Guide to Resolving Massachusetts Back Tax Problems

The Massachusetts Department of Revenue (DOR) is responsible for enforcing the tax laws of the Commonwealth for individuals and businesses. Like the IRS, DOR is committed to helping troubled taxpayers by offering various solutions to help them get back into full compliance of Massachusetts tax laws.

Payment Plan/Installment Agreement

If you cannot pay the state taxes you owe in full, you may be eligible to enter into a payment agreement which will allow you to pay off your taxes in monthly increments.

In order to apply, you must have received a tax assessment bill that shows the amount of taxes owed. Massachusetts has an online application process for applying for a payment agreement. Keep in mind that you must be able to pay all taxes that are owed plus any interest and penalties. If you do not think you can pay for all the taxes owed through monthly installments then consider the other options below.

Offers in Final Settlement

Massachusetts offers a tax settlement program called Offers in final Settlement which allows taxpayers to settle taxes for an amount less than the total tax liability owed.

Eligibility for Offers in Final Settlement Agreement

The state of Massachusetts may consider you for a settlement if you meet one of the following requirements:

• Reason 1 – Question of Liability: There is doubt that the assessed tax is not correct.
• Reason 2 – Doubt as to collectibility: There is about that you will ever be able to pay off the tax amount owed. This could be considered if your monthly required expenses exceed your income and the value of your assets is less than the tax liability owed.

Filing Requirements for an Offers in Final Settlement

Filing Requirements for Reason 1 – Question of Liability

• Form DR-1, Office of Appeals Form: It is sent to the DOR Office of Appeals and explains why you don’t believe the tax liability or portion of it, is owed.

Filing Requirements for Reason 2 – Doubt as to collectibility

• Form M-656, Offer in Settlement: Official form that must be used to request an Offer in Settlement based on collectibility
• Form M-433, Statement of Financial Condition: Form that details the taxpayer’s current financial condition
• Form OIS/AB, Taxpayer’s Consent: Gives the DOR ability to apply the deposit amount of the Offer to the deduced liability amount or put the proceeds in an escrow account that will be held until a decision has been made on the offer.

Abatement of Taxes

The state of Massachusetts allows taxpayers to file abatements to remove tax penalties if the taxpayer had reasonable cause for not filing or not paying on time and they can show it was not willful neglect.

Reasonable Cause Possible Factors

• Delay was due to death or serious illness: This can be due to the death of a loved one, taxpayer being seriously ill or caring for someone who is seriously ill
• Unavoidable absence of the party responsible for filing: This can be due to imprisonment, stranded on an island, or any other reason where the absence was unavoidable
• Deconstruction of property: This can be due to a natural disaster, fire or other casualties
• A delay from an inability to obtain documents necessary to determine the tax amount owed
• The taxpayer was incorrectly advised by a tax professional which caused penalties
• Delay due to lack of clarity in laws or its interpretation
• Any other reason: If the taxpayer can show that care was exercised to the same degree that an ordinary taxpayer in the same position would have, then the reason will be considered by the state of Massachusetts

Filing for Abatement

1. Tax returns must be filed before or at the time of the abatement application. An application cannot be filed until a tax amount due has been assessed.
2. The application for abatement must be filed within 3 years of the due date of the tax return, within two years of the date of the notice of assessment or within one year from the date the tax was paid (whichever is later).
3. Penalty Waiver Request: The taxpayer must provide a penalty waiver request that includes a signed statement of facts that supports the taxpayer’s statement that noncompliance was due to reasonable cause.

Office of the Taxpayer Advocate

The state of Massachusetts has created the Office of the Taxpayer Advocate for taxpayers that have problems resolving problems through normal DOR channels. They were created to serve as the DOR’s ombudsman to act as an independent voice in reviewing prolonged individual tax issues. You should use the Taxpayer Advocate as a last attempt effort to resolve tax issues with the state of Massachusetts.

Contacting the Office of the Taxpayer Advocate

Phone: (617) 626-2280
Email: taxadvocate@dor.state.ma.us
Address:
Massachusetts Department of Revenue
Office of the Taxpayer Advocate
100 Cambridge Street, 8th Floor
Boston, MA 02210

Our Simple Tax Relief Process