Having unfiled Maryland tax returns means one or more required returns for past tax years were never submitted to the Comptroller’s Office. These unfiled returns remain open until completed, and the state considers taxpayers responsible for every year they were required to file. Even if no tax was owed, missing a filing can create long-term complications that affect your financial standing.
The Comptroller’s Office and related state agencies treat this issue seriously. Information shared between the IRS and Maryland helps the department identify when someone should have filed but didn’t. Employers, banks, and other institutions report income details, which allows the office to compare what was received against the returns on file. A notice may be sent if a return is missing, and penalties or substitute filings may follow.
Taxpayers who address the problem early often find the process more manageable. With proper assistance, gathering the required forms, determining eligibility for deductions or credits, and arranging payments when needed is possible. Taking action helps resolve the balance and prevents stronger collection measures such as property liens or wage garnishments.
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What Does It Mean to Have Unfiled Maryland Tax Returns?
Unfiled Maryland tax returns are state income tax filings that were not submitted for a past tax year, even though the taxpayer was required to file. Maryland residents and certain nonresidents must complete Form 502 or another return to report income, claim deductions, and pay any balance due each year. When a required return is skipped, the Comptroller’s Office considers that tax year unresolved, and the obligation remains indefinitely.
Who Is Required to File
- Maryland residency: You must file if you were a resident of Maryland for all or part of the year.
- Income thresholds: You are required to file if your Maryland gross income reached the filing threshold based on your filing status and age.
- Withholding: You must file if Maryland income tax was withheld from your wages or other payments.
- Federal filing requirement: You must file a federal income tax return with the IRS if you were required to do so.
Types of Taxes Involved
- Income tax: This applies to wages, self-employment earnings, and other taxable income.
- Estate tax: This applies to certain estates located in Maryland that exceed the exemption amount.
- Inheritance tax: This applies to property transfers to beneficiaries who are not exempt under Maryland law.
- Local sales taxes: This applies to businesses operating in Maryland that collect sales taxes on goods and services.
- Both an estate tax and inheritance tax: These may apply in some situations where property is passed on and beneficiaries are subject to multiple tax rules.
Why the State Cares
- Revenue collection: The Comptroller’s Office depends on complete and accurate filings to ensure the state receives funds needed for essential services.
- Compliance enforcement: State agencies and the IRS share information, allowing the department to identify missing returns quickly.
- Legal responsibility: Taxpayers are responsible for filing all required returns, and the office has the authority to issue notices, prepare substitute returns, and begin collection if filings are not made.
State-Specific Consequences of Unfiled Returns
Unfiled Maryland tax returns create more than just paperwork problems. The Comptroller of Maryland has broad authority to enforce compliance, and taxpayers who fail to file may face penalties, substitute returns, liens, and other actions. These consequences can affect income, property, and even professional licenses until the issue is resolved.
Penalties and Interest
- Failure-to-file penalty: When a return is not filed on time, a penalty of 5% per month, up to a maximum of 25%, is added.
- Interest charges: Interest accrues on unpaid balances, with rates ranging from 9% annually.
- Late payment penalty: Additional charges apply when taxpayers file but do not pay the balance owed in full.
Substitute Returns
- State-prepared filings: The Comptroller’s Office may prepare a substitute return using information from the IRS, employers, and financial institutions.
- Standard deductions only: Substitute returns allow only limited deductions and do not include credits a taxpayer may qualify for.
- Higher balances due: These returns often show a larger amount owed than if the taxpayer filed personally.
Tax Liens
- Public record: A lien is filed in circuit court, creating a record accessible to lenders and the public.
- Impact on property: Liens attach to homes, vehicles, and other assets located in Maryland.
- Credit consequences: A lien damages credit and may prevent taxpayers from refinancing or selling property.
Wage Garnishments
- Continuous collection: The Comptroller’s Office can garnish wages until the tax debt is paid in full.
- Types of income affected: Garnishment may apply to salary, bonuses, and commissions.
- Employer involvement: Wage deductions continue automatically through payroll once a notice is received.
Bank Levies
- Account access: Funds in checking, savings, or money market accounts can be seized.
- No sign of warning: Levies are often applied without advance approval from a court.
- Business impact: Business accounts may also be frozen, disrupting operations.
License and Registration Holds
- Driver’s license suspension: Holds may block the renewal of driver’s licenses until tax obligations are resolved.
- Vehicle registration: Registration renewals may be denied when returns remain unfiled.
- Professional licenses: Contractors, real estate agents, and other professionals may have their permits suspended.
Intercepted Payments
- Refund offsets: State and federal tax refunds can be intercepted to pay unpaid Maryland balances.
- Government payments: Vendor contracts and lottery winnings over specific amounts may also be seized.
- Long-term effect: Intercepts continue until the taxpayer files returns and pays or arranges acceptable payments.
Step-by-Step Relief Process
Resolving unfiled Maryland tax returns takes organized steps. The Comptroller’s Office and IRS provide ways to access information, submit accurate filings, and request relief if you cannot pay in full. By following each step, taxpayers can move toward compliance and reduce the risk of enforcement actions.
Step 1: Obtain Tax Transcripts
- IRS transcripts: You can request tax transcripts from the IRS. These transcripts include wage and income records, prior returns, and account details to confirm what was reported for each tax year.
- Maryland transcripts: The Comptroller’s Office provides state-level transcripts showing income received, payments made, and your filing status.
- Determine balance: Reviewing transcripts allows you to find missing years, check the size of balances owed, and verify whether forms were filed or payments were credited.
Step 2: Gather Supporting Documents
- Income records: Collect W-2s, 1099s, and other documents showing wages, contract income, or business earnings.
- Property and investment information: Gather rental income, capital gains, or property sales details.
- Deductible expenses: Keep receipts for childcare, retirement contributions, or business expenses that may reduce your debt.
- Prior returns: Old federal and state returns help confirm figures and ensure accuracy for the correct tax year.
Step 3: Prepare Accurate Returns
- Chronological filing: Returns should be filed starting with the oldest year first to prevent calculation errors.
- Credits and deductions: Filing yourself or with professional help ensures you claim the exemptions and credits you are eligible for, rather than paying more than required.
- Professional assistance: Many taxpayers choose tax relief services to ensure forms are completed correctly and payments are applied properly.
Step 4: Submit Returns and Request Relief
- File all returns together: Submitting all missing years simultaneously demonstrates good faith and helps resolve your account faster.
- Payment options: The Comptroller’s Office offers installment agreements, offers in compromise, and currently not collectible status for those who qualify.
- Financial information: Requests for relief require a list of income, expenses, and property values to support your claim.
Step 5: Stay Compliant Going Forward
- File on time: Submit your Maryland tax return by the April deadline each year to avoid penalties.
- Make payments: Stay current with estimated costs if you are self-employed or operate a business.
- Monitor account status: Regularly check your account with the Comptroller’s Office to confirm that filings, payments, and notices are current.
- Update contact details: Ensure your address and contact information are current so you receive all notices promptly.
Frequently Asked Questions
How many years back will Maryland require me to file?
The Comptroller’s Office has no statute of limitations on unfiled Maryland tax returns. This means you are responsible for every year a return is required. In practice, the department often focuses on the most recent six to ten years, but older years can still be pursued, especially if significant income or unpaid balances are involved.
What if I moved out of Maryland but still owe taxes?
Moving out of Maryland does not remove your responsibility to file returns for years when you lived or earned income in the state. The Comptroller’s Office can still collect by placing liens on property, garnishing wages in your new state, or intercepting federal refunds. Past Maryland obligations remain until returns are filed and balances are resolved.
Can Maryland garnish wages like the IRS?
Yes, Maryland has broad wage garnishment powers. Once a notice is issued, the Comptroller’s Office can continuously deduct from wages, bonuses, and commissions until the balance is paid. Unlike some states, Maryland does not need to renew garnishment orders, and the process may continue for years if returns remain unfiled and taxes unpaid in full.
Will filing old returns trigger an audit?
Submitting multiple late returns can draw extra attention, but the Comptroller’s Office usually prioritizes collecting money owed over auditing. The audit risk is low if your filings are accurate and supported with proper forms. Accuracy matters because missing details or incorrect information could raise questions, so professional preparation or review is strongly recommended for taxpayers.
