Death and taxes are inescapable in the United States, but that doesn’t make the taxes any easier to prepare, audits less stressful, or tax codes and government agency procedures any less complicated. It’s important to have a skilled Maryland taxation attorney at The Saint Yves Law Firm to help when issues arise or you find yourself being contacted by the federal or state government; what you may not know is their preparation skills and helpful advice can help you avoid problems in the first place. Here are some important issues related to Maryland and federal tax laws and areas where problems often arise.
Income Tax Return Review and Preparation
Maryland individuals and business owners are required to comply with tax obligations to Maryland state as well as the federal government. Because of these requirements, individuals and businesses often have to deal with several different agencies to get their taxes properly prepared and submitted – notably the IRS for federal taxes and both the Maryland Department of Labor and the Comptroller of Maryland. To ensure your tax obligations are satisfied, it’s helpful to work with an experienced Maryland tax attorney with the preparation and review of your taxes, as well as the submission process.
Past Due Tax Return Preparation & Resolution
Though there are a number of reasons individuals may fail to file taxes in Maryland – lack of sufficient income, procrastination, or even the emotional aftereffects of a loved one’s death, for example – most Maryland residents must file state and federal returns each year. Failing to file taxes can result in, among other issues:
Interest charges on both unpaid taxes and penalties
Forfeiture of any refund you may be owed in past, current or subsequent years
Lack of tax credit applications or earned income tax credits
Working with an attorney experienced in both federal and Maryland tax preparation can help you understand credits you may be entitled to receive, statutes of limitations that may apply to you, and prepare returns on your behalf in ways that minimize any penalties you might otherwise face.
IRS and Maryland Collections
The IRS and the Comptroller of Maryland’s Compliance Division both have authority and resources available to collect taxes owed to both the federal and state governments. Collection efforts to recoup delinquent tax payments may include:
Tax liens, which can harm an individual’s credit and attach a public liability notice regarding their delinquency
Foreclosing on a taxpayer’s real property
Disallowing federal benefits and refunds
Levying bank accounts
These consequences can greatly disrupt the lives of taxpayers and their businesses, so efforts should be made to settle your tax situation and avoid government use of these severe collection methods.
IRS and Maryland Penalty Relief
If taxpayers owe money to the federal or Maryland government, they may be entitled to a penalty abatement if there was a suitable reason they missed a payment or deadline. It’s possible to appeal penalties and potentially avoid them altogether.
IRS Penalty Abatement
The First Time Penalty Abatement Policy offered by the IRS allows taxpayers potential reduction or removal from a penalty they owe for a variety of missed deadlines or payments. It’s important to note that it can only be used every 4 years. To qualify for abatement, a taxpayer must have:
Either had no penalties in the past 3 years or not been required to file a return
Filed current returns on time or filed the appropriate extension request
Paid all taxes due or made arrangements for their payment
It’s also possible to qualify for abatement if you show reasonable cause you missed the deadline. This is more difficult to establish and should be tackled with health of an attorney with federal and state tax experience.
Maryland Tax Penalty Waivers and Abatement
State tax collectors have the ability to waive a taxpayer’s interest and penalties owed in certain circumstances. There are civil tax fraud penalties that can be levied by the Comptroller of Maryland if evidence of fraud exists; these can add up to the entire unpaid tax amount. Tax preparers may even face penalties if it’s determined they violated return preparations standards. It’s possible to request an appeal prior to penalty assessment, but a suitable defense must be presented.
IRS and Maryland Audits
In some instances, the federal or Maryland state tax agencies want to take a closer look at the returns you’ve submitted, your financial information, and the amount you believe you owe; this does not always mean you’re facing serious consequences. Many IRS audits selections are randomly generated, but some are more targeted for suspected financial underreporting. If your tax liability was incorrectly figured or paid, you’ll likely face imposition of additional penalties or taxes among other consequences. Because governments have substantial resources available when performing their examinations of your finances and returns, it’s helpful having an experienced Maryland attorney in your corner.
The IRS may uncover a number of issues during an audit, including unreported or underreported income and taking improper deductions. IRS audits can last for years – their employees are notorious for adding to the scope of the audit after an initial examination at your business, an IRS office, or via mail. Maryland also has the ability to launch audits to examine a Maryland resident’s state tax returns. State audits often examine:
Correct reporting of a business’s gross receipts, sales taxes, or amusement tax
Proper reporting of personal property taxes
The propriety of an individual claiming a state income tax credit
The IRS and Comptroller of Maryland have processes and procedures in place if you disagree with assessments or dispute tax issues. These hearings can be formal or informal in nature depending on the nature of the proceeding and where in the appeals process your dispute currently lies. These procedures require you to provide documentation, show facts and laws supporting your side of the appeal, and allow you to appear at the appropriate appellate court or agency to argue your case. It’s helpful to work with an experienced Maryland tax attorney to construct the best arguments possible and gather evidence to put your strongest case forward.
If your tax issues with either Maryland or the IRS are unable to be resolved in other ways, it may be necessary to file a lawsuit in the appropriate Tax Court. It’s generally required that you must have exhausted all other options prior to advocating with the court, and tax litigation can be difficult for even the most skilled attorneys. The Maryland Tax Court addresses various refund claims and tax assessment disputes, and the U.S. Tax Court handles:
Innocent Spouse Relief Conflicts
Disputed amounts of liability owed in an IRS deficiency notice
It’s possible to enter agreements with the IRS or Comptroller of Maryland to file payment extension application, arrange payment plans, put off penalties, or offer a lesser amount to settle the outstanding debt. It’s important to deal with this issue and settle your tax debt as quickly as possible, because in Maryland you may find yourself unable to renew a driver license, transfer vehicle registration, or renew a business license in addition to criminal prosecution until a taxpayer enters into a suitable agreement to pay what they owe.
Installment Payment Agreements
Installment agreements can be negotiated by a skilled tax attorney and put in place to create agreeable payments that do not hinder the taxpayer’s ability to pay their other bills or put food on the table. It’s even possible to negotiate payment that amounts to less than the amount owed.
Offer in Compromise
A taxpayer, at the agreement of the federal or state government, may enter into a settlement of their liability for less than they owe. These compromise offers are often difficult to obtain – an initial level of review and examination of the payor’s finances may result in refusal and require an administrative appeal. The taxpayer must also comply with the terms of the agreement for at least five years after the debt is settled and offer is accepted.
Federal Tax Accounts Currently Not Collectible
If an Offer in Compromise or installment agreement is not feasible, the IRS may agree to put the taxpayer’s accounts in “currently not collectible” status. This means IRS collection ceases and until there is an improvement in the payor’s financial situation payments are suspended. However, penalties and interest continue accruing.
Contact a Maryland Taxation Attorney Today
Anytime you have to deal with the government on tax issues, it can be a nerve-wracking experience. However, having a skilled Maryland taxation attorney can make the process less stressful, help you fight for the best outcome if issues arise, and even help you avoid problems altogether. We have years of experience helping clients like you address complicated tax issues and navigate the complex process of dealing with government bodies and unclear laws. Schedule a consultation with our office and let's talk about your unique situation so we can learn more and put a skilled legal team in your corner.