Rockville

In Montgomery County, a tax notice can raise two questions: what you owe, and which government may tax you. The county borders the District and faces Virginia across the Potomac. It is also home to federal agency headquarters and a large life sciences industry. A Rockville tax attorney at Whiteford can work through both questions with you, whether the notice came from the IRS or the Comptroller of Maryland.

We serve clients mainly in Montgomery County, including Rockville, Bethesda, Silver Spring and Gaithersburg, and also in Frederick, Howard and Prince George's Counties.

The notice may be an IRS notice of deficiency, a 30-day letter proposing audit changes, or a collection notice. It may come from the Comptroller, hold you responsible for a company's unpaid payroll taxes, or ask about returns you never filed. Each starts its own clock, counted from the date printed on the notice, not the day it arrives.

If you hire us, we file Form 2848 so we can represent you before the IRS, and Form 548 so we can do the same before the Comptroller.

Residency across the DC and Virginia lines

Montgomery County sits on a border, and most residency disputes here start with a move across it. For example, someone takes a job in the District, buys a home in Virginia and keeps the Bethesda house for a while. Two years later, a Comptroller notice says Maryland still treats them as a resident.

How Maryland decides who is a resident

Maryland has two ways to make you a resident. The first is domicile: under Tax-General § 10-101(k)(1)(i), you are a resident if Maryland is your domicile on the final day of your tax year. The second needs no domicile. It applies if you kept a place of abode in Maryland for more than six months of the year. The Comptroller's regulation adds a condition to that test: 183 days or more spent in Maryland. Any part of a day counts as a day.

Domicile is where the fights happen, because no Maryland statute defines it. The courts do: it is the place you treat as your true, fixed and permanent home. Maryland presumes a domicile continues until you gain a new one. Changing it takes two steps: setting up a new domicile, and leaving the old one with no intention of returning. The burden of proving both is yours.

What decides these cases is evidence of intent that anyone can check. Maryland courts give the most weight to where you live day to day and where you vote, and voter registration is the strongest single record. Other records count too:

• your driver's license and vehicle registration
• where your family lives and your children go to school
• the address on your tax returns
• where your bank accounts and furniture are

Keeping the Maryland house does not decide the case by itself, and Maryland cases go both ways. In one, taxpayers who rented out their Maryland homes while working overseas with no end date had changed domicile. In another, a taxpayer worked in West Virginia and Pennsylvania while the family stayed in the Maryland house. That taxpayer also kept a Maryland license, car titles and a safe deposit box, and was still domiciled in Maryland.

Working on one side of the line and living on the other

Maryland's reciprocal agreements with its neighbors cover wages only. Under § 10-806(d)(1), a nonresident with business or self-employment income from Maryland must still file here. A Maryland resident who pays income tax to another state or the District can claim a credit under § 10-703. Maryland extended that credit to the county tax, including Montgomery County's, after the U.S. Supreme Court decided Wynne.

Tax issues around federal work and research

Federal agencies with headquarters in the county include the National Institutes of Health in Bethesda and the Food and Drug Administration in Silver Spring. The National Institute of Standards and Technology is based in Gaithersburg. Federal jobs, federal contracts and research each bring tax issues of their own.

For clearance holders, the national security adjudicative guidelines count unfiled returns and unpaid income tax as a possible security concern. That covers every level, including Maryland and county tax. A plan with the tax agency to file or pay, kept current, is a listed way to ease it. Our page on unfiled returns explains how to catch up.

Federal pay can also be taken for a tax debt. The IRS can take up to 15% of some federal salaries and federal retirement annuities through a continuous levy under IRC § 6331(h). Maryland can reach the same paycheck. Under Tax-General § 13-811, the Comptroller can serve its wage lien on the Maryland federal office that keeps your records.

For a business that sells goods or services to the federal government, the levy can take up to 100% of each payment, under IRC § 6331(h)(3). Our Falls Church page, written for Northern Virginia's federal workforce, explains how the IRS levies federal pay and contract payments.

Life sciences companies that claim the federal research credit face scrutiny of their own. A refund claim for the credit must identify each business component it covers, and the IRS examines these claims with a dedicated audit guide.

Maryland deadlines in a Montgomery County case

A Maryland tax dispute from Montgomery County moves in 30-day steps. You ask the Comptroller for a revision, appeal to the Maryland Tax Court in Baltimore, then seek review in the Circuit Court for Montgomery County. Our Towson page sets out each Maryland deadline in order.

The revision request cannot be skipped. Under § 13-514, the Maryland Tax Court hears only cases in which every administrative remedy has been used. No payment is needed to appeal there.

One deadline is missed again and again. If a final IRS determination increases your federal taxable income, you owe the Comptroller a report within 90 days under § 13-409. Report on time, and the Comptroller has one year from receiving the report to assess under § 13-1101(c). Miss that deadline, and Maryland may assess at any time under § 13-1101(b)(6).

Sales and use tax has its own limit. The Comptroller has four years from the due date to bring an action to recover it, under § 13-1102(a). That limit is lifted only for fraud or gross negligence, under § 13-1102(b). Underpaying by 25% or more counts as prima facie evidence of gross negligence, enough to show it unless you prove otherwise, under § 13-1102(b)(1)(ii).

Payroll taxes and Maryland collection

If an employer withholds Maryland income tax but does not pay it over, the Comptroller can pursue those in charge. Under Tax-General § 10-906(d), personal liability reaches officers and others with direct control over the company's finances, and any agent required to withhold and pay. It applies when the employer negligently fails to withhold or pay. The federal trust fund recovery penalty sets a higher bar: the IRS must show the failure was willful.

The wage lien under § 13-811 reaches a responsible person's own pay, federal pay included. The business can lose its licenses too. Under § 13-707, the Comptroller may suspend or revoke State business licenses held by an employer that willfully fails to withhold or pay over Maryland income tax. Separate tax-clearance rules can also block the renewal of professional and occupational licenses.

Maryland's collection clocks run long. The Comptroller generally has 10 years to collect, counted from the due date under § 13-1103(a) or from the assessment under § 13-1103(c)(1). A tax lien can last up to 20 years after assessment, under § 13-806(a).

The State can also settle for less when the full amount cannot be collected, under § 13-816. The Comptroller runs its own compromise program as well. Our Columbia page covers these limits and who qualifies for the program.

Meet Michael

Michael March

Partner, Co-Chair Tax Section

View Michael's profile →