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Adjustment Notices

An adjustment notice is issued when a taxpayer’s account has been adjusted based on an audit program conducted by the Comptroller of Maryland. The notice indicates the reason for the adjustment and the resulting tax and interest due.

Notice of Adjustments (RAR)

We receive information from the Internal Revenue Service advising us of changes made to a taxpayer’s federal return, as a result of an audit. We make an adjustment to the taxpayer’s account to incorporate all changes which impact the Maryland return. A Notice of Adjustment (RAR) is issued to notify the taxpayer of the changes made and the resulting tax and interest due.

If you received a Notice of Adjustment (RAR) and do not agree with our adjustment, please provide documentation showing that the federal adjustment has been revised. Acceptable documentation would be an updated federal audit report, or a federal Account Transcript. If an amended return was filed with the IRS response to the audit, please provide a copy of the federal amended return and the IRS acceptance letter. Documentation should be sent to the Compliance Programs Section, as indicated on the notice.

Notice of Adjustment (FAGIM)

We compare the income reported on a taxpayer’s Maryland income tax return against the income reported on their federal return. When the income reported on the Maryland return is less than the income reported on the federal return, the Maryland return is adjusted to increase the income accordingly. A Notice of Adjustment (FAGIM) is issued to notify the taxpayer of the changes made and the resulting tax and interest due.

If you received a Notice of Adjustment (FAGIM) and do not agree with our adjustment, please provide documentation to explain the difference in income along with a copy of your federal income tax return. Documentation should be sent to the Compliance Programs Section, as indicated on the notice.

Notice of Adjustment (CP2000)

We receive information from the Internal Revenue Service that indicates they adjusted a taxpayer’s federal income tax return to include income not previously reported. Since the Maryland return is based on the federal return, we adjust the Maryland return to include the unreported income accordingly.

If you received a Notice of Adjustment (CP2000) and do not agree with our adjustment, please provide documentation showing that the federal adjustment has been revised. Acceptable documentation would be an updated federal audit report, or a federal Account Transcript. If an amended return was filed with the IRS response to the audit, please provide a copy of the federal amended return and the IRS acceptance letter. Documentation should be sent to the Compliance Programs Section, as indicated on the notice.

 

Notices of Adjustments are issued when a taxpayer’s return is adjusted based on one of the following audit programs:

Earned Income Credit Program

A taxpayer’s return is adjusted to eliminate or reduce the Earned Income Credit (EIC), Local EIC and Refundable EIC based on information we received from the Internal Revenue Service (IRS). Maryland taxpayer’s are entitled to claim a credit equal to 50% of the allowable federal EIC. The refundable credit is calculated by taking 25% of the federal EIC and reducing this amount by the Maryland state tax amount.

If you have received this notice and feel it is in error, please provide a copy of your federal income tax return along with an Account Transcript which indicates the credit allowed on your federal return. Documentation should be sent to the Compliance Programs Section, as indicated on the notice.

Tuition and Fees Deduction Program

Maryland income tax law requires taxpayers to add back an amount equal to the tuition and fees deduction claimed on their federal return. Information is received from the IRS identifying Maryland taxpayers who have claimed the tuition and fees deduction on their federal return. If the correct addition is not included on the Maryland return, the return is adjusted to include an addition modification equal to the tuition and fees deduction.

If you have received this notice and feel it is in error, please provide a copy of your federal income tax return along with an Account Transcript. If an amended return was previously filed with the IRS to change or eliminate the deduction, please provide a copy of the federal amended return and the IRS acceptance letter. Documentation should be sent to the Compliance Programs Section, as indicated on the notice.

Withholding Verification Program

The amount of withholding taxes claimed on an individual’s tax return is matched against the W-2 Wage and Tax Statements provided to the Comptroller’s office by the individual’s employer. When there is a discrepancy in the amount claimed, the return is adjusted accordingly.

If you have received this notice and feel it is in error, please provide copies of the statements (W-2s, 1099-Rs, etc.) showing the amount of additional Maryland withholding. Documentation should be sent to the Compliance Programs Section, as indicated on the notice.

Pension Exclusion Program

We verify that taxpayers claiming the pension exclusion had income from a qualifying employee retirement system and were at least 65 years old, or totally disabled, or had a spouse who was totally disabled, during the tax 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 determine that the exclusion has been properly calculated. If we find that there was an error in the calculation, the tax return is adjusted to allow the proper amount of exclusion.

A qualified employee retirement plan must be qualified under Sections 401(a), 403 or 457(b) of the Internal Revenue Code. Foreign pensions do not qualify for the pension exclusion.

To be considered totally disabled, an individual must have a mental or physical impairment which prevents you from engaging in substantial gainful activity. The taxpayer must expect the impairment to be of long, continued or indefinite duration or to result in death.

If you received this notice, and feel it is in error, please provide your explanation and documentation to Compliance Programs as indicated on the notice.



 
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