With the new governor comes a new tax amnesty program. Maryland’s newest Tax Amnesty Program, recently signed into law by Governor Hogan, aims to reduce penalties and interest on unpaid tax obligations for certain taxpayers and under certain circumstances. They word “certain” is a critical part to the Amnesty Program. As the bill states, the Comptroller is authorized, “to enter into certain agreements to provide a certain waiver under certain circumstances with respect to certain taxes that a taxpayer agrees to pay in accordance with certain terms and a certain schedule; providing that the amnesty program does not apply to certain taxpayers under certain circumstances.” With such specificity, it is important to know which Marylanders (and to what taxes) the Program applies. Contact Frost & Associates today if you need assistance with understanding this new Program.
WHO: The Tax Amnesty Program will waive civil penalties and one-half interest for the taxpayer who, prior to December 31, 2014, failed to file a required return, or pay one of the following taxes: individual income tax, corporate income tax, withholding tax, sales and use tax, or admissions and amusement tax.
The Program provides amnesty for individuals, as well as most businesses.
WHAT: The waivers provided under the Amnesty program are limited to the following three tax liability situations:
- Non-reporting
- Under-reporting
- Non-payment
This means that an individual or business who failed to report, under-reported, or did not pay one of the tax types listed above, is eligible for a waiver of civil penalties and one-half interest. However, the Amnesty Program also clearly defines an exception to the civil penalties waiver: previously assessed fraud penalties are not included, and therefore do not receive the benefit of amnesty.
WHERE: The Amnesty Program was passed by the Maryland General Assembly and signed into law by Governor Hogan.
WHEN: The amnesty period lasts from September 1, 2015 until October 30, 2015. Waivers under the Program are available for those individuals who failed to file a return, or pay certain taxes, on or before December 31, 2014.
HOW (does one take advantage of the Program): In order to be granted a waiver of civil penalties and one-half interest under the Tax Amnesty Program, qualifying individuals must agree to perform certain duties during the amnesty period. These duties may include any of the following:
- Paying the required tax and one-half interest due on a delinquent or previously filed return; or
- Entering into a repayment agreement with the Comptroller of Maryland to pay the delinquent taxes and one-half interest by December 31, 2016
WHY: Although the Amnesty Program generates significant income for the state, the value of the Program lies most with the qualifying taxpayers and businesses that are able to take advantage of the waivers. As long as taxpayers follow the Program requirements (namely, filing delinquent returns, paying taxes and interest owed, and following set repayment schedules), taxpayers will not be charged for criminal tax offenses related to filed returns or paid taxes during the amnesty period. Although amnesty from all criminal charges is not always guaranteed—criminal charges already pending in State courts will not be granted amnesty, for example—the protection from criminal investigation under certain circumstances is yet another added benefit under the Program. Moreover, for taxpayers coming forward under the program, the civil fraud penalty (100% penalty) will not be asserted.
There are some caveats that one should be aware of when accepting a waiver under the Program. For instance, failure to pay the full amount of taxes owed plus one-half interest, and according to schedule, will result in voiding the waiver. However, by remaining abreast of one’s repayment schedule, and seeking assistance in knowing, understanding, and applying the law, the Amnesty Program can be an immensely useful tool in getting one’s taxes and overall financial well-being back on track.
