Legal options for reducing tax penalties on overdue taxes

 Posted on July 22, 2024 in Tax Debt

Dealing with overdue taxes can be stressful. However, there are legal ways to reduce or eliminate tax penalties and interest. Understanding these options can help you manage your tax debt more effectively.

Request a penalty waiver

One option is to request a penalty waiver. If you have a good reason for missing the tax deadline, you can ask the Maryland Comptroller's Office to waive the penalties. Valid reasons may include serious illness, natural disasters, or other unavoidable circumstances. Providing proper documentation to support your request increases your chances of approval.

Apply for an installment agreement

If you cannot pay your tax debt in full, consider applying for an installment agreement. This allows you to pay your taxes over time in smaller, more manageable amounts. While interest may still accrue, an installment agreement can prevent additional penalties from being added.

Seek an offer in compromise

An offer in compromise allows you to settle your tax debt for less than the full amount owed. This option is available if paying the full amount would cause financial hardship. The Maryland Comptroller's Office will review your financial situation to determine if you qualify.

File an amended return

If you made a mistake on your original tax return, filing an amended return can help reduce your tax debt. This can also help you avoid greater consequences, like tax liens on your property. Correcting errors may lower the amount of taxes owed, which can reduce penalties and interest.

Stay compliant with future taxes

To avoid future penalties, ensure you stay compliant with future tax obligations. Pay your taxes on time and keep accurate records. Regularly reviewing your tax situation can help you avoid falling behind again.

Reducing or eliminating tax penalties and interest in Maryland requires understanding your options and taking proactive steps. By exploring these legal options, you can manage your tax debt and work towards financial stability.