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Tax penalties: Massachusetts amnesty program might help

When you do not have the money to pay your tax bill before the filing deadline, you may not file a return. Requesting an extension usually does not avoid the failure to pay penalty.

Federal and state tax penalties add up quickly. On top of the back taxes and interest, the amount you owe may easily skyrocket. But a new two-month Massachusetts amnesty program might provide some relief when it comes to state penalties.

Earlier this year, House Republicans sponsored the tax amnesty program as a way to collect overdue tax revenue. Governor Deval Patrick recently signed the measure into law.

The Massachusetts Department of Revenue website lists failure to file and late pay penalties. The late file penalty accrues at one percent of the amount of tax owed for each month the return is late. The penalty caps at 25 percent. Similarly, late pay penalties increase one percent for each month or fraction of a month that the payment is late, but cannot exceed 25 percent.

The amnesty program allows you to pay taxes and interest during a two-month window and avoid these state-assessed penalties. You may be eligible if:

  • You have outstanding tax debt or
  • You failed to pay the correct estimated taxes and were left owing a substantial tax bill

The waiver will not apply in cases where a criminal tax investigation is underway. It will also not affect federal penalties.

Depending on your circumstances, this program may allow you to pay a reduced amount in back taxes and avoid a Massachusetts state lien or levy. An experienced tax attorney can explain more details and discuss all possible avenues to resolve your outstanding tax debts.

Source: Boston.com. "Mass Approves 2-Month Tax Amnesty Program," July 13, 2014.

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