachusetts update the treatment of loan forgiveness income?

Yes. Loan forgiveness income is excluded from gross income for personal income taxpayers for 2020 under “An Act Financing a Program for Improvements to the Unemployment Insurance Trust Fund and Providing Relief to Employers and Workers in the Commonwealth.”

I report my business income on a personal income tax return. Is my forgiven PPP loan taxable?

No, forgiven PPP loans are not taxable for personal income taxpayers, including unincorporated businesses reporting income and expenses on Schedule C, partners in a partnership, and individual shareholders of an S corporationRecently passed Massachusetts legislation excludes PPP loan forgiveness from gross income for 2020 for taxpayers subject to the Massachusetts personal income tax. Therefore, personal income taxpayers do not need to report these amounts.

I report my business income on a corporate excise return (Form 355, 355U, 355S or M-990T). Is my forgiven loan taxable in Massachusetts?

No. For purposes of the corporate excise, Massachusetts follows the Code as currently in effect. Therefore, any amount forgiven for a corporate borrower would be excluded from Massachusetts gross income.

Can I deduct my business expenses paid with PPP loan proceeds?

Yes. Whether you are subject to the personal income tax or the corporate excise, if your expenses are deductible on your federal return, they are also deductible on your Massachusetts return.

Where should I report my loan liability from my PPP loan? Do I need to report the loan if I am applying for loan forgiveness?

Yes, even if you are applying for loan forgiveness the initial loan should be reported as a debt instrument and categorized as a loan liability on the balance sheet, which should be categorized as either other current liabilities or long-term Liabilities.

Generally, debt is reported on the following Forms and lines numbers:

Form 355 Business/Manufacturing Corporate Excise Return:  Generally, debt would be reported on Schedule A line 20, “Bonds or Other Funded Debt” or line 24 “Miscellaneous Debt”. It could also impact the Non-Income Measure Calculation.

Form 355S S Corporation Excise Return: Generally, debt would be reported on Schedule A line 20, “Bonds or Other Funded Debt” or line 24 “Miscellaneous Debt”. It could also impact the Non-Income Measure Calculation.

Form 355U Excise for Taxpayers Subject to Combined Reporting: Generally, debt would be reported on Schedule A line 20, “Bonds or Other Funded Debt” or line 24 “Miscellaneous Debt”. It could also impact Schedule U-ST Non-Income Measure Calculation.

M-990T Unrelated Business Income Tax Return: Generally, debt is not recorded on this form.

Form 3 Partnership Income: Debt is reported on Form 3 based on amounts from U.S. Form 1065, line 75 (“Other Liabilities”). A disclosure should also be made on Form 3, line 53 “during the year the partnership had any debt that was cancelled, was forgiven, or had the terms modified so as to reduce the principal amount of debt.”

Coronavirus Relief Fund Grants

Learn about the taxability of grants funded by the CARES Act Coronavirus Relief Fund, including grants awarded by the Massachusetts Growth Capital Corporation (MGCC), the Commonwealth, or municipalities.

My business received a grant awarded by the MGCC, or another Commonwealth or municipal grant funded by the CARES Act Coronavirus Relief Fund.  Is this grant taxable income?

Yes. Federal law requires that grants to businesses be included in gross income. The IRS has specifically stated that if governments use CARES Act Coronavirus Relief Fund payments to establish grant programs to support business, businesses receiving such grants must include the grant amount in their federal gross income. Because these grants are taxable under federal law, they are also taxable under Massachusetts law. 

Can I deduct business expenses paid with grants awarded by the MGCC, or with other Commonwealth or municipal grants funded by the CARES Act Coronavirus Relief Fund?

Yes. Whether you are subject to the personal income tax or the corporate excise, if your expenses are deductible on your federal return, they are also deductible on your Massachusetts return.

Debt Relief Subsidies Paid by the Small Business Administration
 

I report my business income on a personal income tax return. My business received a loan qualifying for debt relief subsidies paid by the Small Business Administration pursuant to Section 1112 of the CARES Act.  Are these debt relief subsidies taxable income?    

No, these debt relief subsidies are not taxable for personal income taxpayers, including unincorporated businesses reporting income and expenses on Schedule C, partners in a partnership, and individual shareholders of an S corporation. Recently passed Massachusetts legislation excludes debt relief subsidies paid by the Small Business Administration pursuant to Section 1112 of the CARES Act for 2020 for taxpayers subject to the Massachusetts personal income tax. Therefore, personal income taxpayers do not need to report these amounts.

Can I deduct business expenses paid with debt relief subsidies paid by the Small Business Administration?

Yes. Whether you are subject to the personal income tax or the corporate excise, if your expenses are deductible on your federal return, they are also deductible on your Massachusetts return.

I report my business income on a corporate excise return (Form 355, 355U, 355S or M-990T) and received debt relief subsidies paid by the Small Business Administration (“SBA”) pursuant to Section 1112 of the CARES Act.  Are these debt relief subsidies taxable in Massachusetts?

No. For purposes of the corporate excise, Massachusetts follows the Code as currently in effect. Therefore, a corporate taxpayer that received such debt relief subsidies would exclude such amounts from Massachusetts gross income.

Economic Injury Disaster Loan Grants
 

I report my business income on a personal income tax return. My business received an Economic Injury Disaster Loan (EIDL) grant awarded pursuant to Section 1110 of the CARES Act or Section 331 of the Economic Aid Act.  Are these EIDL grants taxable income?

No, EIDL grant amounts are not taxable for personal income taxpayers, including unincorporated businesses reporting income and expenses on Schedule C, partners in a partnership, and individual shareholders of an S corporation. Recently passed Massachusetts legislation excludes EIDL grant amounts awarded pursuant to Section 1110 of the CARES Act or Section 331 of the Economic Aid Act for 2020 for taxpayers subject to the Massachusetts personal income tax. Therefore, personal income taxpayers do not need to report these amounts.

Can I deduct business expenses paid with EIDL grants?

Yes. Whether you are subject to the personal income tax or the corporate excise, if your expenses are deductible on your federal return, they are also deductible on your Massachusetts return.

I report my business income on a corporate excise return (Form 355, 355U, 355S or M-990T) and received an Economic Injury Disaster Loan (EIDL) grant awarded pursuant to Section 1110 of the CARES Act or Section 331 of the Economic Aid Act. Are these EIDL grants taxable in Massachusetts?

No. For purposes of the corporate excise, Massachusetts follows the Code as currently in effect. Therefore, a corporate taxpayer that received such EIDL grants would exclude such amounts from Massachusetts gross income.

Unemployment Benefits and Unemployment Fraud

Are the unemployment benefits I received during 2020 taxable in Massachusetts?

While unemployment is generally taxable income for Massachusetts purposes, see additional questions below about a recent law change providing tax relief for certain unemployment income. If you received unemployment benefits or pandemic unemployment benefits during 2020, you should receive a Form 1099-G, Certain Government Payments, showing the amount of unemployment compensation received. This income must be reported on your 2020 Massachusetts Individual Income Tax return [Form 1 for residents or Form 1-NR/PY for nonresidents or part-year residents] whether you are eligible for a deduction or not.       

Does Massachusetts allow a deduction for unemployment income?

As a result of a recent state law change, taxpayers with household income not more than 200% of the federal poverty level may deduct up to $10,200 of unemployment benefits from their taxable income on their 2020 and 2021 tax returns for each eligible individual. Federal law allows a deduction of up to $10,200 if the taxpayer’s federal adjusted gross income is less than $150,000. Since the Massachusetts income threshold is different from the federal income threshold, some taxpayers may be eligible for a deduction on their federal tax return but not on their Massachusetts tax return. Complete the worksheet to find out if you are eligible for a deduction.

If I’ve already filed my 2020 income tax return, should I file an amended return to claim the new deduction?

No, do not file an amended 2020 return before you hear from us. DOR will send a communication to all taxpayers who previously filed a 2020 income tax return reporting unemployment income and will adjust tax returns automatically for most taxpayers who meet the criteria for the unemployment deduction. More information will be posted on this page in the upcoming weeks so please check back for updates. 

If I have not filed my 2020 income tax return, how can I claim the new unemployment deduction?

If you have not filed a 2020 tax return yet, you should report all of your unemployment compensation on your Massachusetts return as usual using line 8a on Form 1 (for resident taxpayers) or line 10a on Form NR/PY (for nonresidents or part-year residents). If you are eligible for a deduction, you should report the deduction amount on Schedule Y, line 9. Note that you may be eligible for a deduction on your federal return but not eligible for a deduction on your Massachusetts return. Complete the worksheet to find out if you are eligible for a deduction.

Are unemployment benefits included in the household income calculation to determine eligibility?

Yes. The full amount of unemployment benefits received during tax year 2020 should be included in a taxpayer’s income in determining whether the taxpayer meets the household income threshold for eligibility.

Are Social Security benefits and other MA non-taxable income (such as MA and US government pensions) included in the household income calculation?    

Yes. The calculation of household income follows Section 36B(d) of the Internal Revenue Code and includes all of a taxpayer’s income, whether or not it is taxable.     

If an individual who is claimed as a dependent files their own MA tax return, are they entitled to the MA unemployment deduction?

Yes. A dependent who received unemployment compensation determines whether they are eligible for a deduction based on their own information. If the dependent’s income is at or below 200% of the federal poverty level, then the dependent would be entitled to a deduction. 

On the Form NR/PY (for nonresident and part-year residents), should taxpayers report all unemployment compensation even if it was not related to previous MA employment or received while a resident of MA?

When completing Form NR/PY, non-residents or part year residents should report as income the amount of unemployment compensation that would be taxable to Massachusetts without considering the new deduction. This would include unemployment received from any source while a resident of MA plus unemployment received while a non-resident that is related to MA employment. A deduction of $10,200 per individual, but not more than the unemployment reported by that individual, can then be claimed on Schedule Y. When determining if the nonresident or part year resident is at or below 200% of the federal poverty level the nonresident or part year resident must include all its income including any unemployment income that is not taxable in MA.

Is a resident taxpayer who collected unemployment compensation from another state eligible for this deduction?

Yes. For a MA resident all unemployment compensation regardless of source should be reported on the Form 1. The deduction applies to any unemployment income taxable in Massachusetts and reported on Form 1. 

Does the unemployment deduction reduce my income for purposes of the Circuit Breaker Credit calculation?  

No. When calculating income for the Circuit Breaker Credit, do not exclude any amount on Schedule Y, line 9 that represents a deduction for unemployment compensation. 

What should I do if I received a Form 1099-G or unemployment compensation, but I didn’t request or receive unemployment benefits?

If you received a Form 1099-G reporting unemployment benefits but did NOT receive unemployment benefits, someone may have used your identity to falsely claim unemployment benefits. You should notify the Department of Unemployment Assistance (DUA) by filing a fraud report online or call the DUA customer service department at 877-626-6800. This income should not be reported on your Massachusetts Individual Income Tax return.  After DUA reviews the fraud report, they will send a corrected Form 1099-G. Keep a copy of all Forms 1099-G with your 2020 tax records and be aware that DOR may ask for an explanation of why the amount shown on the Form 1099-G was not reported on the return.

New! Return due date for sales and use taxes and room occupancy excise

A provision in the FY21 Budget changed the due date for sales and use tax and room occupancy excise returns.  Returns previously due 20 days after the close of the tax period will now be due 30 days after the close of the tax period.  Payments due with the return will also be due 30 days after the close of the tax period.

This change applies to all tax returns filed for the following tax types:

  • Sales/use tax
  • Sales tax on services
  • Meals tax
  • Room occupancy excise
  • Marijuana retail taxes

Please review this information, including charts, for a detailed look at how the changed due date affects filing and paying sales and use taxes and room occupancy excise.

Does the due date change apply to all types of sales and use tax filings

No. This change does not apply to sales/use tax returns filed by materialmen (due 50 days after the close of the tax period) or annual use tax returns for purchasers, Forms ST-10 or ST-11, which remain due on April 15th.          

When does the change in due date go into effect?

The new due date applies for periods ending after April 1, 2021. March 2021 monthly or quarterly returns are still due on April 20th as under prior law.  April 2021 monthly returns are due May 30th.  Note: because May 30th is a Sunday and May 31st is the Memorial Day Holiday, taxpayers will have up to   June 1st to file the April 2021 monthly return.

Is the new date always the 30th of the month? 

The new due date is 30 days after the close of the filing period.  It will be the 30th of the following month except for the January monthly filing period. 

What is the new due date for January returns?

If the last day of February is the 28th, the return for the January monthly filing period would be due March 2nd.

If the last day of February is the 29th, the return for the January monthly filing period would be due March 1st.

DOR previously changed the due date for certain operators and vendors to file returns and pay taxes for filing periods beginning Feb 2020 through periods ending March 2021.  Are these returns and payments still due on May 20, 2021?

Yes, the COVID relief rules are not impacted by the due date change. The new due date is for filing periods ending after April 1, 2021.

Additional Resources

New! Advance payment requirements

Beginning April 2021, a provision in the FY21 budget requires that some vendors and operators, depending on amount of tax or excise liability from previous year, make an advance payment before the related tax return is due. This requirement will begin for tax periods ending after April 1, 2021.

This change applies to tax returns filed for the following tax types:

  • Sales/use tax
  • Sales tax on services
  • Meals tax
  • Room occupancy excise
  • Marijuana retail taxes

Please review this information, including charts, for a detailed look at how the new advanced payment affects filing and paying sales and use taxes and room occupancy excise.

Who is required to make advance payments?

Taxpayers with over $150,000 in cumulative tax liability in the prior year for the tax types listed above will be required to make advance payments.  

  • The advance payment is due on the 25th of the month for the “tax collected”, generally meaning the tax on gross receipts,  from the 1st through the 21st of that same monthly filing period. 
  • No return or voucher is required with the advance payment.
  • The remaining tax for the month will be due with the tax return, 30 days after the close of the filing period.

When does the advance payment requirement go into effect?

The first advance payment will be due on April 25th and will cover the tax liability for April 1st through April 21st. The April return and final payment for period ending April 30, 2021 will be due on May 30, 2021. Note: when a due date falls on a weekend or holiday the return or payment is due on the next business day.

Is a return or voucher required to be filed with the advance payment?

No. The advance payment will be a “return payment” made on the appropriate tax period. No return or voucher is required at the time the advance payment is submitted. 

How will I make my advance payment on MassTaxConnect?

All taxpayers may use ACH debit to make their advance payments through MassTaxConnect. After login:        

  • Locate the account type and select the Returns hyperlink. 
  • Select the Period you want. 
  • Select the Make a Payment hyperlink
  • Select Return Payment in the payment type dropdown

Video tutorial: How to Make an Advance Payment on MassTaxConnect

Can I make my advance payment through ACH Credit?  

ACH credit is available for sales/use tax and sales tax on services. If you are currently making ACH credit payments through your bank, you will be able to make your advance payment using ACH Credit also, following the same process you use currently.

How do I claim a credit for my advance payment on my tax return?

The tax returns where an advance payment is required currently do not have a line to report the advance payment. Starting with the April 2021 filing period, when you file your tax return, you should deduct the amount of your advance payment from the amount shown to be due and submit a payment for the difference. Changes may be made to the tax returns in the future, but this process should be followed until further notice.

Do I have to include the use tax I owe on purchases in my advance payment?

No, you should not include use tax on purchases in your advance payment. Your use tax on purchases must be reported and paid when the return is filed.

Do I have to include any additional taxes and fees in my advance payment?

Yes, if you are liable for any additional taxes from the 1st through the 21st of the month (e.g., the local option meals tax, room occupancy excise or marijuana excise) or fees (e.g., the Convention Center Financing Fee, Cape Cod and Islands Water Protection Fund Fee, and the Community Impact Fee) you must include these amounts in your advance payment.

How does a tobacco retailer that prepays sales tax determine their advance payment?

The advance payment is based on the tax liability from the 1st through the 21st of the monthly filing period.  A tobacco retailer that has prepaid tax to a wholesaler may reduce the amount of the advance payment by the amount that was already paid from the 1st through the 21st of that same monthly filing period.

How does a taxpayer that currently determines tax liabilities when they bill their customers determine their advance payment?

For purposes of calculating the advance payment, a taxpayer that currently determines tax liabilities when they bill their customers should determine the tax liability from the 1st through the 21st of the month using their current method of accounting for the tax types subject to the advance payment requirement, so long as it is the same method used for purposes of each monthly return required to be filed. 

My business operates 6 restaurant locations and collected approximately $30,000 in meals tax for each restaurant location in the prior year. Am I required to make an advance payment based on the prior year total meals tax collected or should I consider each location separately? 

If all locations are part of a single business, you are required to make an advance payment for all 6 locations because the cumulative prior year tax liability for all locations together is more than $150,000. 

My business operates a hotel that pays room occupancy tax and meals tax.  In the prior year, the hotel collected more than $150,000 in room occupancy taxes. At the onsite restaurant, the business collected $70,000 in meals tax in the prior year. Am I required to make an advance payment for both room occupancy taxes and meals tax?

No. Each tax type is considered separately. You are required to make an advance payment for the room occupancy taxes but not for meals tax.

I am a vendor who reported use tax on purchases on my sales and use tax return last year. Do I include the use tax I reported on purchases in the prior year for purposes of calculating my cumulative prior year sales and use tax liability?

No. Vendors who reported use tax are not required to include use tax on purchases for purposes of calculating their cumulative prior year tax liability to determine whether they are over the $150,000 threshold.

If I was not in business for all 12 months of 2020, how do I determine if I’m required to make an advance payment?

If your cumulative tax liability was over $150,000 for the period of time you were operating during calendar year 2020, you are required to make advance payments beginning in April 2021. If your cumulative tax liability for 2020 was $150,000 or less for the months you were operating, you are not required to make advance payments in 2021. 

If I was not filing and paying for most of 2020 due to the COVID relief extension, how do I determine if I’m required to make an advance payment?

If your tax liability was over $150,000 from Jan 1, 2020 through December 31, 2020, even if returns were not filed and tax was not paid you are subject to the advance payment requirement for 2021.

If I’m a new business, am I required to make an advance payment based on estimated future sales?

No. If your first obligation to pay one of the taxes subject to the advance payment requirements is in 2021, you are not required to make advance payments for the remainder of 2021. Your requirement for 2022 will be based on your 2021 tax liability. 

Am I allowed to estimate the advance payment amount based on the prior month or the prior year?

No, the advance payment must be based on your actual tax liability from the 1st through the 21st of the month.

Is there a penalty for not making an advance payment?

Yes.  A 5% penalty may be imposed if the advance payment made on the 25th is less than the amount required to be paid. The penalty will be imposed on the amount of the underpayment. If the advance payment is at least 70% of the final tax, no penalty will be imposed. 

Can my advance payment be less than the 70% threshold?

Yes.  If your actual tax liability through the 21st of the month is less than 70% of the total due for the month, your advance payment requirement would be less than 70%. Since there is no underpayment, no penalty will be imposed.

Will Massachusetts automatically calculate a penalty based on the difference between the advance payment amount and the total tax for the period using the 70% threshold?

No, Massachusetts will not automatically calculate a penalty based on the difference between the advance payment amount and the total tax for the period using the 70% threshold.

If I underpay the advance payment can my penalty be waived for reasonable cause?

Yes, where the advance payment is less than the actual tax liability through the 21st of the month and also less than 70% of the total due for the month, your penalty can be waived if you can show the failure to timely pay was due to reasonable cause.

For filing periods from April 2021 through December 2021, the Department will presume that reasonable cause exists for the waiver of any underpayment penalty where the taxpayer makes an advance payment on or before the 25th  that is equal to 80% or more of the taxpayer’s total tax or excise due for the immediately preceding month, if there was a liability in the prior month. For example, DOR will presume that reasonable cause exists and will not assess a penalty if a taxpayer makes an advance payment on April 25, 2021 that is 80% of their March 2021 tax liability.

I am a vendor who reports use tax on purchases on my sales and use tax return. Do I include the use tax I report on purchases for purposes of calculating 70% of the total due for the month or 80% of the total due for the prior month?

No. Vendors should not include the use tax they report on purchases for purposes of calculating 70% of the total due for the month or 80% of the total due for the prior month.

Additional Resources

Contact

Phone

Tax Department (617) 887-6367
Toll-free in Massachusetts (800) 392-6089

9 a.m.–4 p.m., Monday through Friday

Last updated: April 12, 2021
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