Local Tax Matters
Are you facing Maryland tax penalties that are causing stress and financial strain? Penalty Abatement is a process that provides relief from specific penalties imposed under certain circumstances.
The basics
Are you facing Maryland tax penalties that are causing stress and financial strain? At Azarvand Tax Law, we understand the complexities of tax law and are here to assist individuals and businesses in resolving their tax controversies. Penalty Abatement is a process that provides relief from specific penalties imposed under certain circumstances.
Where relief applies
A range of Maryland tax penalties may be candidates for abatement, depending on your circumstances:
Late filing penalties are imposed when taxpayers fail to file their tax returns by the due date. These penalties typically accrue at a rate of up to 10% of the tax due. Additional monthly interest charges also apply to the unpaid tax amount.
Begins to accrue when taxpayers fail to pay their IRS taxes by the due date. Interest and penalties continue to accrue until the tax is paid in full. The penalty rate may increase if the tax remains unpaid after receiving notices from the Comptroller.
For business taxpayers with withholding requirements: 1–5 days late: 2% of late payroll tax deposits; 5–16 days late: 5%; 16+ days: 10%. Penalties increase further if you fail to respond to notices from the Comptroller.
Late filing of information returns can result in penalties. Penalty amounts increase based on how late the information return is filed. Intentional disregard of filing requirements results in higher penalties.
20% of the portion of the underpayment that was understated because of negligence or disregard of rules and regulations.
2% of the amount of the check or a minimum fee, whichever is greater. Additional penalties may apply for repeat offenders.
Generally, underpayment of estimated tax by corporations or individuals is penalized based on the interest rate set by the Comptroller of Maryland.
It is important to note that penalties are subject to accrue interest. The Maryland Comptroller interest rates are adjusted periodically and apply to all underpayments.
Your options
Depending on the facts, relief may take one of two forms.
The taxpayer must demonstrate that they exercised ordinary care and prudence and were nevertheless unable to file their return or pay the taxes on time.
If penalties are reduced or removed, interest related to those penalties may also be adjusted, which can help alleviate the financial burden of Maryland tax penalties.
Reasonable cause
Taxpayers requesting Reasonable Cause Penalty Abatement must submit a written explanation to the Comptroller of Maryland.
Examples of valid reasons for failing to file or pay on time may include (but are not limited to):
The review
The taxpayer has a good history of compliance.
The taxpayer acted in good faith.
The taxpayer promptly corrects the issue once discovered.
The taxpayer establishes reasonable cause.
Next steps
At Azarvand Tax Law, we have experience helping clients navigate the complexities of requesting penalty abatement from the Maryland Comptroller. Our team of tax attorneys and CPAs is dedicated to providing personalized solutions to your specific situation. If a penalty isn’t the whole story, an Offer in Compromise or a Maryland Installment Agreement may help resolve the underlying balance. Schedule a free 30-minute consultation and take the first step toward tax compliance and resolving your tax liability.
