Owing taxes is a very personal thing. Most of my clients would never dream of telling their neighbors, family members, and sometimes even their spouse that they owe taxes. The flip side to that coin is the State of Maryland is all too happy to announce to the world that you owe a tax debt. It may stem from a common bookkeeping mistake or maybe a family member was sick and you did everything just keep your head above water. Whatever the reason, your name is now on a list or possibly many lists. So what types of lists and announcements are there?
If you have a lien you are no stranger to the calls and letters from companies trying to “help” you resolve your tax problem. But how did they find out you had a tax problem? A lien is a public record filed and recorded for all to see usually. By interacting with programs or by going directly to your local courthouse or recording office, lists can be purchased with your name and lien amount. Companies purchase these lists and look for taxpayers who meet certain criteria. With list in hand, they then reach out to taxpayers and solicit them in an attempt to gain their tax controversy business. In the early 2000s, not many companies performing tax settlements were in Maryland so our residents were pretty much unbothered. As the tax resolution industry grew, the “lien letters” started to pile up in Maryland residents’ mailboxes. Some of these letters can look very official and sometimes even threatening.
Caught in the web
In the last few years, Maryland’s Comptroller, Peter Franchot, started a program that announces the names of businesses and individuals with unpaid taxes, penalties and interest due to the State of Maryland. This new endeavour is known as the Caught in the Web program. The Comptroller publishes these listings on their website in hopes that this public attempt will bring taxpayers into compliance and make them pay their taxes.
Baltimore Business Journal (BBJ)
Along with other public notices, the Baltimore Business Journal has previously published tax liens and the names of the companies attached to those liens. This can make it very hard for an already struggling business to keep their reputation in good standing among the small Maryland community.
Debt Collection Companies
The State of Maryland has teamed up with Penn Credit, Harris and Harris, and other collection agencies to try and settle your state tax debt. If you fail to pay your back tax debt in a timely manner, the debt collection companies may hit your credit and attach these past due debts; thus drastically lowering your credit score. My suggestion is deal with your Maryland tax debt before it gets too far into the collection process. You do not want to deal with a collection agency.
Who else knows about my tax debt?
A tax claim is a legal hold usually in the first lien position to anything you own of value. This means the taxing agencies may reach out to attach to your asset. They may notify your employer to discuss garnishing your paycheck and/or changing your exemptions. They may also attach a lien to your property. Their actions can prevent taxpayers from getting new credit or refinancing old credit. They can take your Federal and State refunds. They can prevent you from getting government clearance, getting a driver’s license or renewal, renewing your registration, obtaining new business licenses, and soon possibly take your U.S. passport.
The bottom line:
With the State and Feds having so much leverage of you while unpaid taxes are on the table, it makes sense to handle this problem sooner rather than later. Do yourself a favor; if you owe over 10k to the IRS or State, talk with some tax practitioners to find out what your options are. I always say it is better to be proactive rather than reactive.