Unfiled tax return help in Baltimore

Unfiled tax returns in Baltimore usually mean two missing filings for each year. One is owed to the IRS, and one to the Comptroller of Maryland. City residents also report Baltimore City's local income tax on that Maryland return. Whiteford Tax Defense prepares the missing years, answers the letters both agencies send, and plans the next step with you.

The two filing rules are linked. Federal law, in Internal Revenue Code Section 6012, says who must file with the IRS. Maryland builds its rule for residents on that same test, with a few changes, such as leaving out Social Security benefits. So a Maryland resident who owed a federal return generally owed a Maryland one too.

How the Comptroller finds a missing Maryland return

Each year, the Comptroller of Maryland checks federal returns filed from a Maryland address against its own records. When it finds no Maryland return to match, it mails a filing inquiry notice. The letter asks you to explain, because the IRS gives the state only basic data, such as your address and income.

The Comptroller describes what happens next:

1. If you lived in Maryland that year and should have filed, the Comptroller asks you to file right away, with all your W-2s.
2. If you don't answer, the next notice is an assessment built from the federal data, with penalty and interest added.
3. That assessment can be collected 30 days after its date. Those same 30 days are your time to appeal it.

Maryland law also covers a return that still doesn't arrive after a formal demand. The demand gives you 30 days from its mailing to file and pay (Tax-General § 13-303). After that, the law directs the Comptroller to estimate your income from the information it holds. It may assess up to twice the tax due on that estimate, and it must add a penalty of 25% of that assessed tax (§§ 13-402 and 13-708).

Answering early puts your own figures in front of the state. We file the missing Maryland years, or explain in writing why no return was due. If an assessment has already arrived, see appealing a Comptroller assessment on our Baltimore office page.

How Baltimore City's income tax is filed and refunded

Baltimore City has no income tax return of its own. Maryland law gives each county, and Baltimore City, a local income tax, and it bars other general local income taxes (Tax-General § 10-103). You report the city's tax on your Maryland return. The Comptroller of Maryland, not the city, collects it along with the state tax.

Your W-2 shows the same link. For a city resident, Maryland withholding covers state and city tax together, and the W-2 reports both as one amount in box 17. So a missed Maryland return leaves that year's state and city tax unsettled at once.

If too much was withheld, a late return can still claim the refund, but not forever. Federal law generally allows it only if you file within three years of the return's due date, counting any extension you had. Maryland uses those same federal limits for its income tax refunds, city tax included (Tax-General § 13-1104(c)).

When your federal return changes

Your Maryland return starts from the income and deductions on your federal one. So most federal corrections change the Maryland return too, city tax included. If you find a mistake yourself, you correct the federal return on Form 1040-X and your Maryland resident return on Form 502X.

A Maryland deadline starts when the IRS makes the change instead, after a notice or an audit. If its final determination raises your federal taxable income, you have 90 days to send the Comptroller a report of federal adjustment (Tax-General § 13-409(b)). The Comptroller's instructions say to make that report on Form 502X. A late report leaves the Maryland tax on that change open to assessment with no deadline (Tax-General § 13-1101(b)).

What the IRS does about a missing year

The federal side works the same way in every state. The IRS may file its own version of your return, known as a substitute for return, using what employers, banks and other payers reported. It often omits deductions and credits your own return could claim. Our guide to unfiled tax returns explains that process and when not filing can turn criminal.

Our work starts with the records. Your IRS wage and income transcripts show what employers and banks reported for each year. Bank statements and old returns fill the gaps. If you'd rather ask in person, the IRS has a Taxpayer Assistance Center at 31 Hopkins Plaza in Baltimore. Call the IRS first to book an appointment.

If the IRS has already mailed a notice of deficiency for a missing year, watch its 90-day deadline. Within that window, you can contest the tax in the U.S. Tax Court, usually without paying it first. Maryland cases can be tried in Baltimore; see tax litigation in Baltimore.

Meanwhile, penalties grow at different speeds. The failure-to-file penalty stops growing after five months. The failure-to-pay penalty keeps running until you pay or it reaches its own cap. Maryland adds interest from the date the tax was due, and a late-payment penalty of up to 10% (Tax-General §§ 13-601 and 13-701).

What comes after the returns are filed

Filing comes first. The IRS generally won't approve an installment agreement or consider an offer in compromise in Baltimore until your required returns are in. Once they are, our Baltimore office works with you on any back taxes left, federal and Maryland alike.

Not filing is usually a civil problem, not a crime. But if a missing year could look deliberate, talk with us before you file it. Where someone skips a return to evade tax, Maryland can add a penalty of up to 100% of the tax underpaid (Tax-General § 13-704). Our page on white collar tax defense in Baltimore covers the criminal side.