Tax Forgiveness in Maryland

Maryland tax forgiveness overview

Unlike some states — Pennsylvania, for example — Maryland doesn’t offer a state-specific tax forgiveness program. But that doesn’t mean you don’t have options if you live in Maryland and have fallen behind on your state taxes.

Hardship relief may temporarily stop collections, but it does not eliminate your tax debt.

Here, you can take advantage of tax relief in the form of Maryland’s offer in compromise program, hardship-based relief and even a monthly payment plan. Eligibility for these programs is based on your ability to pay your state taxes in full and whether you are compliant with filing your state tax returns.

“Maryland resolution options are examined on a case-by-case basis, and each program serves a different purpose,” said Stephen A. Weisberg, attorney and founder of The W Tax Group, a nationwide tax resolution company.

Tax forgiveness options in Maryland

Below, you’ll find a list of each program, along with its chief purpose when it comes to tax relief.

• Offer in compromise: If you realistically cannot pay your tax liability in full as a result of an ongoing financial hardship, this tax relief program may be the best option for you. An OIC can reduce your total debt due, making it more manageable. 
• Hardship-based relief: If your situation is dire right now but could improve over time, hardship relief may temporarily stop collection efforts while you regain financial stability.
• Monthly payment plan: Maryland’s tax payment plan option is best for you if you can’t pay your state tax liability in full immediately, and instead would fare better making smaller payments over time.
• Fresh Start: Maryland’s Fresh Start program helps formerly incarcerated taxpayers who were unable to file returns while in prison get back into compliance. Eligible participants may qualify for relief from certain penalties and interest when filing overdue returns.

Maryland offer in compromise eligibility

Maryland’s offer in compromise program is generous, but it carries strict eligibility requirements. You must not have the financial ability to pay the full liability now or in the foreseeable future. It’s based on a few different criteria — the state looks at income, living expenses, equity in assets and circumstances.

Below, we’ve listed the eligibility requirements you’ll have to meet in order to be approved for an offer in compromise in the state of Maryland.

• You must have a delinquent Maryland state tax liability.
• This tax liability must be at least two years old. 
• All tax returns for the current year and at least six years prior must be filed on time.
• You may not be currently going through a bankruptcy proceeding.
• It must be unlikely that you will be able to pay in full any time in the foreseeable future.

Taxpayers must have already declined or exhausted administrative appeal options, and cannot have any issue currently under appeal. “This is not an informal negotiation,” Weisberg said.

Hardship factors like low income (less than 200% of the federal poverty level is a common threshold used in Maryland), inability to pay basic living expenses, unforeseen circumstances leading to loss of income and whether you own any assets that could be liquidated to pay part or all of your tax debt will all be considered.

If your application for an offer in compromise is rejected, a payment plan might be your next best option. This allows you to pay over time without having to worry about collections.

» MORE: What to know about IRS tax forgiveness

Steps to apply for Maryland offer in compromise

If you’re considering filing a request for an offer in compromise in Maryland, it’s essential that you first get up to date with filing your taxes, including any years you may have missed.

Next, fill out both Form MD 656 and Form MD 433-A, which together constitute an application for an offer in compromise. Your application will be rejected if you don’t submit both forms. It’s a good idea to include documentation that demonstrates your financial situation, such as bank statements and bills.

To email the forms, send them to oic@marylandtaxes.gov. Or you can mail them to the following address:

Offer in Compromise Program 
Comptroller of Maryland
7 St. Paul Street, Room 210 
Baltimore, Maryland 21202

Maryland tax debt relief alternatives

Maryland’s hardship relief is another, less formal method of reducing tax burden. It’s based on whether you can meet basic living expenses while paying back the tax debt you owe to the state of Maryland. If it’s determined that you aren’t able to afford reasonable daily living expenses, the state may stop collections.

The hardship program differs from the offer in compromise in that you’ll still have to pay back the debt at some point. “Basically, it’s a temporary pause in collection attempts that’s meant to help you get back on your feet,” Weisberg said.

If you’ve been in jail, you could qualify for Maryland’s Fresh Start program. This program is meant specifically for people who were incarcerated and unable to file their taxes. The program allows them to get back into compliance and, in certain cases, receive relief from penalties and interest.

» COMPARE: Maryland’s best tax relief companies

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