The Compliance Program Section conducts numerous audits to ensure that tax returns filed with the State of Maryland are in compliance with federal and Maryland income tax laws. Listed below are some of our most common audit programs. You may have received a notice if one of our programs indicated that we need more information, made an adjustment, or an assessment. Look up your notice under "I Received a Notice" to learn more about a notice you may have received.
- CP2000 - We received information from the Internal Revenue Service that indicates they adjusted your Federal income tax return to include income not previously reported. Since your Maryland return is based on your federal return, we have adjusted your Maryland return to include the unreported income accordingly.
- Federal Adjusted Gross Income Match (FAGIM)- As part of our audit program, we compare the amount of income reported on your Maryland income tax return against the income reported on your federal return. According to our records, the income reported to Maryland was less than that reported to the Internal Revenue Service. Since the Maryland return is based on the federal return, we have adjusted your Maryland return to increase the income to agree with what was reported on your federal return.
- Revenue Agent Report (RAR) - We received information from the Internal Revenue Service advising us of changes they made to your federal return as a result of an audit. We have analyzed the changes made by the Internal Revenue Service and adjusted your Maryland return to incorporate all changes which impacted your Maryland return.
- Earned Income Credit – We adjusted your return to eliminate or reduce the Earned Income Credit (EIC), Local EIC and Refundable EIC based on information we received from the Internal Revenue Service. The corrected EIC was based on the allowable federal EIC as provided by the Internal Revenue Service.
- Tuition and Fees –Maryland income tax law requires taxpayers to add back an amount equal to the tuition and fees deduction claimed on the federal return. Based on information received from the Internal Revenue Service, you claimed a deduction for tuition and fees on your federal income tax return. According to our records, no corresponding addition modification was reported on your Maryland return. Your Maryland return was adjusted to include an addition modification for the tuition and fees deduction.
- Withholding Verification- We have adjusted your Maryland income tax return to reduce the Maryland withholding tax claimed to agree with the withholding shown on the wage and tax statements (W-2's) issued to you by your employer(s).
Pension Exclusion – As part of our audit program, we verify the individual claiming the pension exclusion had income from a qualifying employee retirement system and that the individual was at least 65 years old, or totally disabled, or had a spouse who was totally disabled, during the year in question. If our records indicate that one of these criteria is not met, an adjustment is made to eliminate the pension exclusion claimed. If the individual meets the criteria to claim the exclusion, the amount claimed is then verified to ensure that the exclusion was properly calculated. If we find that it was not properly calculated, an adjustment is made to allow the correct amount of pension exclusion.
General Audit – Maryland income tax law allows the Comptroller to independently audit Maryland income tax returns. As part of our audit program, we had previously contacted you and requested that documentation be provided to substantiate items (such as, itemized deductions, business expenses, etc.) claimed on your Maryland return. If no documentation was provided, your return was adjusted to eliminate all the items in question. If documentation was provided, your account was adjusted to allow the items properly substantiated.
Statute of Limitations
Generally the Comptroller’s Office has three (3) years to audit a tax return from the due date of the return or the date the return was filed, whichever is later. However, there is no statue of limitations when there has been a change made to the federal return by the IRS and the taxpayer fails to notify the Comptroller’s Office within ninety (90) days of the final determination by the IRS. If the Comptroller’s Office is notified within the ninety (90) days, the Comptroller’s Office has one (1) year to assess the deficiency.
If you have question regarding any of our audit programs, you may call (410) 767-1966 or toll free at 1 (800) 648-9638.