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Virginia and Maryland Give Late Taxpayers a Break

By Nancy Trejos
Washington Post Staff Writer
Sunday, October 18, 2009

If you owe back taxes to Virginia or Maryland, you have some time to redeem yourself.

Both states are offering amnesty to delinquent taxpayers for a limited time. Maryland residents have until Oct. 30 to settle their tax bills. Virginia residents have until Dec. 5.

With state revenue battered in the economic downturn, officials are seeking cash to bolster their reserves.

"Like all states, we need the revenue, and this is money owed to the Commonwealth of Virginia anyway," said Joel Davison, a spokesman for Virginia's Department of Taxation. "And why not give people a break during these recessionary times?"

Both states will waive all penalties and half of any unpaid interest unless the penalties are related to fraud. Annual interest has averaged about 8 percent in Virginia over the past five years. The interest rate on unpaid taxes in Maryland has been 13 percent annually. In Virginia, taxpayers pay penalties of 6 percent a month after the first month of delinquency but no more than 30 percent of the total tax bill in penalties. A 10 percent penalty is assessed on delinquent tax bills in Maryland each year.

Maryland's program, which began Sept. 1, applies to liabilities on returns due on or before Dec. 31, 2008. Any taxpayer who took advantage of a 2001 amnesty is not eligible for the same tax covered under that previous program. In Virginia, you must have a delinquent bill that was assessed on or before July 9, 2009. Even those who took advantage of previous tax amnesties in 1990 or 2003 qualify.

Virginia's program, which began Oct. 7, differs in other ways. Those who choose not to participate in the program will have to pay a 20 percent penalty on any outstanding taxes. No such penalty will be assessed on delinquent taxpayers in Maryland.

Also, those who seek amnesty in Virginia must pay what they owe within the 60 days that the program is underway. Maryland residents can set up payment plans that expire Dec. 31, 2010.

"Virginia's program is a carrot and stick," said Burton J. Haynes, a tax lawyer based in Burke, Va., who practices in both states and has had many clients seek the amnesty.

"They offer you a carrot if you settle. They'll waive the penalties. The stick is if you don't settle anything in the amnesty, they will impose a 20 percent penalty."

Virginia's Taxation Department notified 550,000 people and businesses that they qualify. The average tax bill is $2,315, and the state hopes to generate $48 million for its general fund. There are no figures available on how many people and businesses have applied for amnesty, but the number of calls to the department has increased dramatically, Davison said.

In Maryland, 172,568 people and 32,316 businesses are eligible. The state has received 2,248 applications, of which 222 were denied for various reasons, such as fraud, said Lisa Lester, a spokeswoman for the Comptroller of Maryland's office.

The state hopes to generate $5 million in revenue. As of last week, it had made $4.1 million.

The District's city council recently approved a tax amnesty program but has not yet designated dates for it.

People seeking more information on Maryland's program can call 1-800-MD-TAXES or e-mail amnesty@comp.state.md.us. Virginia residents seeking more information can call 1-888-560-0057 or go to http://www.getsquareva.com.

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