When a taxpayer fails to pay their taxes, the Maryland Comptroller’s office puts them in the collections phase and starts sending letters. If after sending a series of letters the taxpayer still fails to pay or set up a qualifying payment plan or provide a reason as to which they cannot pay, the Comptroller’s office can take action.
The Maryland Comptroller’s office can:
- File a lien against you or your property
- Garnish your wages or Social Security
- Prevent you from renewing your State business license
- Prevent you from renewing your professional or occupational license(s)
- Attach your assets including your bank account(s)
- Suspend payments coming from the State if you do business with the State
- Intercept your State returns
- Intercept your FEDERAL RETURNS!
- Force file your return with the highest estimates possible
- Summons you to a hearing to revoke your sales tax license
- Initiate other legal procedures
But I will just let the statute run out!
Wrong! Maryland taxes never expire and they carry around a 13% interest rate. Maryland law mandates that interest be charged on unpaid tax from the date the return was due until the date filed and paid. There is also a one time penalty for the unpaid tax up to 25%.
Let’s say that you originally owed the State of Maryland (SOM) $1,000 from 2009. Today you get around to becoming compliant with a State of Maryland Tax Resolution Firm. Now you go ahead and file and pay that tax on 7/15/2017. The interest on the unpaid tax is $1,073 more than your original debt. You can see how easily the interest stacks up with the SOM.
Take a look at what your Maryland Tax debt might look like by clicking here: State of Maryland Interest Calculator
How are my payments to Maryland applied?
There are a few ways you can pay a Maryland tax debt. You can send money in with your tax return; you can wait for a notice and pay with that voucher; or you can send voluntary payments. How and when you send your payments may change how they are applied. First, any payment sent will be applied to the oldest tax debt first. Second, if you send payment along with your return, it will first be applied to tax; then to any applicable penalty and interest. If you wait for a notice and then send payment, it will first be applied to penalty and interest and second to the actual back tax balance. We recommend that if you can pay along with your return, you should send that payment in when filing. If you plan on sending voluntary payments, always specify what year to apply the payment to or the State will apply it to the oldest year first.
Reasons my balance may increase?
Aside from penalties and interest there are other reasons your Maryland balance might increase. The IRS may notify Maryland that you reported more income to IRS than you did to the State and they will adjust accordingly. You may have had a federal audit which makes changes to your return and if Maryland gets wind of it, they will adjust your balance. There are many other reasons your balance with Maryland could be adjusted. If you have specific questions about a Maryland Audit or CP2000, FAGIM, RAT, or similar adjustment letter, it may be in your best interest to speak to a tax lawyer.
The Bottom Line:
Everyone has come to fear the IRS and most people laugh off the State of Maryland. However, Maryland carries hefty interest rates with taxes that never expire; they can take your license, garnish your wages, flag your vehicle, take your business license, and prevent you from government clearance. The short of it is, Maryland back taxes are no laughing matter! Take care of your tax matters; federal and State in a timely manner to avoid costing yourself more than necessary.