I've written about this here every year since it started happening to us in around 2009. Every year, it's the same problem, but the Mass. DOR has started handling it a little differently from year to year to prevent monotony and keep me on my toes.
The issue is always the personal use (or sales) tax that Massachusetts residents are required to pay on out-of-state purchases, especially from online sellers. We calculate the correct "safe harbor" amount, based on our income, and pay it. Some years we owe money to Massachusetts but we receive a surprise refund check. Some years we're owed a refund and get a bigger one. In both cases. the sum in question is suspiciously similar to the amount of "personal use" tax that we paid. If we receive it in a refund check and cash it, a month or two later we will receive a sternly-worded letter that says we owe the DOR that same amount — plus a penalty of around $2.
This year, we owed money but I told my husband to expect a refund check, and to give it to me so I could call the DOR and tear it up as I spoke to an agent. Instead, they sent us a sternly-worded letter plus a Form M-8379. It stated that we had overpaid our income taxes by $144 but that the State was legally entitled to apply that overpayment to any tax that we owed. And we happened to owe personal-use tax, which just happened to come to that exact amount... plus a penalty of $1.49.
I was instructed to write a letter to a certain address if I had questions. So I called them up. I explained the whole story to the agent and he saw my point. He told me he had an idea on how to fix it, and asked me to hold. Then he disconnected me. When you are disconnected from the DOR, you are immediately connected to a recorded customer-satisfaction survey. Since I hadn't had my issue settled, I vented a lot of dissatisfaction.
Then I redialed. I explained to a different agent that I had been disconnected after explaining a detailed problem, so would he like my phone number, in case it happened again? He said he wasn't allowed to make outside calls. "Wow, that must feel like being incarcerated," I said cheerfully. Then I told my story again.
The agent said we have been victims of a computer glitch that he would have to bring up in a meeting, although he hadn't seen it before. Every year, I hear that. And then I ask the agent why — if millions of Mass. residents use TurboTax — we seem to be the only couple having this problem every year.
This agent was the first one in all these years to confirm what I have long suspected — that hardly anyone pays the personal use tax except us! But he said they were about to start cracking down on tax evaders and it would be retroactive. So if you've been skipping your safe-harbor payment over the last few years, be prepared. You'll have to pony up big-time, with fines. (And then the DOR will probably refund you and then bill you, and charge you a fine. But you won't be surprised because I've warned you.)
I predict that the DOR will get their ducks in a row to start nabbing you tax-evading crooks by about 2026. But by then, all of us who have any brains will have moved out of state because of the 2024 Olympics.
The agent cleared our $1.49 penalty when I pointed out that we had paid the tax on time. At this point during my annual ritual phone call, I traditionally and thoughtfully suggest that maybe the glitch is a DOR scam to collect a couple of extra bucks from gullible tax payers, which would bring in extra millions. Usually the agent shuts that idea down fast. This year I decided not to go there, to prevent monotony.
I said that owing tax penalties keeps me up at night. The agent apologized. I said that my dad always told me to pay my taxes because that's how the Feds got Al Capone. (Please note that my dad never told me to avoid any of Al Capone's other criminal activities. My orders are simply to pay taxes.) The agent told me that his parents had told him the same thing, which is why he works for the Mass. DOR.
I thanked him and said I looked forward to having a similar discussion with him next year. He laughed as he hung up.