Understanding the Maryland Tax Collection Process: A Complete Guide

Understanding how the State of Maryland collects unpaid taxes is essential for individuals and businesses seeking to resolve outstanding liabilities. Taxpayers who owe back taxes, have received a formal notice, or cannot pay in full must become familiar with the state's collection procedures to avoid escalation and additional enforcement actions.

The Office of the Comptroller of Maryland, which serves as the state’s central tax collection authority, is empowered to recover unpaid taxes through various legal methods. These include wage garnishments, bank account levies, business or professional license holds, and the placement of liens on real or personal property. However, taxpayers retain certain rights throughout the process, including requesting an installment agreement, filing a formal appeal, or applying for an offer in compromise when eligible.

This guide provides a structured overview of Maryland’s tax collection process, including the state's initial steps, potential consequences for nonresponse, and available resolution options. Whether you are an individual wage earner, a small business owner, or a taxpayer responding to a recent notice, this resource is designed to help you understand your obligations and take informed, timely action to achieve compliance.

Comprehending the Maryland Comptroller's Function

As the state's chief financial officer, the Maryland Comptroller oversees the state's tax collection and enforcement operations. The office collects taxes from individuals, companies, and other entities. Taxpayers must comply with Maryland tax laws, file their returns, and pay their debts.

Key Responsibilities of the Comptroller’s Office:

• Tax Administration
  The Comptroller's Office collects state taxes, such as individual income taxes, business taxes, sales and use taxes, and other required taxes. It also ensures that people file their taxes correctly and pay what they owe on time.
  
  
• Collections and Law Enforcement
  When taxes in Maryland remain unpaid, the office begins to collect them. It can take actions to enforce the law, like sending a bill or a notice, filing a lien, garnishing wages, or seizing assets to collect unpaid taxes.
  
  
• Coordination with the Internal Revenue Service
  The Comptroller frequently collaborates with the IRS when adjusting federal taxes. If the IRS sends notice of changes to a federal tax return, Maryland may adjust the taxpayer’s state tax return accordingly. Such adjustments can result in a new assessment or increased tax liability at the state level.
  
  
• Taxpayer Support and Education
  The agency provides resources, forms, and contact support to help taxpayers pay off their tax debt, set up a payment plan, or qualify for an offer in compromise. The agency also disseminates updates on tax law modifications and enforcement methods.

The Comptroller's Office ensures that the state receives the money it needs, that taxpayers can pay off their debts, and that they avoid additional penalties.

Maryland's Steps and Timeline for Collecting Taxes Owed

Overdue tax claims for Maryland are lengthy and complicated processes in stages. They start by letting the taxpayer know, but the taxpayer doesn't respond because they don't know, care, or want to. The taxpayer can avoid the fees, penalties, and interest that come with the later stages of a tax claim by using the layers correctly up until the tax claim.

1. Phase 1: Initial Notice and Assessment (Days 1–30)

The Comptroller's Office sends an initial notice when it discovers a tax issue, such as an unpaid balance or a missing tax return. Taxpayers can respond to this notice, which informs them of the remaining tax they owe, before the situation worsens.

Taxpayers may receive this notice for the following reasons:

• The required state tax return was not filed by the taxpayer's due date.
  
  
• Although a return was submitted, the taxes due were not paid.
  
  
• A revised state tax liability is the outcome of changes the Internal Revenue Service sent on federal returns.
  
  
• The filed tax return contained mistakes or discrepancies.

With this first notice, Maryland's tax collection process officially begins. To resolve or dispute the balance, taxpayers should carefully review the details, confirm the bill, and take appropriate action.

2. Phase 2 – Notice of Assessment (Days 31–60)

If the taxpayer does not reply to the initial notice, the Comptroller's Office sends a formal Notice of Assessment. In addition to informing the taxpayer of their debt, this letter serves as a warning that legal action may be taken if the problem is not fixed.

Typically, the evaluation consists of notifying the taxpayer

• The original amount of taxes owed to the state.
  
  
• Accrued interest, calculated at 9% annually from the return’s original due date.
  
  
• The tax also includes penalties for late payments and other applicable fees.
  
  
• Dishonored payments, like bounced checks, incur a $30 charge.

The taxpayer still has time to pay the full amount, request an appeal, or apply for a payment plan before the account is referred for collections.

3. Phase 3 – Collections Contact (Days 61–90)

If nothing is done following the Notice of Assessment, the matter is referred to the Collections Section. The Comptroller's staff might call the taxpayer or send additional letters pleading with them to resolve the issue.

Depending on their circumstances, taxpayers should use the relevant contact information:

• Individuals with income tax issues can call 410-974-2432 or email cdcollectionind@marylandtaxes.gov.
  
  
• Businesses with outstanding obligations should contact 410-649-0633 or email cdcollectionbizz@marylandtaxes.gov.
  
  

At this stage, taxpayers can still qualify for installment agreements, submit offers in compromise, or explore other resolution options. Acting promptly is crucial to preventing enforcement actions like wage garnishments or bank levies.

Enforcement Actions Used by the Comptroller

The Comptroller of Maryland can take different steps to collect the full amount owed if a taxpayer does not pay their taxes. These tools enforce adherence to rules, and disregarding them may result in significant legal or financial issues.

1. Tax Liens and Asset Seizure

When taxes remain unpaid, the Comptroller may file a tax lien in the circuit court where the taxpayer lives or operates a business. This lien becomes a matter of public record and gives the state a legal claim over the taxpayer’s property.

A filed tax lien can:

• Appear on credit reports and significantly damage the taxpayer’s credit score.
  
  
• This makes it difficult to sell or refinance property, as liens must be satisfied before closing.
  
  
• Take legal priority over most other creditors once recorded.

If the lien remains unresolved, the Comptroller’s Office may issue attachments that authorize sheriffs to seize assets such as business equipment, real estate, vehicles, and cash on business premises.

2. Wage Garnishment and Bank Levies

The Comptroller’s Office can collect unpaid taxes by garnishing taxpayers' wages or freezing bank accounts. These enforcement methods are commonly used when taxpayers do not respond to notices or fail to set up a payment plan.

• In a wage garnishment, the taxpayer’s employer must legally withhold a portion of the employee’s monthly income and send those funds to the Comptroller.
  
  
• A bank levy allows the state to freeze and withdraw funds directly from a taxpayer’s account until the tax debt is paid in full.
  
  
• These actions continue until the total liability, including interest and penalties, is satisfied.
  
  
• Maryland’s Central Payroll Bureau manages these garnishments through a dedicated team.

3. Refund Interception Programs

Maryland participates in state and federal refund offset programs that automatically apply taxpayer refunds to outstanding tax debt.

These intercepts may include:

• Maryland state income tax refunds are owed to the taxpayer.
  
  
• The Internal Revenue Service issues federal tax refunds.
  
  
• Make payments to state or federal vendors.

Taxpayers in active payment plans may still have refunds intercepted, unless a specific agreement prevents it.

4. License Holds and Revocations

When a tax debt remains unpaid, the Comptroller may place holds or initiate revocation proceedings on various licenses issued by state agencies.

• Business licenses may be suspended or revoked, impacting the taxpayer’s ability to operate legally.
  
  
• Professional licenses like those for attorneys or accountants may be suspended until the liability is resolved.
  
  
• Driver’s licenses may be held, preventing renewal or reissuance.
  
  
• Liquor licenses may be revoked, affecting bars, restaurants, and distributors.

These holds are typically lifted once the taxpayer enters a formal resolution agreement or pays the due amount.

5. Public Disclosure of Delinquent Accounts

The Comptroller’s Office publishes a list of delinquent taxpayers through a program called “Caught in the Web.” This list displays the names and tax liability amounts of individuals and businesses that owe significant unpaid taxes.

This public disclosure aims to pressure noncompliant taxpayers to settle their debt and discourage others from ignoring their tax obligations.

Taxpayer Rights During the Collection Process

Maryland taxpayers have legal rights that protect them during the tax collection process. These rights provide opportunities to challenge assessments, request representation, and pause specific collection actions while appeals are underway.

1. Right to Appeal an Assessment

Taxpayers can dispute a tax bill or assessment issued by the Comptroller’s Office. Appeals must be filed within 30 days of the notice being mailed.

• Appeals can be filed online using the MyCOMConnect portal, by email at cdhearings@marylandtaxes.gov, or by mail.
  
  
• The appeal must include the taxpayer’s name, contact details, the tax year, and a reason for disputing the liability.
  
  
• If no appeal is filed within the deadline, the tax assessment becomes final, and collection actions may proceed.

2. Right to Representation

Taxpayers can appoint an authorized representative to act on their behalf during the appeals or collections process.

• Acceptable representatives include certified public accountants (CPAs), attorneys, enrolled agents, and others with a valid Maryland Form 548 (Power of Attorney).
  
  
• Representation allows taxpayers to receive guidance and avoid mistakes that could lead to further penalties or delayed resolution.

3. Collections Hold During an Appeal

If a taxpayer files a timely appeal, the Comptroller’s Office may temporarily hold collection activity for the tax periods.

• During the hold, the agency generally pauses enforcement actions such as wage garnishment or asset seizure.
  
  
• However, interest continues to accrue on the balance, and state or federal refunds may still be intercepted.
  
  
• The hold does not apply to other tax years or liabilities not under appeal.

Taxpayers can resolve disputes promptly by exercising their appeal rights before the agency takes harsher actions.

Business Tax Collection and Officer Liability

Maryland business owners are subject to the same tax enforcement procedures as individuals, but specific rules apply to companies and their officers. The Comptroller’s Office holds businesses and responsible employees accountable for unpaid taxes, especially trust fund taxes like sales and withholding.

1. Personal Liability for Corporate Officers

Maryland law allows the state to hold certain corporate officers personally liable for unpaid business debts. This provision is especially relevant for taxes collected from customers or employees, such as officers, and the use of taxes and employer withholding.

• Officers may be held responsible, including the president, vice president, treasurer, or anyone who owns at least 20% of the corporation’s stock.
  
  
• Individuals with direct fiscal control over a company’s finances—such as payroll, tax filing, or bill payment—are also subject to personal liability.
  
  
• The Comptroller may pursue the officer for the full tax liability, even if the business can't pay.

This policy ensures that individuals controlling business finances cannot avoid responsibility by hiding behind a company structure.

2. License Revocation for Non-Compliance

Businesses with unresolved tax debt may face the suspension or revocation of state-issued licenses. This includes licenses required to operate legally, such as

• Sales and use tax licenses for retailers
  
  
• Admissions and amusement licenses for entertainment venues
  
  
• Alcohol and tobacco licenses for distributors and restaurants

The Comptroller may issue a summons requiring the business to appear and show cause for continued operation. The business loses its ability to conduct taxable activity in Maryland if it fails to resolve the debt or present a valid defense.

3. Bankruptcy and Tax Debt

Filing for bankruptcy does not automatically eliminate Maryland tax obligations. Even after filing for bankruptcy, the state often pursues unpaid taxes.

• Bankruptcy does not discharge certain tax debts, particularly those related to withholding or fraud.
  
  
• Corporate officers may still be liable for outstanding amounts even if the business dissolves.
  
  
• Taxpayers involved in an open bankruptcy proceeding are not eligible to apply for specific tax relief options, such as an offer in compromise.

Business owners and officers must understand these risks and take action early to avoid severe financial consequences.

Resolving Debt Through the Offer in Compromise Program

The Offer in Compromise (OIC) Program allows eligible taxpayers to settle their Maryland tax debt for less than the full amount owed. This option is best suited for taxpayers who lack the financial resources to pay their liability in full and can demonstrate hardship or inability to pay.

1. Eligibility Criteria

Before submitting an offer in compromise, the taxpayer must meet specific conditions:

• A formal tax assessment must already exist for the liability in question.
  
  
• The taxpayer must not have an open bankruptcy proceeding.
  
  
• All required tax returns must be filed and up-to-date.
  
  
• At least two years must have passed since the original tax debt was incurred.
  
  
• The taxpayer must not be actively appealing the tax assessment.
  
  

Failure to meet these conditions will result in automatic rejection of the offer.

2. Application and Evaluation Process

To apply for the program, taxpayers must complete and submit the following forms:

• Form MD 656 – Maryland Offer in Compromise Application
  
  
• Form MD 433-A—Financial disclosure form detailing income, assets, debts, and monthly expenses

Applications can be submitted electronically to oic@marylandtaxes.gov for faster processing. The Comptroller’s Office evaluates each case based on

• The taxpayer’s ability to pay using available assets and monthly income
  
  
• Whether full payment would cause an economic hardship
  
  
• The taxpayer’s overall compliance history and willingness to cooperate

3. Program Limitations

The OIC program has strict limitations:

• There is no collection hold while the application is under review. Enforcement actions may continue unless the taxpayer arranges a temporary resolution.
  
  
• Decisions made under the program are final and cannot be appealed.
  
  
• If the taxpayer fails to stay compliant for three years after approval—such as by missing payments or failing to file returns—the agreement may be voided and the original debt reinstated.

Taxpayers considering an offer in compromise should be fully prepared to support their request with detailed financial records and be committed to long-term compliance.

Payment Plans and Online Payment Options

If you can't pay your Maryland taxes in full immediately, the Comptroller's Office has payment plans that let you pay off your debt over time. Acting quickly to set up a payment plan can help you avoid serious enforcement actions.

1. Benefits of Making Immediate Payments

Paying the entire balance due as soon as you receive a notice provides essential advantages:

• Interest charges (currently 9% annually) stop accruing once the debt is paid in full.
  
  
• Penalties related to late payment are reduced or avoided.
  
  
• The Comptroller’s Office will not proceed with enforcement actions like wage garnishment or liens.
  
  
• You protect your credit score by avoiding court judgments or tax liens.
  
  
• Your business or professional licenses remain active without interruption.
  
  

2. Setting Up a Payment Plan

If immediate full payment is impossible, you can request an installment agreement. This allows you to pay in smaller amounts over time.

• Individual taxpayers should contact 410-974-2432 or email cdcollectionind@marylandtaxes.gov.
  
  
• Business taxpayers can call 410-767-1655 or email cdcollectionbizz@marylandtaxes.gov.
  
  
• The Comptroller will typically request financial documentation to verify your ability to make monthly payments.
  
  
• Plans may involve automatic bank drafts and must be updated if your financial situation changes.
  
  

Establishing a payment plan early reduces the likelihood of aggressive enforcement actions.

3. Using Maryland’s Online Services

Taxpayers can also use the state’s digital platform to manage their accounts and make secure payments.

Through the Maryland Taxes Online Services portal, you can:

• Submit full or partial payments toward your tax bill
  
  
• Schedule recurring monthly payments.
  
  
• Access your account balance and payment history.
  
  
• Download forms and correspondence from the Comptroller’s Office

Online services provide faster processing and reduce the risk of missed deadlines or miscommunication.

Consequences of Ignoring Maryland Tax Obligations

Not responding to tax notices or unpaid debts can have serious and long-lasting consequences. Interest, penalties, and enforcement actions will likely increase as time passes. Ignoring Maryland's tax collection processes can expose individuals and businesses to financial and legal dangers.

1. Impact on Credit and Financing

When the Comptroller’s Office files a tax lien in court, it becomes a public record that appears on the taxpayer’s credit report. This can:

• Lower credit scores make qualifying for loans, mortgages, or refinancing harder.
  
  
• This causes creditors and lenders to deny applications or offer less favorable terms.
  
  
• Prevent the sale or transfer of property until the full amount owed is paid.

Credit reporting agencies may retain lien information for several years, allowing these consequences to persist even after the debt resolution.

2. Business Operations Disruption

Non-compliance has even more extensive repercussions for businesses:

• The state could revoke essential licenses, prohibiting the company from conducting lawful business.
  
  
• Enforcement measures like asset seizures or bank levies may stop daily operations.
  
  
• The Comptroller may halt payments owed to federal or state agencies if the company is a government vendor.

Permanent closure, layoffs, or lost revenue are possible outcomes of these disruptions.

3. Professional and Employment Consequences

When licensed professionals have unpaid taxes, they are also at risk:

• Licensing boards can put holds on or suspend professional credentials, which can make it illegal to work in regulated industries.
  
  
• The "Caught in the Web" list and other public records of unpaid taxes can hurt a professional's reputation.
  
  
• Employers may limit job opportunities if they perceive outstanding tax issues as a liability.

By responding quickly, taxpayers can avoid these long-lasting effects and keep their finances and careers under control.

Federal Context: IRS Taxpayer Rights Overview

This guide is mainly about Maryland's state-level collection efforts. Still, it's helpful to know how they relate to federal protections—the IRS Taxpayer Bill of Rights lists ten fundamental rights for taxpayers. Many state agencies, including the Comptroller's Office, use it as a model.

These federal rights include:

• You have the right to receive information about tax laws and actions taken by the IRS or a state agency.
  
  
• You also have the right to pay only the correct amount of tax.
  
  
• They also have the right to challenge decisions, request payment plans, and pursue relief through a compromise offer.
  
  
• You also have the right to keep your lawyer and privacy throughout the process.

Maryland's tax collection process incorporates many of these same ideas. For example, the state lets people appeal assessments, offers an installment plan, and allows people to join the Maryland Offer in Compromise program. Knowing your rights under state and federal law will help you address tax problems fairly and confidently.

Frequently Asked Questions

How does the tax collection process in Maryland begin?

When the Comptroller's Office in Maryland finds a tax return that hasn't been filed or a tax debt that hasn't been paid, it starts collecting taxes. The Comptroller's Office sends the taxpayer a letter informing them how much they owe, including penalties, interest, and other applicable fees. If the taxpayer doesn't respond or pay the bill, the agency can take steps to collect the debt, like a levy, lien, or wage garnishment.

Can I ask for a payment plan to help me pay off my taxes?

Yes, taxpayers who can't pay their taxes all at once can call the Comptroller's Office and ask for a payment plan, which is also called an installment agreement. The agency will look at your monthly income, account balance, and ability to pay. These agreements help taxpayers repay their debts over time and avoid harsher actions to collect them. It's best to file early and keep up with your plan's required payments and taxes in the future.

What happens if I ignore a tax notice or bill?

If you ignore a tax notice, the government may take more severe action. The Comptroller's Office can charge interest, impose penalties, or take action like a lien, levy, or wage garnishment. The longer the debt remains unpaid, the more difficult and expensive it becomes to resolve. Taxpayers who owe back taxes should act quickly by submitting the appropriate form, contacting the agency, and exploring options such as compromise or installment agreements.

Is my federal tax refund subject to collection for Maryland tax debt?

Yes, Maryland works with the IRS on programs that offset refunds. The state can take that money if the IRS sends a federal tax refund to taxpayers who owe Maryland taxes. The Comptroller's Office can still apply the rebate to the taxpayer's account for the full amount owed, even if the taxpayer is on a payment plan. Refunds can be collected until the debt is paid off or settled.

Can I settle my Maryland tax debt for less than I owe?

If taxpayers can't pay the full amount they owe, they may be able to get an offer in compromise (OIC). To see eligibility, the Comptroller's Office looks at taxpayers' financial records, like their monthly income, assets, and debts. Some taxpayers can choose this option and pay less than the full amount they owe. However, people in an open bankruptcy case cannot make a compromise offer.

How should I respond if I get a tax bill from a previous year?

If you get a bill for a past tax year, check the information on the notice against your tax return. The IRS or your failure to file may have caused the Comptroller's Office to change your account. To fix the problem, you should respond immediately, ask for clarification, and either pay the bill or dispute it. Delayed action may result in penalties or enforcement measures.

Can the state garnish my wages to collect unpaid taxes?

The Comptroller's Office may garnish your employer's wages to collect unpaid taxes. The state may order your employer to withhold a portion of your wages if you don't reply to a notice or make required payments. Garnishment will continue until the entire sum—including interest and penalties—is retrieved. Taxpayers should contact the agency to prevent wage garnishment and set up a payment schedule.