Massachusetts – Tax amnesty program

On July 11, 2014, Massachusetts enacted H.B. 4001, which requires the commissioner of revenue to establish a tax amnesty program. Pursuant to that authority, the commissioner has announced that the tax amnesty will take place during the months of September and October, 2014.

Participation in the tax amnesty program is by invitation for taxpayers that meet certain criteria. For those taxpayers that qualify, tax amnesty notices showing the tax and interest due, along with the penalties to be waived, will be mailed on September 2, 2014. Qualified taxpayers that pay the tax and interest shown on the bill on or before October 31, 2014, will have any unpaid penalties waived. Payment of the outstanding tax liability does not constitute a forfeiture of statutory rights of appeal.

Read more: pwc-massachusetts-tax-amnesty-program

Increased Payroll Scrutiny

The frequency of payroll audits has surged over the last five years and businesses are facing increased payroll scrutiny.

Most payroll audits have traditionally focused on whether or not a business is misclassifying an employee as an independent contractor, thus avoiding Social Security, Medicare and other payroll taxes. According to an article published last March by the Wall Street Journal entitled Payroll Audits Put Employers on Edge, “local businesses misclassify anywhere from 10% to more than 60% of their workers as independent contractors.”

Since the 2008 economic meltdown states have been springing into action to audit payroll taxes as a way to increase revenue. States are assessing hefty fines for misclassification. For example, Colorado passed House Bill 1301, which allows the Colorado Department of Labor and Employment to fine a business up to $5,000 for the first misclassification offense and up to $25,000 for subsequent offenses (Payroll audits increase as government seeks added revenue, Heather Draper, Denver Business Journal).

The increase in payroll audits has also been intensified by the Federal government. The U.S. Department of Labor has issued partnership agreements with California, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington to collaboratively investigate more than 6,000 employers for misclassifying employees. The U.S. Treasury estimates that if all employers were forced to properly classify employees it would result in $8.71 billion in added federal tax revenue over the next decade.

If an employer is misclassifying employees then they can take advantage of a voluntary disclosure program. The IRS is offering a Voluntary Clarification Settlement Program (VCSP) that allows employers to reclassify employees while minimizing look back, and waiving penalties and interest. Similar agreements may be negotiated at the state level.

Resistance To Tech Tax/Service Tax!

This article from USA Today outlines the problems that states are having keeping up with an economy that is ever shifting from industrial and products based to technological and service based. States are running into resistance as they attempt to implement new technology taxes and service taxes.

This resistance is best illuminated by the backlash the Massachusetts legislature experienced after it passed a sales tax on tech services. The 6.25 percent tax was designed to pay for roads, subways, buses and bridges. But after it passed the tech industry heavily lobbied, and the tax was repealed.
The article also points out that most states do not tax services, and that the taxation of consumer goods can only go so far.

To read more:

I’ve collected the MA Tech Sales Tax. . . Now What?

A controversial 6.25% sales tax on computer and software services was repealed by the Massachusetts legislature and governor after being in effect just under two months.

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For those who have already collected the sales tax but have not remitted it, you must make “reasonable efforts to return that tax to the retail customers from whom the tax was collected,” according to the Massachusetts Department Of Revenue. If you have filed and or remitted the tax, you must follow the steps listed in the Technical Information Release 13-17 (see link below) to file an abatement.