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Do interest and penalties always accompany tax controversies?

One of the most discouraging aspects about a tax dispute is the late fees and penalties that may attach. Although a taxpayer may have a good-faith belief in his or her defense, the consequences, if proven wrong, can be costly. In other scenarios, a taxpayer may not have realized that he or she was delinquent, only to discover that the oversight comes with fines and interest from the date the tax was owed.

Maryland state lawmakers apparently understand this stigma, as they recently announced a so-called “tax amnesty” for this coming fall. The amnesty program is intended to help delinquent taxpayers by allowing them to pay their unpaid taxes with only half the interest that would normally attach. In other words, the rate would be 6.5 percent, instead of 13 percent annual interest. In addition, state civil penalties that would normally accompany the unpaid taxes will also be waived, with the exception of charges relating to fraud. The grace period will run from September 1 to October 30, 2015. 

Notably, a variety of unpaid taxes might qualify for the measure, including personal and corporate income tax, employer withholding tax, and sales and use tax, among others. However, taxpayers must apply and enroll in the amnesty program to receive the benefit.

Whether the dispute is at the state or federal level, tax disputes can be costly. For that reason, our law firm recommends a consultation with a tax attorney as soon as one receives a tax notice. Although an innocent mistake may not always be a defense, it may provide leverage in administrative negotiations with tax officials, especially in the hands of an experienced tax attorney.

Source: Baltimore Sun, “Maryland to have 'amnesty' for delinquent taxpayers this fall,” Carrie Wells, July 27, 2015

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