To find a way to generate funds to deal with the State’s $2 billion tax deficit, the General Assembly this past legislative session passed a Tax Amnesty Program that begins on September 1st and runs through October 30th. The Amnesty Program offers a short window of opportunity for taxpayers owing taxes to the State of Maryland to reduce their payment obligation. The program applies to the State’s (1) individual income tax; (2) fiduciary income tax; (3) pass-through entity non-resident tax; (4) corporate income tax; (5) employer withholding tax; (6) sales and use tax; and (7) admissions and amusement tax. Under the amnesty program, penalties are abated and interest on the tax deficiency is reduced to one-half of the current statutory rate. That current statutory rate is 13% (compared to 4% for federal tax deficiencies), so that the applicable rate for interest would be 6.5%. The amnesty, however, does not apply to (i) taxpayers with more than 500 employees; (ii) tax liabilities for returns due after December 31, 2008; or (iii) taxpayers that took advantage of the tax amnesty program offered by the State in 2001.
Payments should not be made to the State prior to the September 1st start date. Any payments received before that date will be applied under the State’s general procedure rules, i.e., payments will be applied first to penalties, next to interest and lastly to taxes. An early payment, therefore, actually hurts the taxpayer.
Unlike past amnesty programs, a taxpayer in the audit or collection process can pay the tax and interest and still either fight the assessment or apply for a refund. There is no waiver of that right. The program also provides for a payment plan option. While a 10% "down payment" is required with the application, final payment under such a plan is not due until December 31, 2010. As a result, the taxpayer can enter into a 3, 6, 9, 12 or 15 month plan – with a final payment due no later than December 31, 2010.
If you have any questions regarding the Maryland Tax Amnesty, please contact: