The Maryland tax authority, the Comptroller of Maryland, is required to asses Maryland tax penalties against any taxpayers who fail to file their tax returns (timely or otherwise) as well as any taxpayer who fails to completely pay their tax liability due. When these penalties are assessed, a significant Maryland tax dispute can develop and possibly end up in Maryland tax court. However, Maryland’s tax penalty law includes exceptions and times when the amount of the tax penalty is increased or when the tax penalty amount can be waived.
Under Maryland’s tax laws, Maryland’s tax penalty for a taxpayer’s failure to file a tax return and a taxpayer’s failure to pay income tax can be up to 25% of the unpaid tax. Thus, if a taxpayer does not file a Maryland tax return and the taxpayer is due a Maryland tax refund then a Maryland tax penalty will not be assessed by the Comptroller. However, if a taxpayer does not file a Maryland tax return and the taxpayer has incurred a tax liability then a Maryland tax penalty will be assessed against the Maryland taxpayer. While the Comptroller of Maryland is not required to impose the full amount of the penalty against all Maryland taxpayers, the Comptroller generally assesses a Maryland tax penalty between 5% and 25% .
Importantly, if a false Maryland tax return is filed with the the Comptroller of Maryland with the specific intent to evade a Maryland tax payment due or if a return is not filed with the intent to evade Maryland taxes the penalty can be up to 100% of the Maryland tax due.
Not only are taxes based upon the liability that is due, but certain penalties also exist that are assessed in a numerical number. For example, if a Maryland tax return is filed with information that contains obvious errors or is substantially incorrect that person can be assessed a penalty of $500. In these specific situations a taxpayer has submitted a Maryland tax return where a specific claim on an existing Maryland tax return (1) is not supported in law or fact, (2) is unlawful, (3) does not involve a legitimate dispute, or (4) is not considered an inadvertent mathematical error. This specific numerical penalty does appear on its face similar to the penalty above where a false tax return is filed or no return is filed in an attempt to evade tax; however, generally this specific numerical penalty will be easier to assess because an intent to evade taxes is not necessary. In these cases, the specific error is required to be one that a reasonable person can assume will not be upheld by any court or any finding.
The Comptroller of Maryland can also impose other penalties that are not financial penalties. A taxpayer who owes income tax can have their driver’s license, permit, or registration withheld upon renewal or suspended. A business owner who owes tax can have their business or professions licenses for doctors and attorneys can also be withheld for renewal or suspended. Our firm has worked with clients in Rockville, Bethesda, Potomac, Gaithersburg, Silver Spring, Frederick, Baltimore, Towson, Annapolis, and many other Maryland locations.
As head of the Longman & Van Grack’s Tax Practice, Robb Longman has been the Chair of Maryland State Bar Association’s Tax Section and currently serves as the Secretary of the American Bar Association’s (ABA) Tax Section. Mr. Longman regularly works with his Maryland tax clients at our firm’s Rockville and Bethesda offices to devise strategies to help them minimize their tax penalties and, if possible, avoid tax disputes. Robb Longman and each tax attorney at Longman & Van Grack works with each of our tax clients regarding Maryland tax problems, tax planning, and estate planning throughout Maryland, including Rockville and Bethesda. Robb Longman works directly with each of his clients to lessen the tax burdens and maximize the tax benefits associated with accomplishing each of their financial goals. If you would like to meet with Mr. Longman in Rockville or Bethesda regarding a Maryland tax problem, call 301-291-5027 to schedule an appointment or speak with Mr. Longman.