How Maryland Collects Taxes & Tax Help Options for Those in Need
Maryland’s Office of the Comptroller is responsible for administering the tax laws of the State and a major part of this involves collecting taxes, which is handled by the Collections Section. When individual taxpayers or businesses are unable to pay their taxes on time and in full, the State has no choice but to make an effort to collect those taxes. If enough time goes by without a response from taxpayers, the collection efforts can become fairly aggressive, as follows:
If you fail to file and pay your taxes on time and do not make payment arrangements with the State, you can expect to be on the receiving end of enforced collection efforts. These activities may include the filing of liens, attaching your assets and bank account(s), garnishing your wages and denying the renewal or issuance of any state licenses. Rather than risking any of these repercussions, it would make sense to hire a tax professional or CPA for the tax help and advice he/she could provide in resolving the matter once and for all.
Interest & Penalties
Taxpayers who file and/or pay late, whether an individual or business, are subject to having interest and penalty charges added to their tax bill.
Admissions and amusement tax, sales and use tax and/or tire recycling fees filed late could be charged a minimum of 1% interest per month and and a penalty of 10%. If you are a vendor in this situation you would also be disqualified from receiving the “timely filing discount.”
Withholding returns that are filed late are subject to a penalty of 5% initially, which goes up after 30 days to 10% plus interest charges.
If you get a Notice and still do not file your tax return, you will incur additional penalties along with being levied an estimated assessment. Once you receive an Assessment Notice you have just 30 days to reply and if you dispute the amount you can request a hearing. If you fail to file a dispute the assessment then becomes final and collection efforts may commence.
For Individual Taxpayers
The Comptroller may assess penalty charges of up to 25% of what is owed with 13% interest charged as well per year on outstanding taxes.
If you do not make payment arrangements to pay off your taxes or don’t make your installment payments on time, you may have a tax lien filed against you. A lien is issued to protect the State’s interest and enables the State to embark on collection activities to satisfy your liability. A lien also becomes public information and will likely have a negative impact on your credit report, which will impair your ability to buy, transfer or sell any real estate you own.
Wage & Asset Seizure
Once the Comptroller of Maryland files a lien against a taxpayer, the seizure of assets or wages may soon follow through an attachment order. Your bank account(s), paycheck, business equipment and inventory as well as real estate may be attached and ultimately seized and sold to pay off your delinquent taxes.
Denial of Driver’s License Renewal & Vehicle Registration
You should also know that Maryland’s Office of the Comptroller requires that all taxpayers be up-to-date in paying their taxes, have their tax debt paid in full or an Installment Payment Plan in place in order to renew their driver’s license and vehicle registration. If your driver’s license or car registration is being held up due to a State tax debt, go online to the Comptroller’s website and read question 4 for instructions on what to do.
Revocation of Business Licenses
Vendors who do not remit their sales and use tax may receive a summons from the Comptroller to attend a hearing regarding the status of their licenses. If you do not appear for the hearing or do not pay the taxes you owe or contact the Comptroller to make payment arrangements, you can expect your license to be revoked. Without a business license most businesses would have to close their doors. Every business should have a tax professional who offers tax help and advice on a regular basis so it can run smoothly without risking its license. The enforcement of license revocations occurs through civil court orders, criminal proceedings or via local liquor boards.
Personal Liability for Business Taxes
Any corporate officer who has at least 20% ownership may be held financially liable personally for any unpaid sales and use tax plus interest and penalties the corporation owes. These officers include, but are not limited to, the president, vice president or treasurer. Furthermore, any officer who directly control’s the business’ finances may be held financially liable personally for unpaid withholding as well as admissions and amusement taxes plus interest and penalties.
The bankruptcy of a business does not eliminate tax debt so the payment of taxes for a business in bankruptcy would be the personal responsibility of the owners and certain corporate officers.
Unpaid Tax Debt is Public Information
The Comptroller of Maryland aggressively goes after people, business entities and corporate officers who are carrying a large unpaid tax debt. The Comptroller publicly names these individuals and businesses on a list published online. Any recorded judgments and liens against these delinquent taxpayers filed in any circuit court in Maryland are public information as well.
Programs Providing the Taxpayers of Maryland Tax Help & Tax Relief
Although the Office of the Comptroller is responsible for administering the tax laws of the state, it does provide some flexibility to taxpayers who are having difficulty paying their taxes. If you need more time to file or pay your taxes, or if you are having major financial problems and do not see how you will ever be able to pay off what you owe, the State provides options. If you are having trouble paying your taxes it would make sense to consult with a tax professional, CPA or tax attorney for the tax help you need in evaluating your options.
Power of Attorney
The Maryland Office of Comptroller allows taxpayers to designate others to represent them before the Comptroller with regard to their taxes. Form 548 is the only acceptable form for designating Power of Attorney.
Appeals & Hearings
You are within your rights to appeal a tax assessment, interest, penalty or the denial of a tax refund that you disagree with. You would do this by filing an appeal of the Notice of Assessment you received from the Comptroller within 30 days of the date the Notice is postmarked. The first step of the process would be the setting of an informal hearing. If you plan on appealing your Notice of Assessment, it would be wise to consult with an experienced tax professional for their tax help and guidance through the appeals process.
Installment Payment Plans
When the Comptroller determines that you owe a back tax debt, you will be notified in writing with a Personal Income Tax Balance Due Notice in the mail. If you are unable to fully pay what you owe, the Notice allows you to select among several choices the payment term that would work best for you. Then, return your Notice using the envelope enclosed. While you’re waiting for your requested payment plan to be processed, you should start making payments. At some point you will be notified that your payment plan has been approved along with the terms of the agreement.
If you do not think any of the terms offered in the selection will work for you, please contact the Collection Department by phone at (888) 674-0014 or (410) 974-2432 to discuss your financial situation. You can also send an email to firstname.lastname@example.org.
Include the following information in your email:
- Your full name and address
- Your phone number
- The number on your Notice or your case number
- The last 4 digits of your social security number
If you want to arrange your Installment Payment Plan online you can to the Online Payment Agreement Request Service on the Comptroller’s website to get it set up. To complete the request you must register with the service center.
You are not allowed to pay in cash at any of the branch locations. You will need to pay by money order, certified check or cashier’s check. If you want, you can arrange to have your monthly payments deducted automatically from your checking account on a certain day each month.
This is similar to a program offered by the IRS. If you find yourself in this situation you should find a reputable tax professional or CPA who can offer you the kind of tax help you need. If you don’t pay what you owe, the State has the right to charge interest of 13% per year and penalties of up to 25% for late payments. It only makes sense to face the situation head on as early as possible.
Businesses that cannot fully pay their taxes on time may also request an Installment Payment Plan. Generally, these payment plans are supposed to last no more than 6 months. For these short-term payment arrangements, filing a lien is not required. While the business is making installment payments, any refunds that are payable to your business will be intercepted and applied to the unpaid tax balance.
If you are asking for an Installment Payment Plan that extends beyond 6 months, your request will have to be approved by a Collections Section supervisor. To protect the State’s interest, a lien may be filed against you in the applicable circuit court.
Tax Filing Extensions
If you fill out your tax return and realize you cannot pay what you owe in taxes, you should still file your taxes! However, if you find that you do not owe any money by April 15, you have the right to ask for an extension. You can do this online by filing a Form 502, 503, 505 or 515 requesting a 6-month extension from April 15th. You can also phone the Revenue Administration Division at (800) 260-3664.
If you are not sure whether you owe any money, use Form 502E to determine whether you do or not. If you know that you don’t owe any taxes, do not use Form 502E. In certain cases, if you are overseas you can ask for an extension of up to 12 months. If you’ve received an extension for filing your federal taxes to the IRS and you owe nothing in State taxes, you will automatically get a 6-month filing extension for your State tax return since Maryland compares its records with the IRS.
However, if you do owe taxes to the State, you need to pay on time (by April 15th) and included a completed Form 502E. If you are taking care of all of this online, you can pay your taxes via credit or debit card. Don’t forget, an extension to file your taxes does not give you an extension on actually paying your taxes.
Offer in Compromise
If you do not have the funds to fully pay your taxes and have tried unsuccessfully to resolve the matter through all normal channels, you may be eligible for an Offer in Compromise. This does not involve filing an appeal, but rather this is a form of tax relief that would allow you to pay less than what you owe to settle the entire matter. Before making your request you should consult with an reputable tax professional or CPA who has provided the needed tax help to successfully navigate this process with other clients.
This program is for individual Income Taxes, a business’ Sales & Use Tax or for unpaid Amusement & Admissions Tax. When applying for an Offer in Compromise you would need to use Form MD656. Individuals would also need to submit Collection Information Statement Form 433-A, while businesses would use Form 433-B. A completed Collection Information Statement provides the Office of the Comptroller detailed information on the taxpayer’s income, financial assets and liabilities so their financial situation can be accurately evaluated.
In applying to the IRS for their Offer in Compromise program you are required to pay whatever your collection potential would reasonably be, or to offer an amount that both you and the IRS agree could be paid without causing you and your family severe financial hardship.
This is the same stance that the State of Maryland takes with those applying for tax relief through an Offer in Compromise. In reality, the State rarely accepts these applications because taxpayers really have no right to to pay the State less than they owe in taxes, however it is up to the Collections Section to determine whether it makes sense to accept a taxpayer’s offer to settle their tax liability once and for all.
To qualify for tax relief through an Offer in Compromise you must meet these requirements:
- You have an outstanding tax bill that you’ve received an assessment for.
- You have tried to resolve your liability in every possible way without success.
- Two years have passed since you first became liable for this tax.
- Your financial situation is such that you it is unlikely that you will have the means to pay this tax bill anytime soon.
- Your resources and assets are insufficient to pay the tax bill and you are unable to use your present resources or those in the future to pay off these taxes.
- There are no other remaining tax matters that you can appeal. If any one of your tax problems can still be appealed, you are not eligible for an Offer in Compromise.
- You are up-to-date on filing all required tax returns.
- You are not involved in any unresolved bankruptcy proceeding.
In applying for an Offer in Compromise, you must complete, sign and submit the forms listed below, as well as all the documents asked for on the forms:
- Offer in Compromise Form MD 656
- Individual Collection Information Statement Form MD 433-A
- A complete and current financial statement if you are applying for an Offer in Comprised based on insufficient financial resources or hardship.
- If you are asking for an Offer in Compromise based on doubting your liability, you are required to provide a detailed explanation of your reasons why you do not think you owe this amount in taxes.
Offers in Compromise requests should be mailed to:
Offer in Compromise Program
Maryland Office of the Comptroller
301 West Preston Street, Room 203
Baltimore, MD 21201
The Office of the Comptroller will consider your offer and decide whether there are adequate grounds for reducing your tax liability by accepting your offer. If the Comptroller determines that there is good reason to accept less than you owe, but you have not offered enough, they will tell you how much they would accept to settle the entire matter.
The Comptroller’s Office considers the following when they review an offer:
- Doubt about the amount owed – you do not think you owe the assessed amount.
- Insufficient financial resources – your income and/or assets are not sufficient to fully pay what you owe in taxes.
- Financial or other hardship – you do have the assets, but being forced to make full payment would lead to severe financial hardship or it would be inequitable and unfair.
You will be notified in writing of the Comptroller’s decision, although there is no standard timeframe for this. If your offer is approved, you are required to stay up-to-date for the next 3 years on all tax filings, otherwise you will end up being responsible for the full amount. If the Comptroller decides that your offer is not enough, you may be told an amount that they would find acceptable. If you have any questions or concerns, please call (410) 767-1557.
For further information or help please phone the Office of the Comptroller at (855) 213-6669.Contact Us