Tax Confusion
Attempts to pre-pay property taxes lead to confusion and frustration.
Via the NYT: Last-Minute Rush to Prepay Taxes Gives Way to Confusion and Anger.
In Hempstead, a Long Island town where the typical property tax bill tops $10,000, residents have lined up all week to prepay those taxes for next year. They have been trying to save thousands of dollars before the new federal tax bill, which goes into effect on New Year’s Day, sharply limits deductions for state and local taxes.
[…]
The new tax bill, and its $10,000 cap on all local and state tax deductions, has generated a variety of strong emotions — including anxiety and frustration — in places like Hempstead.
By Thursday, however, that stew of emotions had been replaced by utter confusion, as well as rage, including among people who had shelled out money only to discover that they might not get any benefit.
When I first heard about this story in passing, I wondered why so many people thought they could pre-pay and claim tax liability in 2017 for 2018 taxes (something that struck me as likely problematic), but the answer appears to be state and local officials:
Even before President Trump signed the bill into law last week, local officials in Washington announced they would accept prepayments in what the city’s mayor, Muriel Bowser, called a bid to “protect Washingtonians from the negative impacts of this devastating legislation.” Gov. Andrew Cuomo of New York last week signed an executive order opening the door for prepayment, a move he freely described as a bid to circumvent the new law. Local officials in Maryland, Virginia and other states made similar moves.
On the one hand, I understand the move as it would allow taxpayers a one-time opportunity to save some money. On the other, this was clearly the kind of move destined to create confusion. It is one level of government (state/local) making a decision about how another level of government (federal) would behave in a complex policy arena (taxes). It was destined for a bumpy road.
Of course, the real problem stems from ramming extremely complicated legislation through the process at the last minute:
This week’s tax-prepayment roller coaster could be just the beginning. Republicans pushed through their tax overhaul at blistering speed, giving lawyers and accountants only about a week to study the bill before it goes into effect.
But already, those people studying the law have uncovered internal conflicts and unintended consequences, as well as broad areas of uncertainty the I.R.S., the Treasury Department and, ultimately, the court system will be left to resolve.
I fully recognize that any piece of major legislation is going to have bugs to work out (especially one of this scope and size), but the way this particular piece of legislation was crafted and passed was not exactly impressive (e.g., no hearings, hand-written changes on the fly, numerous last-minute sweetners to get support, etc) will likely result in a large number of headaches for tax payers and tax preparers.
At a minimum, the notion that this was simplification of the tax code is clearly absurd.
Well boo dee hoo hoo!
Let’s see now, my last Jackson County IL RE Tax bill for my 1/2 acre hillside for 2016 payable in 2017 was $22.54 for the year. Payable in two easy installments of $11.27 each.
The annual Mobile Home Tax for my 14×60 1977 Model Park Avenue trailer house that sits on that hillside was $60 and change.
To all the high rolling whiners that voted for Trump and his Republican looters:
Fuk ’em!
Fuk ’em and feed ’em beans…
and if they don’t like that,
take away the beans!
“Of course, the real problem stems from ramming extremely complicated legislation through the process at the last minute:”
One can only speculate about what may arise in the future as a result of the bill. But no, this is not the cause of the property tax prepayment issue. It is rather, as initially noted, local officials meddling (for political purposes) in a federal authority’s jurisdiction. Further, on the merits, all of GAAP accounting, which includes tax aspects, would suggest matching liabilities to the period actually incurred unless expressly provided for in legislation. I don’t see any responsibility except for boneheaded local officials.
I don’t live in a “high state income state”, nor is my property tax bill over 10,000.
So all this property tax prepayment chaos shouldn’t apply to me, but it does!
Because of medical expenses and other expenses during 2017, I will be able to itemize. God willing, I will not have those unexpected expenses next year so I will not be able to itemize for the 2018 tax year.
Now in my county in Ohio the tax bill that appears on my doorstep in March 2018 is for the tax liability of the previous year, (2017). In otherwords, I owe the property taxes now, regardless of when the billing normally occurs.
If I pay my 2017 property tax (normally billed in 2018) now, I should be able to increase my itemization for the 2017 tax year. This works to my benefit as my 2017 taxable income is lowered, and ergo my tax liability.
However, as I understand it the IRS published guidance on 12/27/17 that seems to indicate that date of “assessment” is critical. Checking with my local tax property tax office, they tell me that the date of my assessment was several years ago. Clearly the IRS is using a different definition for the word “assessment” than my county.
All of which is to point out two things:
1) a homeowner need not have a property tax bill greater than 10,000 to be impacted by this chaos
2) The chaos is created by a deadline (12/31/17) with a law that was pushed thru without the benefit of a debate or discussion.
And how did the Affordable Care Act look early on? Was that reform a smooth-running machine? If Obama couldn’t even get a website to work, I’m not sure how many stones should be pitched at Trump.
Wouldn’t applying a little thought to the issue of high tax states freaking out because the Feds will no longer treat state and local taxes like charitable donations be more productive? Particularly because the change is probably one of the most progressive tax reforms we’ve seen in decades?
Mike
@MBunge: IOW, what about Obama? The discussion is about an aspect of the recently passed tax reform act. The one where they literally did not have time to read what they were voting on. The one where there was virtually no debate, where hand-written notes were inserted into the bill at the last second. So your response is what about Obama.
Just to refresh everyone’s memory on the road to passage of the ACA:
In June and July 2009, with Democrats in charge, the Senate health committee spent nearly 60 hours over 13 days marking up the bill that became the Affordable Care Act. That September and October, the Senate Finance Committee worked on the legislation for eight days — its longest markup in two decades. It considered more than 130 amendments and held 79 roll-call votes. The full Senate debated the health care bill for 25 straight days before passing it on Dec. 24, 2009.
@MBunge:
Clearly you are delusional.
@Bob@Youngstown: I have to assume MBunge is a troll. Even for him that comment is over the edge. Unless he is Trump himself.
@Guarneri:
Ohio, to the best of my knowledge, billed property taxes in arrears for 20 years. I am liable for the property tax for 2017 to-date, but the county doesn’t actually send out an invoice until 2018.
I don’t see how that is “meddling in a federal authorities jurisdiction”.
BTW, Other states that bill in arrears are: CO, IL, IN, AK, WI …. list may be incomplete
@SenyorDave:..@Bob@Youngstown:…
Bunge is Trump’s Basket Case.
Charming country bumpkin Duane Bradley takes a motel room in New York with a basket and a backpack. In a flash back-series we learn the basket contains his surgically removed Siamese twin who is not only physically deformed so badly the doctors hesitated to consider him a human,..
Nuclear football…HA! HA! HA!
@MBunge:
I presume you’re not joking?
This tax reform bill, one that allocates over 80% of the resulting tax benefits to the top 1 percent, is most certainly NOT one of the most progressive tax reforms we’ve seen in decades.
Also, you may not be aware that high tax Blue States are net donors to the federal government, that is, in the case of California, we get back less than 80 cents on every tax dollar we send to DC, and this ultimately results in a subsidy to low tax states like Louisiana, Alabama, etc.
@Mister Bluster: I had to look up the movie on IMDB. Sounds interesting, the first review on the sit had the tagline “So sleazy you’ll want to take a shower afterwards!” (the reviewer gave it a 10 out of 10). Is Trump the deformed conjoined twin? That would explain a lot, although I suspect even Belial (the deformed twin) would speak in more coherent sentences if he had a mouth.
The movie sounds pretty repellent, up there with The Human Centipede.
@MBunge: I roughly agree with your first sentiment. New laws have side effects, intended or otherwise. And they’re always considered “rammed through” or “rushed” by the opposition.
But you’ve got a basic misunderstanding of the English language if you think this tax reform was “progressive”. Besides, I thought you guys didn’t like double taxation? By not deducting state and local taxes, you’re being taxed on money that has already been used for taxes.
The IMBD trivia page for Basket Case relates a prescient foreshadowing of the current administration from way back in 1982.
Director Frank Henenlotter (Brain Damage 1988) is apparently still active.
@MBunge: And over how many years was the ACA rolled out? Lets just say a wee bit more than a week and a half. Idiot.
Re: Trolls. Just in general, I highly recommend the podcast “Reply All” but a recent episode on Trolls was especially interesting. Summary: an American journalist who covers Mexico was essentially forced to leave the country by extremely violent and sexual online harassment, as she truly feared what Mexican drug gangs could do, and it appeared that some of their members were involved (appeared being the operative word here). It all started after she reported negatively on a viral video outfit along the lines of Jackass but more homophobic and anti-woman. (I know, I know, the troll connection. It’s coming.) She continued to investigate and followed one slim lead until it led her to… the PRI, Mexico’s predominant political party.
It turns out that one of their internet strategies for keeping down negative online discussion of their candidates or policies was to hire hundreds of professional trolls. They would be paid bounties if they could co-opt an online discussion and divert it. The trolls amassed a tool bag of outrageous things they could post that would immediately overwhelm everything else going on. Some of them were… innocuous? It seems Justin Bieber died any number of times, as well as cancelled a lot of sometimes non-existent concerts. But some were just plain vile. One of these trolls spotted the story she wrote about these Jackass-like lamers and knew that their fans were worse than they were, so he recruited a group of them (basically a Mexican 4chan) to go after her. He would direct them to certain forums and chats where they would get into crazed back and forth flame wars, whereupon he would collect his bounty. They doxed her, and sent out live updates of where she was, and posted “selfies” showing them to be young drug gang thugs. (FWIW, the professional troll who directed them thought they were all 12 years old by the way they acted.)
What does this have to do with OTB’s regular trolls? It seems to me there are a few possibilities: They could be –
1) Professional Trolls paid for by Putin or the Koch brothers
2) Dupes of Professional Trolls
3) Trolls just for the h*ll of it
4) Sincere in their beliefs, and fanatical in the “can’t change their mind, and can’t change the subject” kind of way.
Regardless of which of the above holds true, I’m fairly certain that directly engaging with them is just about the worst possible tactic.
@SenyorDave:
No, this is how low @MBunge has now sunk.
I have a macabre fascination for the Bung. He reminds me of the short story Flowers For Algernon, which involved (IIRC) a mentally challenged guy becoming a genius through pharmaceuticals, then as the drug loses effect we watch the tragedy of a mind losing capacity, a mind diminished. Sort of an Alzheimers story. Or you could stretch it into an anti-drug parable.
At a philosophical level it’s fascinating that a person would choose to handicap their own brain. It’s mental self-harm. And it’s not as isolated a phenomenon as we might imagine. Ignorance really is bliss for a lot of people. Many find the world too complex, too challenging, and retreat from it. They box themselves into ideologies, conspiracy theories, cults, which is what the Bung has done, indifferent to the violence done to their own intellect. They surrender intellectual integrity and in exchange they get a reassuring dullness that insulates them.
Not everyone is strong enough for reality. In fact most people aren’t. And when you look at the Venn diagram of Trumpaloons, what do you see? Huge overlaps with primitive religion, poor or non-existent education, and of course racism and misogyny. Setting aside the predator class (Adelson, Mercer, etc…) the best identifier of a Trumpaloon is weakness.
This is kind of genius — since the tax changes will affect the 2018 filing season, after the November elections, the pre-pay makes people seriously consider how the Republican tax plan will affect their own taxes before the election (rather than accepting a platitude of “Trump cut taxes”). The fact that it is a complete clusterf.ck only adds to the effect.
Republicans are going to be having a lot of problems winning these people over again.
All in all, very well done. Sucks to be a Republican Representative in a middle class suburb of any of our functioning cities.
@Steven Taylor
My favorite “bug” is the Repub tax bill leaves open the possibility for states to recast income tax on wages (paid by the individual) as a payroll tax (paid by the employer), payroll taxes are still a deductible expense.
Read more: https://www.outsidethebeltway.com/tax-confusion/#ixzz52gzWrnar
OMG… Just… no. No.
US GAAP is an accrual basis accounting system whose rules apply to publicly traded corporations that are registered with the SEC and choose not to use IFRS.
Income Tax accounting is a modified cash basis accounting system.
The differences between the two are boundless, and CPAs working for public accounting firms normally specialize in one or the other area, but not both. The separation is so wide that, when I worked at PwC, auditors outsourced the testing on tax related portions of the financial statements to the tax accountants.
@Bob@Youngstown: My tax accountant, in Ohio, emailed his clients suggesting we prepay. I have done so, mailed it this morning. He says it’s OK if postmarked by the 31st, and that the Cty Treasurer says we can pay an estimated amount based on last year. I don’t think they’re sure, but worth a chance. If it works it’ll pay a lot better than leaving the money in savings.
Given all the confusion, even people who do save a bit will be pissed. I love it.
@MBunge: It took 4 years -4 f’n years- to fully roll out the ACA. That is a wee bit more time than 2 weeks.
Fish in a barrel.
@MBunge:
Bunge, who rabidly supports child molestation, sexual assault, and Russia attacking our nation…thinks a website is just like tax reform legislation.
Obamacare did what it was intended to do…insure millions more, bend the health inflation curve down, and extend the life of Medicare.
The Trump tax bill will do what it’s intended to do…make Trump richer.
Bunge just loves a man with a fake tan, fake hair, and fake teeth.
Figures.
@Gromitt Gunn: What’s this!? You mean that alleged Master of the Universe doesn’t know the intricacies of tax laws? Oh well, I guess he can only learn so much while playing Monopoly…
@gV****@fu**.net:
Here’s the kicker — how will you know that “it works” ?
I called around several counties and all said they had no intention of refusing to accept payments, they would be glad to deposit your check and credit your account in advance of the actual billing.
HOWEVER, the scheme “works” only if the IRS accepts that payment as a 2017 deduction – as of this time they have not advised on that – except to say you must have been assessed that tax. https://www.irs.gov/newsroom/irs-advisory-prepaid-real-property-taxes-may-be-deductible-in-2017-if-assessed-and-paid-in-2017
Apparently the word “assessed” has multiple meanings.
Short of that “guidance”, the only way you’ll know ” if it works” is when your IRS auditor says it is acceptable as a 2017 deduction – maybe two or three years from now.
Good Grief !
I decided Chicago real estate taxes–and the sending out of the bills–are such a masterpiece of confusion anyway that there was no way I am going to prepay. (I think I more or less just slide in under the $10K anyway.)
All the attorneys at work seem to be rolling their eyes over the chaos this tax “improvement” will cause and are muttering “at some point, this too shall pass.”
I’m just waiting until Paul Ryan and the rest of the Ayn Randites decide to go after Social Security and Medicare. Won’t that be fun!
This is our equivalent of Brexit–doing something really, really stupid in spite of all the warnings against it. Like the toddler touching the hot stove even after mommy told him MANY TIMES “Don’t touch.” So I guess we’ll have to pull a Kansas on the entire country before deciding that “trickle-down economics” doesn’t work. (It will probably involve at least one stock market crash.)
I was hoping for a simple half page form.
@Tyrell: I would not anticipate a major change to the forms.
I would think that that closest you will get is the current 1040EZ
Confusion brought on by an eleventh-hour change in the Internal Revenue Code, a change that will materially affect millions of taxpayers. Who even suspected such a thing could happen? /s/ On the serious side, I would favor a law or constitutional amendment specifying that no “permanent” change in the tax laws may take effect for at least six months after it is signed into law. A one-year delay would be better.
@grumpy realist:
WE HAD A STOCK MARKET CRASH. THEY PROPOSED AUSTERITY AS THE SOLUTION!!! THEY WILL NEVER LEARN!!! THEY DON’T GIVE A FLOCK IF THE ECONOMY BECOMES THAT OF GHANA AS LONG AS THEY CAN BE IN CHARGE AND STILL RICH. WHEN ALL THAT’S LEFT IS CRUMBS, THEY WILL DEMAND ALL OF THEM BECAUSE OF HOW HARD THEY WORKED TO MAKE THE NATION GREAT.
Now, I’ll go find my happy place. That was cathartic.
@Tyrell: I’ve been hoping for a simple half-page form for most of my life. Unfortunately, small investment pool that I have, combined with the private mortgage that I provided for someone pretty much guarantee that I’ll never qualify for a half-pager.
I have it on good authority that if you’re willing to reduce your income stream–including Social Security payments–to below $13k (and Speaker Ryan seems to have this as his next goal for the bulk of Americans not named Paul Ryan), you don’t need to file at all. Can I have an “amen” brother?
Cry me a river. These are people trying to arbitrage the transition when others, who kept their local taxes low, are no longer going to cover a portion of the high state and local taxes of people who support high taxes. Some will win, others will lose, just as when people try to game the market during an inflection.
As USA Today found the single, no kids, renter, who makes $1 million/yr will have their taxes go up by $1800/yr.
@Steven L. Taylor: “I would not anticipate a major change to the forms.”
I would, but only for the forms used by the 1% of the 1% 🙂
@JKB: “Cry me a river. These are people trying to arbitrage the transition when others, who kept their local taxes low, are no longer going to cover a portion of the high state and local taxes of people who support high taxes.”
We already are subsidizing them.
@Bob@Youngstown: Yes, it’s so confusing. I think I’m OK, Hamilton County has apparently already billed for Jan payment. (I’m travelling so it may be in held mail.) And yes, I can’t be sure until they’ve gone a few years without auditing. Also how the accountant feels about it in a month or two. Given that the GOPs have been restricting IRS audit funding, spending limited funds to audit me would be malfeasance. But at worst it should turn out to be only hassle, not money, and I’m happy to add my small bit to the confusion from the idiot GOPs’ tax bill.
@michael reynolds: Flowers for Algernon was adapted as a successful movie, Charly, for which Cliff Robertson won an Academy Award as best actor. Also nominated for a Hugo, but somehow lost out to 2001.
@JKB: Get a job mf’er, better yet get 2 or 3 jobs, because blue states are soon going to refuse to subsidize your welfare ass.
Gloat now, a$$hole…the most delicious irony of all of this is that it may lead to the wipeout of many of the Blue State Republicans in Congress, thereby setting up a Democratic majority…how sweet will the Orange Mange be to Nancy Pelosi when she is again the Speaker of the House…
@JKB:
You, of course, have this completely backward. Taxes are lower in those areas precisely because they are subsidized by massive transfers of wealth from higher taxed areas.
South Carolina, for example, receives some $3 and change from DC in return for every $1 that it sends there.
Short version: it gets every dime it ever pays back, in full, and it gets $2 and some change of other people money from somewhere else. This leaves SC able to implement much lower taxes rates on its own population. They have those “Yankees” they love to hate (but whose money they line up to receive) to thank for carrying them financially.
If the South wants us to give it respect, it could start to earn that by carrying its own weight and paying its own way for a change.
The Joint Committee on Taxation has found who is getting burned by the new tax bill. It’s the bureaucrats. Americans get to keep a bit over a quarter trillion of their hard earned dollars. The percentage of taxes paid by each income group doesn’t change more than a few tenths of percent.
@JKB:
Why I’m even remotely giving you the time of day, considering your unfathomable ignorance, befuddles me.Now let’s look at the details your libertarian economist (which is a contradiction in terms in and of itself, but …) left out …
That’s conveniently shifting the income categories up by calling total compensation income. Get back to me when Fred the steel worker considers the employer portion of FICA tax to be income – or for that matter when he includes it on his 1040.
That having been said, your guy neglected (on purpose) to say anything about the effects rolling forward. You might want to download the entire report and have a look at the outyear projections.
You’ll want to pay particular attention to who gets f’ked in CY 2027 🙂
We won’t even get into the >$1 trillion in additional debt this ridiculous proposal adds. (You did read that correctly: >$1 trillion over and above the debt that would have been added under the status quo – and will still be added under this lunatic giveaway.)
Interesting that nobody on your side seems to care about debt any longer. We’re projected to skyrocket to 97% of GDP by 2027, so well done. Good on ya … 🙄
Toddle along back to the treehouse for morons now.
@Tyrell:
Probably should move to Sweden.
@PJ: Sounds like Korea while I was there. As a foreign teacher on a visa, my school’s business office did my forms (and those of about 150 other teachers) which had me a little puzzled. Turns out that the task involves verifying that the teacher is not legally employed outside the school and that he or she receives no bonuses or book royalties that have not been already reported. The last year or so, the university business office asked us to go to the tax office website and file our own returns. I went to the site clicked a button and received a message that my taxes had already been filed and they needed no further information but that I could appeal if I wanted to. I passed.