Technical Information Release  TIR 21-9: Expansion of Certain Electronic Filing and Payment Requirements

Date:	08/25/2021
Referenced Sources:	Massachusetts General Laws

Reissued 9/15/2021 to correct an error in Section I.B.

From time to time, the Department of Revenue (the “Department”) announces expanded requirements for electronic filing and payment of taxes for certain filers, as authorized under G.L. c. 62C, § 5.  The expansion of such rules reflects the advances in technology that have led increasing numbers of taxpayers to do business electronically.  Electronic filing offers many benefits to both taxpayers and the Department.  All current electronic filing and payment requirements can be found on the Department’s website at https://www.mass.gov/info-details/dor-e-filing-and-payment-requirements.

This TIR announces the expansion of electronic filing and payment requirements for certain tax types. It also announces an expansion of the Department’s two-dimensional (“2D”) bar code requirements for paper forms produced by tax preparation software programs. The expansions apply to the following tax types:

• Corporation, Financial Institution and Urban Redevelopment Excises
• Partnership Income Tax
• Fiduciary Income Tax
• Sales/Use Tax, including Sales Tax on Meals and Telecommunications Services

Where a return is required to be filed electronically, any schedules or supporting documents filed with the return must be submitted electronically. In addition, any amendment of that return, or request for abatement with respect to that return, must also be filed electronically.

This TIR revokes and replaces all prior TIRs to the extent they are inconsistent with this TIR’s requirements.

I. Expansion of Mandatory Electronic Filing for Certain Returns

A. Corporation, Financial Institution and Urban Redevelopment Excises

Currently, any business corporation seeking an extension of time to file its return must submit extension payments of $5,000 or more by electronic means.  Business corporations including S corporations, financial institutions and taxpayers paying the urban redevelopment excise are required to file all returns and payments electronically if their gross income is $100,000 or more.  Effective for tax periods ending on or after December 31, 2021, electronic filing and payment of tax will be required of all business corporations and financial institutions subject to tax under G.L. c. 63, with no income threshold.   

Form 121A (Urban Redevelopment Excise), Form 63FI (Financial Institution Excise) and Form 355SBC (Small Business Corporation Excise)[1] must be filed through MassTaxConnect.

Form 355S may be filed on MassTaxConnect if the S corporation meets all of the following conditions:

1. The corporation is not requesting alternative apportionment under G.L. c. 63, § 42; and
2. The corporation is not a mutual fund service corporation pursuant to G.L. c. 63, § 38(m).

All other corporate forms, including any Form 355S that does not meet the conditions above, must be filed electronically using commercial software.

B. Partnerships

Currently, the Department requires that partnerships at or above the applicable annual income or loss threshold, or with 25 or more partners, submit all Forms 3 and Schedules 3K-1 to the Department by electronic means.

Effective for tax periods ending on or after December 31, 2021, this TIR expands the electronic filing requirement to all partnership returns and schedules regardless of the partnership’s net taxable income or loss, or the number of partners in the partnership.

Form 3 may be filed electronically using commercial software or through MassTaxConnect.

C.  Fiduciaries

Currently, fiduciaries filing Form 2 or Form 2G with total Part A, Part B, and Part C (as defined in G.L. c. 62, § 2(b)) net taxable income of $50,000 or more are required to make all payments, including estimated payments, by electronic means.  

Effective for payments made on or after January 1, 2022, all fiduciary income tax payments of $2,500 or more must be made electronically.  This includes estimated payments, extension payments and return payments.  Payments may be made electronically using commercial software or through MassTaxConnect.

Effective for tax periods ending on or after December 31, 2021, tax return preparers must file all Massachusetts fiduciary income tax returns (Forms 2 and 2G) electronically, provided the tax return preparer reasonably expects to file more than 10 original Massachusetts Forms 2 and 2G during the calendar year.  This requirement parallels the requirement stated in TIR 11-13 regarding the filing of personal income tax returns. 

Forms 2 and 2G may be filed electronically using commercial software or through MassTaxConnect.

D. Sales/Use Tax, including Sales Tax on Meals

Currently, a vendor registered with the Department prior to September 1, 2003 and remitting sales and use taxes under chapters 64H and 64I, including sales taxes imposed on meals and telecommunications services, is required to file all returns and documents electronically and pay all amounts due via electronic funds transfer if the filer’s combined tax liabilities meet or exceed the $5,000 “combined tax threshold.”[2]

Effective for returns for tax periods beginning on or after January 1, 2022, and any late-filed returns for earlier periods, all vendors remitting sales and use taxes under chapters 64H and 64I, including sales taxes imposed on meals and telecommunications, and all businesses remitting use tax on purchases, are required to file all returns and submit all payments electronically, regardless of tax liability or the date they registered to collect sales tax.  

Sales and use tax returns must be filed electronically through MassTaxConnect.

II. Summary of New Mandatory Electronic Filing Requirements

The forms subject to new electronic filing requirements, as described in Section I, are listed below:

1.  Corporations:	Form 355
	Form 355S
	Form 355SBC
	Form 63FI

2. Urban Redevelopment Companies:  Form 121A

3. Partnerships:  Form 3

4. Fiduciaries:  Form 2 and Form 2G must be filed electronically if filed by a preparer who files more than 10 such returns.  All payments of $2,500 or more must be submitted electronically.

5. Sales/Use/Meals:	Vendor Registration
	Form ST-9
	Form ST-10
	Form ST-MAB-4
	Form STS

III. Penalties for Failure to File or Pay Electronically

If an entity required to file by electronic means fails to do so, such failure may be deemed a failure to file, unless the failure to file electronically is due to the breakdown of systems or equipment at the Department, or other circumstances under which the Department may exercise its discretion to waive penalties.  See Administrative Procedure 633. 

Generally, a taxpayer will receive a letter from the Department for the first instance of failure to file or pay electronically and will be penalized for any subsequent failure. If a taxpayer, without reasonable cause, fails to conform to any filing or payment requirement, a penalty of not greater than $100 for each improper return and for each improper payment shall be due.  G.L. c. 62C, § 33(g).

The information contained in TIR 04-30 regarding timely filing, penalties for failure to file, and the procedure to apply for waivers from electronic filing requirements continue to apply to the new electronic filing requirements announced in this TIR.

IV. Expansion of 2D Bar Code Requirements on Paper Forms Produced by Tax Preparation Software, for tax periods ending on or after December 31, 2021

As of January 1, 2004, all paper Forms 1 (resident personal income tax returns), Forms 1-NR/PY (nonresident/part-year resident personal income tax returns), and supporting Massachusetts schedules produced by tax preparation software programs were required to contain 2D bar coding and fixed-position text.

This TIR expands the 2D bar coding requirements set forth in TIR 03-11 and provides that 2D bar codes are required, effective for tax periods ending on or after December 31, 2021, for the following paper returns:  

Form 3 - Partnership (including all schedules)
Form 355S – S corporation (including all schedules)
Form 355 – Business/Manufacturing Corporation (including all schedules)
Form 2 – Fiduciary (including all schedules)
Form 2G – Grantor-Type Trust

All Massachusetts tax preparation software developed for commercial or individual use must be approved by the Department.  Prior to approval, a software developer will be required to provide the Department with a sample of a supported 2D bar code-enabled document with a 2D bar code.  Once the Department has identified and approved a document as 2D bar code enabled, the software provider must also show that there is no way the 2D bar code could possibly be disabled by a user.

The Department has made 2D bar code specifications available to software developers that produce Massachusetts tax preparation software. See Handbook for Reproduction of Department of Revenue Forms at https://www.mass.gov/info-details/dor-tax-software-developers.

Returns submitted to the Department without the required 2D bar codes may be rejected for failure to conform with Department specifications, thereby subjecting taxpayers to late penalty and interest charges. In cases where electronic filing is not required or is not possible – such as a return for a prior year for which electronic filing is no longer supported by software vendors – taxpayers may file a paper return with 2D bar codes.

 

            /s/Geoffrey E. Snyder
            Geoffrey E. Snyder
            Commissioner of Revenue


GES:RHF:wm

August 25, 2021

TIR 21-9

[1] A corporation may file Form 355SBC if it meets all of the following conditions:

1. The corporation had gross receipts or sales under $1,000,000.00 (from U.S. Form 1120, line 1c) and total income under $1,000,000.00 (from U.S. Form 1120, line 11);
2. 100% of the corporation’s net income was taxable in Massachusetts and was not subject to tax in another state;
3. The corporation was not a DISC, an S corporation, or a Massachusetts Security Corporation;
4. The corporation did not own 50% or more of the voting stock of another corporation and did not have 50% or more of its voting stock owned by another corporation (i.e., was neither a subsidiary nor a parent corporation); and
5. The corporation is not claiming any credits, special deductions, or adjustments against its Massachusetts corporate excise.

Corporations eligible to file Form 355SBC that choose not to must file Form 355 electronically using commercial software.

[2] The applicable tax types for the “combined tax threshold” are wage withholding, room occupancy consolidated, sales and use (including sales tax on meals and telecommunication services) alcoholic beverages excise, cigarettes and tobacco products (including electronic nicotine delivery systems), gasoline and fuel, ferry embarkation, satellite services, convention center financing surcharges and vehicle rental surcharges.