Moves due to tax bill passage

[IMATERP]

Yes, check this other thread:

http://www.early-retirement.org/forums/f28/release-of-final-tax-bill-details-89791.html#post1986498

The IRS announced TODAY (after I already made my prepayment earlier today), that unless you received a bill this year, for taxes due next year, they won't be an allowed deduction.

I think there will be huge backlash, and this will get overturned, but who knows? That could render your added Roth conversions to be taxed at a higher rate (and IIRC, re-characterizations are maybe not allowed in 2018, even for a 2017 conversion?).

I hate tax complexity.

-ERD50

The IRS position is completely GUIDANCE which was an instinctual response to the passage of the new tax laws set to go into effect in 2018.

I am certain that this Guidance will be challenged and amended to allow for the deduction of 2018 property tax prepayment.

The IRS isn't expressing guidance on an individual making twice the amount of Charitable contributions due to prepayments, although they could.

People that have property tax bills in excess of 10k and folks who are Cash poor (many residents) were the folks calling this unfair.

Anyway, I made my prepayment and I will deduct that 2018 prperty tax deduction on my 2017 Return.

I

 

[calmloki]

Spent the last couple days loading stuff we should have gotten rid of into the car and dragging it down to a donation center. Won't gain much in charitable write off, but man it feels better with fewer loads of cr*p in the house! Also stuffed the recycle bin with (broken down) empty boxes - SWMBO hates to throw out boxes or packing material that could be needed someday. Thanks gubernment! needed that impetus!

 

[pb4uski]

The IRS position is completely GUIDANCE which was an instinctual response to the passage of the new tax laws set to go into effect in 2018.

I am certain that this Guidance will be challenged and amended to allow for the deduction of 2018 property tax prepayment.

The IRS isn't expressing guidance on an individual making twice the amount of Charitable contributions due to prepayments, although they could.

People that have property tax bills in excess of 10k and folks who are Cash poor (many residents) were the folks calling this unfair.

Anyway, I made my prepayment and I will deduct that 2018 prperty tax deduction on my 2017 Return.

I

Yeah, good luck with that. I am certain that he so-called "guidance" will not be amended.... there is no reason to do so... the IRS will decide based on what the law and precedence suggest is right irrespective of how popular the decision is.... and that is the way that it should be.... the advisory was just a reminder of existing guidance.

Also see: http://www.early-retirement.org/for...nal-tax-bill-details-89791-6.html#post1986498 post #545

They were very wishy-washy about it:

A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017.

 

[UpAnchor]

I prepaid our prop taxes after county announced we could do so a couple of days ago. But while our property has been assessed for 2018, the the taxes have not been "billed". So now--given the recent IRS guidance--I'm not sure where my prepayment falls on the deductibility spectrum. Expect to hear lots more on this in the days to come.

 

[ERD50]

Yeah, good luck with that. I am certain that he so-called "guidance" will not be amended.... there is no reason to do so... the IRS will decide based on what the law and precedence suggest is right irrespective of how popular the decision is.... and that is the way that it should be.... the advisory was just a reminder of existing guidance. ...

No, I would not expect the IRS to change their guidance on their own, as I understand it, they interpret and enforce the rules.

But, with enough public outrage, I do think that Congress might pass a change to the law. Not holding my breath, but I think it is a possibility.

I wrote my local Treasurer, asking them to just announce that our 2018 1st installment has been officially assessed at last year's value, and they can make any adjustments in the 2nd installment (these are due in June/Sept). This is basically what Cook County, IL (Chicago area) does.

At least he responded, but after the second exchange, where I pointed out how many thousands of people scrambled to get the cash together, and stood in line for hours, and this sure would help them, and it will save many people thousands of $$$$ (though we'd get just half, with the 1st installment, but it's something), he just said they are unable to make changes on such short time frame. I wrote back (not expecting a repsonse to this one, and I didn't get it), that in the private sector, businesses respond to short term issues all the time, and I expect the same from my government.

I'll probably be reassessed at 3x next year for that email!

I prepaid our prop taxes after county announced we could do so a couple of days ago. But while our property has been assessed for 2018, the the taxes have not been "billed". So now--given the recent IRS guidance--I'm not sure where my prepayment falls on the deductibility spectrum. Expect to hear lots more on this in the days to come.

Unless they come out and specifically tell you "NO", I'd deduct it. "Assessing" is close enough for me. Take it and let them tell you you were wrong. I don't think there's much downside.

-ERD50

 

[MichaelB]

For 2017 the tax rules are established, and the IRS only publishes explanations and interpretations. There are no new rules regarding the deductibility of SALT / property taxes for individuals, the IRS is just reaffirming existing tax regulations. There are a couple of tax law changes that do affect 2017: such as medical deduction, but that probably doesn’t need a separate review period, just a change in the number.

For the new tax law the IRS will first interpret the new law, then publish their proposed new regulations, receive feedback from anyone choosing to comment, then write the final regsmand publish them. That is likely to take a fair amount of time, well into 2018.

 

[misanman]

But, with enough public outrage

Just my observation, but the only place I've seen "public outrage" is in a few posts on this forum. Of course, I don't live in a particularly high tax state so that might have something to do with it.

 

[ERD50]

Just my observation, but the only place I've seen "public outrage" is in a few posts on this forum. Of course, I don't live in a particularly high tax state so that might have something to do with it.

Well, I don't have any measure of the public outrage level either. That's why I said "But, with enough public outrage, I do think that..."

But in our area, there was a lot of media showing the people standing in long lines to pay, talk about the Offices having to bring in extra people to handle the load etc. The line was an hour long for me, and moving reasonably fast, and I assume that continued for some days. I would imagine that is a lot of people who are not happy - I'm sure not.

It just seems to me that as this is the way it was, nothing new, there should have been lots of publicity ahead of time clearing that up, and each municipality should have been able to be clear as to whether prepayments meet the IRS standards. Nope, just a bunch of publicity, come and pay, we will have extra people working to take your money. Some with caveats about "consult with your accountant", but based on some of the phone calls of people in line with me, their accountants weren't up on these requirements either.

In hindsight, it's really pretty simple. The prepayment only counts as a 2107 deduction if you were assessed and billed a specific amount in 2017 and allowed to pre-pay in 2017. Why couldn't that be clearly communicated in a timely fashion? That IRS announcement didn't come out till Wednesday. I (and many others) already paid.

There really should not have been any confusion, there should not have been thousands and thousands of people wasting their time, and I'm sure many of those had to do some juggling to come up with that much liquidity on short notice. And those who were not able to come up with the liquidity are grumbling, saying this is another give-away to the "rich".

-ERD50

 

[pb4uski]

.....Unless they come out and specifically tell you "NO", I'd deduct it. "Assessing" is close enough for me. Take it and let them tell you you were wrong. I don't think there's much downside.

-ERD50

Well, they have come out and made it clear that the property tax needs to be assessed in 2017 and paid in 2017 in order to be deductible.

Payment is pretty clear cut. For assessment, it depends on the tax year in the jurisdiction... but if one is paying taxes in 2017 relating to a property tax year that begins in 2018 then your deduction will probably be denied on audit or examination.

Situations that should be suspicious and looked at will be pretty easy to flag by comparing the amount of property taxes deducted in 2017 vs 2016 or 2015 and whether your address changed.

I suspect that the only downsides would be penalties and interest.... I doubt that they will throw people in jail for this.

IRS Definition
A component of the accuracy-related penalty involves a taxpayer’s negligence or disregard of rules or regulations — “negligence” is defined in tax law as any failure to make a reasonable attempt to comply with the provisions of the tax law, and the term “disregard” includes any careless, reckless or intentional disregard.

More from H&R Block
If the IRS has reason to believe that you made a careless, reckless or intentional mistake on your tax return, the IRS may charge you the 20% accuracy-related negligence penalty. ....

 

[pb4uski]

Well, I don't have any measure of the public outrage level either. That's why I said "But, with enough public outrage, I do think that..."....

I had an interesting email exchange with our town clerk on this earlier this week. Before the IRS advisory had come out I had heard a lot about this and called the town clerk's office to see if they were accepting prepayments. She said that they were and had even already received a few checks.

Then I saw the advisory and decided that I was not going to proceed. I emailed her the advisory and suggested that they might want to suggest that they suggest to the taxpayers prepaying that the consult with their tax advisors in light of the advisory (which I sent her a link to). My thinking was that, like me, some people might want their checks back in light of the advisory.

She simply responded that she agreed that no 2018 taxes have been assessed yet that it has always been their practice to accept prepayments and that they will continue to do so.... IOW, if a taxpayer sends them a check then they will accept it.... if the taxpayer later learns that they can't take a deduction in 2017 then no skin off her back.

 

[jazz4cash]

I agree the communication on this is awful on a local level and confusion reigns on a national level. We've had two local county tax agencies announce emergency meetings to adopt taxpayer friendly policies but only one succeeded. The other reversed their position after the IRS Guidance. Confusing since the assessment only occurs every three years so 2/3 of homeowners have already been assessed for 2018, although unfair to the 1/3 not assessed. Some places the requirement is described as assessed and other places the requirement is assessed AND billed. In any event the state now says their assessment policy does not satisfy the guidance for deductibility of prepayments which doesn't make sense to me but there just wasn't enough time to make sense of this.

 

[Potstickers]

I paid the RE taxes from my sinking fund for taxes that earns basically nada, so no harm, no foul if it turns out that I can't deduct them now. I might lose all of $4 in interest.

So, upside gain is about $2900 in tax savings if the deduction goes through, or $4 in loss if it doesn't.

 

[gerntz]

Then I saw the advisory and decided that I was not going to proceed. I emailed her the advisory and suggested that they might want to suggest that they suggest to the taxpayers prepaying that the consult with their tax advisors in light of the advisory (which I sent her a link to). My thinking was that, like me, some people might want their checks back in light of the advisory.

She simply responded that she agreed that no 2018 taxes have been assessed yet that it has always been their practice to accept prepayments and that they will continue to do so.... IOW, if a taxpayer sends them a check then they will accept it.... if the taxpayer later learns that they can't take a deduction in 2017 then no skin off her back.

Good for her. Gets her area taxes in advance. Not at all on her to know her payers tax situations.

 

[gerntz]

I agree the communication on this is awful on a local level and confusion reigns on a national level.

Not really. If people figure out that it helps them to pay early, fine. If not, fine too. Nothing wrong about paying taxes in the year they are due.