Do Your Clients Owe Any Massachusetts Back Taxes?

The Massachusetts Legislature enacted a Tax Amnesty Program that will run from April 1, 2016 through May 31, 2016. Unlike the programs the Massachusetts Department of Revenue (“DOR”) administered during 2014 and 2015 that were targeted in approach, the 2016 program is more liberal in scope in that it applies to unfiled and amended tax returns.

The 2016 program, however, does not cover existing tax liabilities and any taxpayer who participated in either the 2014 or 2015 programs is not eligible to participate in the current one for the same tax types or tax periods.

I.  Who is eligible?
The program is available to any individual or business who has not:

1. Registered with the DOR and is required to do so;

2. Filed a required tax return; or

3. Reported the full amount of taxes owed on a previously filed return that were due on or before December 31, 2015.

The program is not available to any individual or business who is or has been subject to a tax-related criminal investigation or prosecution or who has filed a false or fraudulent return or statement.

II. What tax types are included?
All of the tax types administered by the DOR are included in the program except for the Preferred Provider excise tax and the taxes that are part of the International Fuels Tax Agreement (IFTA).

III. What are the benefits to the taxpayer?
The taxpayer will:

1. Pay only the actual tax owed plus interest calculated on the tax liability;

2. Limit the number of years unfiled returns will be required to a three (3) year look back period rather than the unlimited number of years that are open when no return has been filed;

3. Not have any tax penalties assessed; and

4. Not have interest assessed on penalty amounts that may have been owed.

The look-back period of 3 years is an excellent opportunity for non-filers to come forward  and get on the tax rolls and remain compliant in the future without the risk of criminal prosecution or the requirement to pay liabilities, interest, and penalties for an unlimited number of years.

IV. What if the taxpayer does not take advantage of the Amnesty Program?
After the May 31^st date, taxpayers may be subject to the following:

1. The DOR may assess double the amount of tax due plus all interest and penalties;

2. There will be no three (3) year look back period available and no statute of limitation on assessments will apply to unfiled tax returns;

3. The DOR will be able to use a six (6) year statute of limitations period rather than the standard three (3) years if certain conditions are met; and

4. The DOR will use escalating enforcement actions including the potential for criminal prosecution.

Over the last couple of years the DOR has been developing its state-of-the-art integrated tax system and will be better positioned to locate non-filers and under-reporters.

V. How does the taxpayer or practitioner participate in the Amnesty Program?
The DOR will have an Online Amnesty Return available on its web page starting on April 1^st for taxpayers or practitioners to calculate the total amount due, including the appropriate interest for each tax period. Once the total liability is determined, taxpayers and practitioners will submit an electronic payment with the amnesty return.

Our Tax Team stands ready to assist you and your clients in understanding and complying with the current statutory language or the potential impact of any proposed change. Members of our team can also assist practitioners and their clients with tax planning or tax representation before the Internal Revenue Service or the various states’ Departments of Revenue.