Massachusetts tax amnesty begins Nov. 1

On July 29, 2024, Massachusetts enacted budget legislation authorizing the Commissioner of Revenue to establish a 60-day tax amnesty program during the fiscal year ending June 30, 2025.¹ The Massachusetts Department of Revenue has released information on the tax amnesty program and announced that it will be conducted from Nov. 1 to Dec. 30, 2024.² Massachusetts will waive most penalties for eligible individuals and businesses who file outstanding returns and pay tax and interest owed for tax periods with returns due by Dec. 31, 2024. There is no limit on how far a taxpayer can look back to report or pay overdue taxes. Also, a limited lookback period generally is provided for non-filers.

Taxes included in program

The amnesty program includes a broad array of tax types, including personal income, corporate excise, sales and use (including meals), trust, estate, marijuana excise, and room occupancy taxes.³

Eligible and ineligible participants

Entities and individuals may participate in the amnesty program if they: (i) have unfiled returns, underreported obligations, or existing tax obligations; (ii) currently are under audit for periods with returns due by Dec. 31, 2024; or (iii) have pending resolution, Appellate Tax Board, or collection cases. However, entities and individuals are not eligible for amnesty if they: (i) received prior amnesty relief in 2015 or 2016 for the same tax type and period; (ii) are seeking a waiver of penalties related to a tax that was already paid; (iii) are seeking a refund of tax or a credit for an overpayment; (iv) are, or have been, under tax-related criminal investigation or prosecution or filed a false or fraudulent return, statement, or fraudulent amnesty return; or (v) are active in the bankruptcy process.

Operation of program

In general, to receive tax amnesty, taxpayers must submit an Amnesty Request⁴ on MassTaxConnect, pay the total tax and interest due, and file all required returns by Dec. 30, 2024. Returns may be filed on MassTaxConnect or through third-party software. To request amnesty for multiple tax types, taxpayers must submit a separate Amnesty Request for each tax type. However, taxpayers may include multiple tax periods for the same tax type in one Amnesty Request. A taxpayer filing an outstanding return or reporting an additional tax due on a previously filed return retains the right to file an amended return or application for abatement within the usual time limits. There are specified steps that eligible entities or individuals must take to obtain tax amnesty, which vary according to the character of the issue that each entity or individual is trying to cure through the amnesty process. In all cases, all steps need to be completed by Dec. 30, 2024.

Amended returns

Taxpayers who determine they underreported their income or tax on a previously filed return must submit an Amnesty Request on MassTaxConnect, indicate that the request is for an amended return, enter the tax liability based on the amended return calculation, pay the total amount of tax and interest shown on MassTaxConnect, and file the amended return.

Taxpayers receiving Amnesty Eligibility Letter

The Department is sending an Amnesty Eligibility Letter to taxpayers with an existing tax liability, including liabilities resulting from a closed audit. To receive tax amnesty, taxpayers with an Amnesty Eligibility Letter must submit an Amnesty Request on MassTaxConnect, enter the Amnesty Letter ID to verify their Amnesty Request, and pay the total amount of tax and interest shown on MassTaxConnect.⁵

Taxpayers with an open audit

If taxpayers have an open audit, they should contact their assigned auditor at the Department to discuss amnesty and the tax and interest amounts due. To receive tax amnesty in this circumstance, taxpayers need to agree to the audit adjustment, submit an Amnesty Request on MassTaxConnect, indicate that the request is for either an amended return or a new tax liability, enter the tax liability based on the audit calculation, pay the total amount of tax and interest shown on MassTaxConnect, and file a return to report the additional tax.

Taxpayers who failed to file required return

Taxpayers who determine they were subject to Massachusetts tax but failed to file a return must submit an Amnesty Request on MassTaxConnect, indicate that the request is for a new tax liability, enter the tax liability based on the return calculation, pay the total amount of tax and interest shown on MassTaxConnect, and file the unfiled tax return.

Limited lookback period

The amnesty program generally applies a limited three-year lookback period to non-filers. Outside of amnesty, if an entity or individual has not filed all required tax returns, the Department generally requires the filing of returns for the most recent seven years. For the 2024 amnesty program, the Department will only require an eligible non-filer to file returns for the three prior years (returns due from Jan. 1, 2022, through Dec. 31, 2024), without regard to extensions. The limited lookback period is available to eligible non-filers who have not been previously contacted by the Department, who submit an Amnesty Request, and who file all returns that were due from Jan. 1, 2022, through Dec. 31, 2024, with full payment of tax and interest. The Department clarifies that the limited lookback applies separately to each tax type.

The limited lookback period does not apply to non-filers who have been contacted by the Department about unfiled returns, taxpayers reporting trustee taxes (such as sales and use, meals, and withholding) where the tax was collected but not paid to Massachusetts, or taxpayers filing estate tax returns.⁶

Amnesty determination notice

The Department will issue a determination letter for each tax type when the taxpayer’s Amnesty Request has been either fully or partially approved or denied. If an Amnesty Request is denied, any payments made will be applied to outstanding liabilities.

Commentary

Following tax amnesty programs offered in 2015 and 2016, this is the third tax amnesty program that Massachusetts has offered in the past decade. As noted above, entities and individuals are not eligible to participate in the upcoming amnesty program if they were granted amnesty for the same tax type and period in 2015 or 2016. Entities and individuals who believe they owe Massachusetts taxes are advised to consider participating in this program to avoid most penalties. It is important to consider the effect of the tax amnesty program on tax audits and controversies, especially in cases where significant penalties could be at issue. Typically, state tax amnesty is limited to situations in which entities and individuals have not been filing tax returns, so the ability to utilize tax amnesty to resolve a current audit or controversy is relatively novel. As a result, from the Department’s perspective, the tax amnesty program may serve the dual purpose of bringing in revenue that should have been paid to the state, as well as reducing the overall portfolio of tax controversies within the Department’s pipeline. From the perspective of filing taxpayers, and non-filing entities and individuals, the tax amnesty offers an option to accelerate the settlement process in an existing controversy or cure historic non-filing positions.