State tax audit assistance from Maryland Tax Attorneys serving Baltimore, Annapolis, and the Washington D.C. metro area
The word “tax audit” often dredges up unrelenting fear and trepidation in hardworking individuals and business owners. Many imagine a team of intimidating state officials combing through every bank receipt and monthly statement, looking for the smallest discrepancy. However, a state tax audit need not necessarily evoke the overwhelming feelings of anxiety commonly associated with this tedious task – and a state tax audit attorney can help put you and your financial team at ease in the weeks or months leading up to your audit. At Rosenberg Martin Greenberg, we live and breathe the state and federal tax codes – and will work tirelessly to help you prepare and minimize tax liability and penalties.
Getting Started With a Maryland State Tax Audit
You are undoubtedly familiar with the concept of an IRS tax audit, which is performed by federal authorities pursuant to federal laws. A state tax audit is similar in concept, however it pertains solely to your state income tax returns and is not generally concerned with issues pertaining to your federal tax liability.
A Maryland state tax audit is commenced by the Maryland Comptroller’s Office. If you are chosen, you will receive a letter or phone call from the Comptroller’s office to schedule the audit. If you receive notice, be sure to contact a Baltimore tax attorney right away – the turnaround times are generally fairly short. In general, a Maryland-based business will receive just one week’s notice, while an out-of-state business will likely be given additional time to prepare. If you need additional time, the Comptroller will generally grant you a postponement, however you must still account for that period of time leading up to the audit.
The Business Audit
As a business owner conducting commercial transactions in the state of Maryland, you are required to report your Maryland income on your state tax return. Business audits can occur for any number of reasons, including inconsistencies with your federal return or suspicions of underreporting.
The business audit begins with an initial contact meeting with the auditor wherein the audit is scheduled, the auditor requests the provision of certain documents, and general information about the business is discussed. Once the official audit is underway, the auditor will begin with a conference-style meeting and may ask for a description of your business model, the nature of your industry, how sales are conducted, and how accounting procedures are handled. The auditor may actually ask for a tour of your facility as well in order to gain a clearer understanding of your daily operations.
Next, the auditor will conduct a review of a sample of your business records, which you should compile beforehand. The auditor will then work through the sample, ensuring that you have paid the proper amount of state income tax as compared with your income and expense records. Once the audit is over, the auditor will meet with you and your state tax audit attorney to discuss findings – known as “working papers.” Once the auditor has explained everything to you, you will be required to sign the working papers acknowledging receipt of the documents and an understanding of your tax liability.
The Individual State Income Tax Audit
The Maryland Comptroller’s office may also initiate audit proceedings with individual taxpayers, which may be triggered by any of the following possible issues:
- Maryland authorities received notice from the IRS that your individual return was amended to reflect underreported income
- Your reported adjusted gross income (AGI) does not match that reported on your federal return
- You were audited by the IRS, resulting in changes to your return
- You received Earned Income Credits despite being ineligible at the time of filing
- You failed to add or modify your state return with regard to tuition and fees, which must be added back to a Maryland income tax return in an amount congruent with the federal tuition and fees deduction
- Eligibility issues with a pension exclusion
Much like the business audit, the Maryland Comptroller will contact individual taxpayers to arrange for a scheduled audit. Under Maryland law, the Comptroller must work within a three-year statute of limitations when auditing individual taxpayers, which begins on the due date of the return or the date it was filed – whichever is later.
How Rosenberg Martin Greenberg Can Help
State tax auditors, while well-versed in Maryland tax laws, make mistakes – which can lead to unnecessary penalties, fines, and tax liability.
Working with a Baltimore tax audit attorney can help ensure calculations are conducted correctly, tax overpayments are recognized, and taxpayers do not unknowingly waive their rights. If a tax underpayment issue is uncovered, having an attorney advocate on your side can help ensure you do not unknowingly admit to wrongdoing or otherwise make statements against your own interests during the audit. In the past few years, Maryland individual and business audits have increased, giving you even greater incentive to enlist the services of a competent and meticulous team of tax professionals as you prepare for a possible audit.
If you receive notification that you have been selected for a state tax audit, do not delay. If the Maryland Comptroller does not hear from you within a reasonable period of time, it will send an auditor to your home or business to make contact with you personally. To avoid this abrupt result, be sure to respond to the inquiry quickly, then give us a call immediately.
For help with your Maryland state tax audit, please call Brian Crepeau at 410.649.4981, email firstname.lastname@example.org.
Talk to a Baltimore Tax Attorney Today
If you are seeking counsel for a tax related legal matter, contact the Rosenberg Martin Greenberg Tax Controversy experts.
Tax Controversy News
Earlier this year, the Supreme Court decided on the much-anticipated case of South Dakota v. Wayfair, 585 U.S. ___, 138 S.Ct. 2080 (2018). At issue was the validity of a statute applying sales tax to internet retailers that had very limited economic nexus to the state (i.e., without property or employees in the state). By…
Small business owners make up the bulk of American businesses. According to the Small Business Administration, in 2010, there were nearly 28 million small businesses, making up 99.7% of U.S. employer firms. More than 50% of the small businesses were home-based, and nearly 75% were sole proprietors. The vast majority of Maryland businesses, then, can…
At best, a business tax audit will consume only time and personnel resources. At worst, you and your business could face criminal charges and payments of additional taxes, fines, and penalties. Moreover, if the audit uncovers fraudulent activity, substantial underpayments of taxes, or unreported income an audit can be expanded from three to six years,…