The Massachusetts Department of Revenue believes that voluntary compliance is the cornerstone of our tax system. The goal of the Department is to ensure that all taxpayers living in Massachusetts or doing business in Massachusetts are registered, collecting and paying the taxes they are obligated to pay.
In an effort to further increase compliance and foster cooperation, the Massachusetts Department of Revenue has a Voluntary Disclosure Program for taxpayers who wish to report previously unpaid tax liabilities. It is an opportunity for taxpayers to come forward voluntarily in a user-friendly and informal process.
- The taxpayer has had no previous contact by the Department of Revenue relating to the issues of the voluntary disclosure.
- The taxpayer is not registered for the tax type involved in the disclosure.
- The tax has not been collected.
- Informal Process.
- A taxpayer can come forward anonymously.
- Waiver of penalties for qualified taxpayers.
- Limited "look back" period of 3 years for qualified taxpayers as set forth in TIR 11-1.
The initial contact on most voluntary disclosures is a letter from the representative giving a brief general description of the company's activities and what the company is seeking by coming forward.
The letter should include the following:
- The principal location (state) of the business and the state of incorporation.
- A general description of the business activities and the activities in Massachusetts.
- Which tax type(s) the taxpayer is looking to file.
- The terms the taxpayer is seeking in coming forward.
The Department will respond with a letter outlining the Department's position. At that time the company can decide whether or not to disclose.
- Combined Remittance Agreements
- Voluntary Use Tax Agreements
Multistate Tax Commission
If the taxpayer has liability in more than one state it may consider applying for multi-state voluntary disclosure through the Multistate Tax Commission. More information about the MTC's Voluntary Disclosure Program and the application for Multi-state Voluntary Disclosure is available.
Voluntary Disclosure FAQs
If we are already registered and filing corporation excise tax returns can we come through the VDA program for sales tax?
Yes. Provided you meet the following criteria: 1) You have not registered for the tax type in the disclosure, 2) you have not been contacted by DOR regarding that particular tax type and 3) you have not collected the tax associated with the disclosure, you are eligible to participate in the program.
During the initial stage of the voluntary disclosure process, must the identity of the taxpayer be disclosed?
No, the taxpayer can remain anonymous during the initial stage. Once they decide to participate in the program and file delinquent returns, they will be required to complete forms which will disclose their identity.
Will interest be waived if I participate in the VDA program?
No. Only late-pay and late-file penalties pursuant to MGL Ch. 62C sec 33(a); (b) are eligible to be waived. Interest is a statutory addition to tax and cannot be waived, revised or reduced. The applicable interest rate is the federal short term rate plus four percentage points. This rate changes quarterly and is announced by DOR through the form of a TIR.
Do I have to file Form ABT or request a hearing with the Office of Appeals to participate in the VDA program?
No. During your initial contact with the VDA group you can request entrance into the program based on the particular facts and circumstances and request penalties be waived.
What are my appeal rights if my entrance into the Voluntary Disclosure Program is denied?
If for some reason the waiver of penalty request is denied in part or whole, the taxpayer has the option to file a Form ABT (Abatement Form) with the Office of Appeals.
Is there a limit to the amount of tax being disclosed and the penalties associated with that tax? What if I can’t pay the tax liability?
No, there is no limit as to the amount of taxes owed to be eligible for the program. Once penalties are waived, the taxpayer will receive a notice of assessment. At that point they can request a payment plan to settle their liabilities on MassTaxConnect.
Due to the recent changes regarding remote sellers and marketplace facilitators, I have been made aware that I have a sales tax filing responsibility in Massachusetts along with several different states. How should I proceed?
The Multi-State Tax Commission can assist you in navigating through each state's voluntary disclosure process or you may choose to contact each state individually where you have an obligation. www.mtc.gov
If I decide to come through the voluntary disclosure program, is it sufficient to begin filing prospectively from the date of disclosure?
No. TIR 11-1 outlines the look-back periods for the VDA program. Generally a three-year look-back will apply to a foreign taxpayer while a seven-year look back will be applied for Massachusetts residents or corporations.
Once accepted into the VDA program can I file paper returns?
No. TIR 16-9 requires that all returns and payments must be made electronically.
I received a Notice of Failure to File from DOR for the tax type I wish to disclose do I still qualify?
No, if you have been previously contacted by DOR for the tax type you are trying to disclose, you do not meet the criteria listed above.
Why are there still penalties on my Notice of Assessment (NOA)?
Only late-pay and late-file penalties are waived through the program. Underpayment of estimated tax penalties are statutory additions to tax. (M-2210/M-2220)
Am I required to pay the full amount of tax due when I come through the program?
While you are not required to make a payment at the time of filing, it is recommended that the taxpayer makes a payment towards the tax liability to avoid the additional accrual of interest. A notice of assessment will be issued for any outstanding balance once the case is closed.
Will I receive a signed agreement from the state of MA regarding this VDA and the taxpayer’s acceptance into the program?
The DOR does not generally enter into written agreements regarding acceptance into the Voluntary Disclosure Program.
What happens after the VDA case is closed?
You will receive an approval or denial letter along with a notice of assessment for any outstanding liability. Please note that going forward, the expectation is for the taxpayer to file returns timely.
Are there any other similar programs for voluntary tax disclosure?
For these programs, contact the Corporate Tax Audit Bureau by mail, phone, fax or e-mail.
Corporate Tax Audit Bureau
Attention: Voluntary Disclosure Unit
Massachusetts Department of Revenue
200 Arlington Street, Room 4300
Chelsea, MA 02150
Phone: (617) 887-6725
Fax: (617) 660-0295