Paying taxes on time can be challenging. For some, there are situations when they are unable to pay them at all. Financial difficulties or emergencies occur in people’s lives, which can result in postponing timely tax payments. Taxpayers are sometimes unprepared for a large tax assessment. They may not have the funds available when the tax is due. Unfortunately, there are consequences of not paying taxes on time.
Penalties for not paying taxes when due
The penalty for failing to pay taxes on time is 1% per month, or a fraction thereof, up to 25% of the unpaid tax. When a tax return is not filed in a timely manner, the penalty is the same from 1% per month up to 25%.
Taxpayers who evade paying their taxes altogether or those who willfully evade paying their taxes can face a potential fine of up to $100, 000, a sentence of up to 5 years in jail, or a combination of both.
Payment agreements offered by Massachusetts DOR
Massachusetts Department of Revenue (DOR) offers options for taxpayers to avoid additional expenses. The primary form of assistance from the DOR is the opportunity to enter into a payment agreement.
To be eligible for a payment agreement, a taxpayer must first file their income tax forms. Those who do not file are not eligible for this payment plan until they do. Only taxpayers who receive a Notice of Assessment from the DOR will qualify for this option.
Receipt of Notice of Assessment
Taxpayers will receive a notice of assessment when the DOR determines that they owe taxes or additional taxes. This assessment could be determined by:
- An audit
- A late tax return
- A return that was submitted without payment or inadequate payment
- An error made on the return
When a taxpayer receives a Notice of Assessment, they have 30 days to pay the full amount to prevent any additional interest and penalties from being added. Taxpayers can then:
- Enter into a payment agreement
- File an amendment to their taxes, correcting any errors
Application for a payment agreement
Massachusetts DOR allows taxpayers to enter into payment agreements when they are unable to pay their entire tax bill. Taxpayers may apply for a payment agreement through MassTaxConnect, the online portal for taxpayer services with DOR, or they may call the DOR Contact Center at (617) 887-6367 or DOR Collections at (617) 887-6400 for further assistance.
Payment arrangements can be made from $25 or $50 per month, depending on the total amount owed. Payments can continue as long as the taxpayer is in compliance with the plan. Payments can be made through MassConnect, on the phone, or by mail. DOR accepts most major credit cards, EFTs from banks, checks, or money orders by mail.