Massachusetts is in the midst of a tax amnesty running from Nov. 1 to Dec. 30. Tax amnesties don’t come around often and don’t last long.
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Massachusetts is in the midst of a tax amnesty running from Nov. 1 to Dec. 30. Tax amnesties don’t come around often and don’t last long. The Department of Revenue has mailed thousands of amnesty eligibility letters to those who have existing tax liabilities, offering them a chance at having penalties forgiven if they can pay their debt in full by the end of the year. When the Legislature included the amnesty in the state budget, it projected raising $100 million in revenue. The program will resolve the tax burdens of those who have the ability to make amends within the limited time window. A win-win, it seems, except for those distressed taxpayers who cannot quickly come up with a lump sum.
It will be impossible for many low- to moderate-income taxpayers and small business owners to take advantage of the tax penalty amnesty. Amnesties targeting a class of individuals who can pay up do not take into account individual circumstances. Distressed taxpayers can settle debts another way.
Though not well known, Massachusetts law includes a settlement program started in 1998. These individual settlements are akin to personalized amnesties. In our practice, however, tax debtors with very limited resources have a much better chance at negotiating their troubles away with the Internal Revenue Service than with Mass. DOR. The IRS program is not perfect, and it is certainly not as easy as late-night infomercials make it seem, but the federal program is more accessible and transparent.
Unsurprisingly, the state accepts vanishingly few offers, and practitioners are often reluctant to even try. To fix this, the more equitable and transparent IRS model should be adopted in Massachusetts.
A bill pending at the State House would update our state program. “An Act Providing for Settlement in Tax Liability” received a favorable review from the Committee on Revenue and is languishing in the Ways and Means Committee. It would give more guidance to the DOR, eliminate minimum payments out of reach of many residents, and demand taxpayers granted relief remain in compliance with their obligations for three years.
By rehabilitating taxpayers who are suffering undue hardship and for whom it is impossible to repay the entire debt, we would increase tax rolls and foster future compliance. By taking into account life circumstances, we can create a more humane tax system for working-class households and small business owners.
Luz Arevalo and Angela Divaris are attorneys at Greater Boston Legal Services, covering municipalities including Acton, Harvard, Littleton, Maynard, and Stow.
