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A closer look at the enforcement options Maryland uses to collect tax debt - II

Earlier this month, our blog spent some time discussing how those individuals who find themselves in the unenviable position of not having made payment arrangements with the Comptroller of Maryland's office or being unable to comply with these arrangements should know that the agency will not hesitate to pursue one -- or several -- enforcement actions.

We'll continue examining these enforcement actions in today's post. However, it's important to reiterate at the outset that the primary purpose in this exercise isn't to cause unnecessary alarm, but rather to provide valuable insight and reinforce just how important it is to seek the necessary assistance.

Salary liens

The Comptroller's Office has the authority to garnish the wages/salary of those with unpaid and undisputed state tax liabilities. As alarming as this sounds, this doesn't mean that it has carte blanche to take the entirety of a person's wages.

Rather, the state legislature has established that that the greater of the following amounts are exempt from liens for unpaid tax debt:

  • 75 percent of disposable wages due; or
  • $145 multiplied by the number of weeks wages due were earned;
  • Minus health insurance payments deducted by an employer

It's worth noting that the calculation is a bit different for residents of Caroline, Queen Anne's, Worcester and Kent counties, with the greater of the following amounts per workweek being exempt from liens for unpaid tax debt:  

  • 75 percent of disposable wages due; or
  • 30 times the then-current federal minimum hourly wage  
  • Minus health insurance payments deducted by an employer

Accordingly, the amount left over after taxes (federal, state, FICA) and the above-discussed exemptions is the amount that would be taken by the Comptroller's Office.

Professional and business changes

Holders of professional or business licenses should be aware that failure to file tax returns, pay a tax debt owed or enter into a payment arrangement can jeopardize their ability to earn a living.

Indeed, the following state agencies are required to check on the existence of any tax debt prior to issuing any license and withhold renewals if necessary:

  • Department of Labor, Licensing and Regulation
  • Department of Health and Mental Hygiene
  • Comptroller of Maryland
  • Clerks of the Circuit Court
  • Department of Natural Resources
  • Department of the Environment
  • Motor Vehicles Administration

In the event a license renewal is delayed because of tax debt, the agency in question will be notified by the Comptroller's Office once a resolution has been reached.

We'll conclude our discussion of this important topic in a future post. In the meantime, consider speaking with a skilled legal professional if you have any manner of state tax concern.

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Friday, November 18, 2016

Chaya Kundra will be a panelist at the New England IRS Representation Conference on Preparer Penalties.

Preparer Penalties: Everything You Need to Know! Over time the IRS has increased its focus from individual taxpayers to tax preparers. When the IRS identifies a pattern of false or fraudulent returns, it does not hesitate to impose penalties on the return preparers. This panel will walk you through the various penalties and what preparers need to know to protect themselves.

Moderator: Amanda Evans, Green & Sklarz LLC, New Haven, CT

Panelists: Chaya Kundra, Kundra & Associates, Rockville, MD, Barbara Kaplan, Greenburg Traurig, New York, NY

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