Maryland has a long history of failing to formally advise taxpayers of old debts, high-interest rates, special programs and no statute of limitations on the expiration of back taxes.
In my Baltimore tax law firm, we deal with the Maryland comptroller on a daily basis. I often compare how the IRS works with the process the comptroller takes, and it upsets me to say that Maryland fails to do its job to notify and educate taxpayers about their tax debt. For instance, Maryland has an interest rate that is almost comparable to credit card rates, a whopping 13 percent compounded monthly. This doesn’t include penalties that may be charged on the account.
A big difference between Maryland and the IRS is the statute of limitations. Maryland taxes never expire, unlike federal taxes: the IRS has a general rule that after 10 years from the last date of assessment the debt expires and the taxpayer is no longer responsible for that tax period. Why is this such a big deal?
With Maryland now giving out longer-term driver’s and professional licenses, many residents’ renewal dates for their licenses are coming due now or in the next few years. To their shock, Marylanders are being denied their licenses based on debts that are at least 20 years old. I have many clients that the comptroller collects from the ‘80s and ‘90s. Just imagine 13 percent interest on a tax debt from 1985 or earlier!
The comptroller, however, unlike the IRS, will set up installment agreements with taxpayers who have failed to come into compliance. The comptroller will set up payment arrangements to release a license with many years unfiled and a total tax debt unknown.
Getting your license back
To get your license back or your registration renewed, the comptroller requires 10 percent down of the amount calculated by the comptroller and the balance in 36 months. But this is only for the first-time license holds. If you are a second-time offender, the down payment is 25 percent of the amount owed; and for a third-time offender, the down payment is 50 percent of the amount owed and the balance in 36 months. Not only is it difficult for most taxpayers to come up with the down payment, but complying with the stringent rules and hefty payments on a 36-month plan is nearly impossible and they are destined to fail.
The comptroller also fails to sufficiently alert taxpayers of its plans. Maryland failed to adequately notify and educate its residents about its previous tax amnesty program ending in October 2015. Due to the lack of educating its taxpayers on the finer details of the program, the results were poor at best, and many taxpayers defaulted on those agreements. Violation of those agreements caused all previously forgiven penalty and interest to become due immediately.
The IRS tries to create compliance. It is my thinking that Maryland should do the same, but instead is just out to generate revenue.
I’m not asking the state to reform its collection procedures. However, I do propose it revises its advertising and education standards. The state should begin to advise taxpayers of the laws that are in place and are currently not understood by the general public. In my many years of helping to resolve tax debts for Maryland residents, I have discovered that almost no person understands what I have written about above.
It is the comptroller’s job to provide the public with valuable information so they can become compliant taxpayers adhering to the laws of the state. At this point in time, Maryland residents have not been adequately advised by the comptroller’s office.
Stanley H. Block is a Baltimore tax attorney. He can be reached at 410-727-6006.