Maryland Tax Debt Relief: Comptroller Penalties, Interest, and Your Options
If you owe back taxes in Maryland, the Comptroller of Maryland handles collection, and the debt usually includes both the state income tax and the county or Baltimore City piggyback tax on the same return. Maryland also has an unusual enforcement tool: it can block your driver license and vehicle registration renewal until you resolve the balance. This page explains the current penalties, interest rates, payment plans, and settlement options so you can see your real choices.
This page is for informational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently. Consult a qualified tax professional for advice specific to your situation.
Maryland can block your driver license and vehicle registration renewal
Since June 1, 2011, the Comptroller of Maryland has partnered with the Motor Vehicle Administration to collect unpaid state taxes by placing an MVA hold on delinquent taxpayers. When the Comptroller certifies an unpaid balance to the MVA, the MVA will refuse to renew your driver license, refuse to renew your vehicle registration, and refuse to issue replacement or substitute tags, stickers, or transfers. The hold covers a wide range of debts, including individual income tax, withholding, and sales and use tax. To clear it you must pay in full or enter an approved payment plan with the Comptroller, which typically requires a down payment (often around 10% of the balance) with the rest paid over roughly 36 months, though hardship can reduce or waive the down payment. Holds are usually released about two business days after certified payment or an accepted agreement. To arrange this, individuals call the Comptroller at 855-213-6669 or email mvahold@marylandtaxes.gov.
Tax Relief Companies Serve Maryland Residents Nationwide
You don't need a local office to get help with tax debt. Tax relief companies work with the IRS on your behalf remotely. The IRS itself handles most taxpayer communication by phone, fax, mail, and its online portal. A licensed Enrolled Agent, CPA, or tax attorney can represent you before the IRS from anywhere in the country through a Power of Attorney (Form 2848).
This means Maryland residents have access to the same top-rated national firms regardless of where they're located in the state. Most consultations are done by phone or video, and all IRS correspondence is handled directly by your representative.
How Taxes Work in Maryland
How Maryland taxes individuals
Maryland taxes residents on a progressive state schedule that ran up to 5.75% for years, and the 2025 legislative session added two new top brackets of 6.25% and 6.50% on high incomes for tax years beginning after December 31, 2024. What makes Maryland unusual is that almost every resident also pays a county or Baltimore City "piggyback" local income tax on the same return, ranging from about 2.25% to 3.30%, so the real combined burden for most filers is roughly 6% to 10%. A separate 2% surtax now applies to net capital gains for filers with federal adjusted gross income above $350,000. The Comptroller of Maryland administers and collects both the state and the local piggyback tax.
Retirement income and Social Security
Maryland does not tax Social Security benefits at all, even though part of those benefits may be taxable federally. For other retirement income, Maryland offers a pension exclusion: a person who is at least 65, or totally disabled, or whose spouse is totally disabled, may subtract qualifying employer pension and annuity income up to a cap tied to the maximum Social Security benefit (about $41,200 for 2025). That exclusion is reduced dollar for dollar by Social Security or Railroad Retirement benefits received (the "Social Security offset"), and income from IRAs, Roth IRAs, SEPs, and Keogh plans generally does not qualify.
How long Maryland can collect a tax debt
Under Tax-General Article Section 13-1103, Maryland generally may not collect a tax more than 10 years after it was due, or more than 10 years after the date of assessment. Separately, a recorded tax lien under Section 13-806 continues until it is satisfied or released or for 20 years from the date of assessment, whichever comes first.
Estimate your Maryland penalties and interest
Unpaid Maryland tax grows from three things: a late filing penalty, a late payment penalty, and interest. This tool has Maryland's current rates built in, so you can see roughly where a balance stands today. It is an estimate, not the Comptroller of Maryland's official figure.
State Penalty & Interest Estimator
Estimate the late filing penalty, late payment penalty, and interest on unpaid state tax. The state rate is built in, so there is nothing to look up.
Estimated total owed
Important This is a general estimate, not tax or legal advice, and not the state's official calculation. ClearChoiceRadar is not affiliated with, endorsed by, or acting on behalf of any state tax authority. Penalties may be reduced or removed for reasonable cause. Only the state tax authority can determine your exact balance.
What to know about Maryland tax debt
The combined state plus local tax is what actually drives Maryland debt
Most states have one income tax. Maryland effectively has two on the same return: the state tax, now ranging from 2% up to 6.50% after the 2025 changes, and a county or Baltimore City piggyback tax that runs from about 2.25% to 3.30%. The Comptroller collects both together, so when a balance goes unpaid, the debt includes the local portion too. This is why Maryland balances can look larger than a taxpayer expects, and why residents in higher-rate counties can face a combined marginal rate near 9% to 10%. If you owe, make sure any notice you receive reflects both the state and local components correctly before you agree to a number.
Penalties are capped lower than many people assume, but interest is steep
Maryland's failure-to-pay penalty for income tax is capped at 10% of the unpaid tax under Tax-General Article Section 13-701, which is different from the IRS approach of stacking monthly penalties. There is a separate penalty of up to 25% for underestimating estimated tax under Section 13-702, and fraud or willful failure carries harsher penalties. The bigger long-run cost is usually interest: it accrues from the original due date until the tax is paid and is set annually by the Comptroller. The rate has been unusually high, at 9% for 2023 and 2024, 11.4825% for 2025, and 10.8133% for 2026.
How the interest rate is set each year
Under Tax-General Article Section 13-604, the Comptroller must determine the next calendar year's interest rate on or before October 1 each year. The rate is the greater of a 9% statutory floor or the average prime rate plus 3 percentage points. Because prime rates climbed, the 9% floor governed 2023 and 2024, then the formula pushed the rate above the floor to 11.4825% for 2025 and 10.8133% for 2026. Interest applies to the tax, and separately can apply to penalties, so a two or three year old balance can grow substantially even if the underlying tax is modest.
Liens, wage attachment, and how long Maryland can pursue you
If you do not resolve a balance, the Comptroller can record a lien that carries the same force as a court judgment. Under Tax-General Article Section 13-806 that lien can remain in force for up to 20 years from the date of assessment. Maryland can also attach wages: Section 13-811 authorizes a continuous salary lien that keeps taking part of each paycheck until the debt is paid. As a general collection limit, Section 13-1103 provides that a tax may not be collected more than 10 years after it was due or more than 10 years after assessment, though a filed lien can outlast that window.
What to do first if you owe Maryland
Start by confirming the balance is correct, including the local piggyback portion, and make sure every required return is filed, since the Comptroller usually requires all returns to be filed before approving a plan or an Offer in Compromise. If cash flow allows, an Individual Payment Agreement online or by phone is the fastest way to stop enforcement and lift any MVA hold. If you genuinely cannot pay the full amount, gather your financial documents and evaluate an Offer in Compromise using Form MD 656 and Form MD 433-A. Acting before a hold or wage lien lands gives you the most options.
Maryland state relief options
Individual Payment Agreement (installment plan)
The Comptroller lets individuals set up a payment plan online through the Individual Payment Agreement portal or by phone at 410-974-2432 or 1-888-674-0016. Balances are commonly expected to be paid within about 24 months, with longer terms possible if you document financial hardship. Penalties and interest keep accruing until the balance is paid.
Offer in Compromise
Maryland has a formal Offer in Compromise program that can settle a liability for less than the full amount. You file Form MD 656 plus a financial statement (Form MD 433-A for individuals) and must qualify under one of three grounds: doubt as to liability, doubt as to collectibility, or economic or other hardship. All required returns generally must be filed first. Submissions go to the Offer in Compromise Program, Comptroller of Maryland, 301 West Preston Street, Room 203, Baltimore, MD 21201.
Penalty consideration and hardship review
Maryland does not publish an automatic first-time penalty abatement like the IRS, but the Comptroller can consider reducing or waiving penalties for reasonable cause and can factor hardship into payment terms and Offer in Compromise decisions. Interest set by statute is generally not waived.
MVA hold release through payment arrangement
If a hold is placed on your driver license or vehicle registration, entering an approved payment plan (or paying in full) with the Comptroller releases the hold, usually within about two business days after certified payment or an accepted agreement.
Tax Relief in Maryland: What You Need to Know
Maryland taxes both a state income tax (2% to 6.50%) and a county or Baltimore City piggyback tax (about 2.25% to 3.30%) on the same return.
The Comptroller of Maryland, not the IRS, handles state tax debt, payment plans, and Offers in Compromise.
Unpaid Maryland taxes can trigger an MVA hold that blocks driver license and vehicle registration renewal.
Interest on unpaid tax is set annually and has been high: 9% for 2023 and 2024, 11.4825% for 2025, and 10.8133% for 2026.
The income tax failure-to-pay penalty is capped at 10% of the tax, but interest keeps accruing until paid.
Maryland does not tax Social Security benefits and offers a pension exclusion for filers 65 and older or disabled.
Frequently Asked Questions
Sources and further reading: Comptroller of Maryland (marylandtaxes.gov), Comptroller of Maryland individual tax services, Maryland Tax Alert: 2025 state and local income tax rate changes, Administrative Release No. 14: Interest Rates for Refunds and Delinquent Taxes, Maryland Unpaid Tax Interest Calculator, Tax-General Article Section 13-701 (failure to pay penalty), Tax-General Article Section 13-604 (interest rate) via Justia, Tax-General Article Section 13-806 (lien duration), Tax-General Article Section 13-1103 (collection limit), Maryland Offer in Compromise Form MD 656, Comptroller Individual Payment Agreement portal, Maryland Pension Exclusion guidance. Rates and rules change; confirm current figures with the Comptroller of Maryland before you rely on them.
Tax Relief in Other States
More states coming soon.