The Massachusetts Chapter 62F Refund: IRS Won’t Tax This Stimulus Check

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Stimulus Check
Stimulus Check

The fiscal year 2022 saw the tax revenue of Massachusetts exceed the annual cap on tax revenue set under the Massachusetts General Law (Chapter 62F) by a generous sum of $2.941B. And this statute stipulates that such excess revenue should be returned to taxpaying residents of the state as stimulus checks.

Massachusetts has returned close to $3B to state taxpayers by the end of 2022 as Chapter 62F of the state laws got triggered. It is a little-known 1986 law that limits how much money the state is allowed to collect.

Generally, this translates to a refund stimulus check of 14.0312% of the Massachusetts personal tax liability for 2021, generally payable in the first quarter of 2022. It is to be noted that such credits may stand reduced as refund intercepts. Refund intercepts include unpaid child support payments, due tax liability, and certain other specified debts.

The distribution of the Massachusetts stimulus checks began on November 1 last year. Eligible filers received the refunds directly through paper stimulus checks sent through the US Postal Service, or direct credit to bank accounts.

Stimulus Check
Stimulus Check

For those residents who have filed their state income tax returns for the tax year 2021 and had a tax liability, no further action would be needed. Such filers will automatically receive the state stimulus checks.

Such filers can expect the Massachusetts stimulus checks by December 2022. Those who have failed to file their income tax returns are still eligible to file their state income tax returns by September 15, 2023. If they become eligible for a refund stimulus check, they will receive the amount within a month of filing their taxes. State filers can take the help of the tax estimator to determine the tax refund over their income tax liability of the state file.

The Massachusetts General Law enabled the Dept. of Revenue to issue a taxpayers’ credit if the total revenues from taxes in any given fiscal exceed the annual cap tied to the growth of salary and wages in the Commonwealth. It was enacted by voters in 1986 through a ballot questionnaire. Only once before has the Chapter 62F process by triggered and that was way back in 1987.

Determines If Chapter 62F Has Been Triggered To Enable A State Stimulus Check

The Massachusetts state law stipulates that the revenue department of the state submit its report to the Massachusetts state auditor on the net tax revenues of the state and the tax revenues for the state that becomes automatically allowable under Chapter 62F, thus permitting state stimulus checks that fiscal. This is done every fiscal year on or before September 1.

In the next stage, the auditor of the state determines whether the net tax revenues of Massachusetts exceed the allowable tax revenue of the state. It also determines by what amount it is exceeded before the third Tuesday of September each year. In 2022, that date was on the 20th.

The 2022 financial year tax revenue of Massachusetts was $41,812,654,358, exceeding the allowable threshold for state revenue for the 2022 financial year as defined by the law under Chapter 62F by $2,941,499,731 as the allowable revenue was $38,871,154,627. Thus, around $3B will be returned to Massachusetts state filers as per the statute.

The eligibility for the refund stimulus check under Massachusetts state law is for any resident who has paid personal taxes in the state for the tax year 2021. They must also have filed the state income tax return for 2021 by September 15 of 2023 automatically becomes eligible for the refund stimulus check under Chapter 62F. It may be noted that those who have filed their state income tax return for 2021 from the state of Massachusetts or will do so before September 15, 2023, are eligible for a refund.

It may be noted that both residents and also non-resident income tax filers are eligible for this state stimulus check. Also, eligible are non-residents on whose behalf an S corporation or a partnership is filed on a composite basis. Fiduciary income tax filers, including trusts or estates, are also eligible. But pass-through entities electing to pay their excise under Chapter 63D are not entitled to the refund stimulus checks.

Filers who have already filed their income tax return for the state for the 2021 tax year and had a tax liability do not have to take any action. They have already received their state stimulus checks or should expect them soon from the US Postal Services.

Chapter 62F of the Massachusetts law requires that the distribution of the amount of the credits is in proportion to the personal tax liability in the state that was incurred by taxpayers in the taxable year that immediately precedes, which in this case is the financial year 2021. Thus, in general, taxpayers can expect the refund stimulus check that will come to 14.0312% of their personal tax liability in the state of Massachusetts for the 2021 tax year.

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This percentage was decided upon by the revenue department after the extended deadline of the individual tax returns for 2021 passed on October 17 last year. It should also be noted that the credits become subject to offsets, which include unpaid liability of income tax, unpaid child support payments, and a few other stipulated debts.

Close to two dozen states have paid special tax rebates in 2022, but the IRS did not issue any specific guidance on how filers should handle those payments until recently. It initially told taxpayers in the relevant states to wait on filing. With the guidance released on Friday night, taxpayers can now proceed to file their federal tax returns.

Are Residents In Massachusetts In Line For Another Round Of Stimulus Checks?

It becomes difficult to project whether residents of Massachusetts are in line for tax refunds under 62F. Multiple economic factors that have contributed to the huge surplus revenue and the 62F refunds for 2022 that include higher tax revenue, gains on the stock market, and collection of corporate tax may have a similar impact on the Chapter 62F formula this year.

Some policy advocates and lawmakers have voiced concern about certain aspects of Chapter 62F. it includes whether the refunds have benefitted mainly wealthy taxpayers. Questions have also arisen about whether the law should be revised or revisited given the huge amount that is perhaps being sent back to undeserving filers.