Postcard tax filing a pipe dream as CPAs eye early retirement

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jserraglio
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Postcard tax filing a pipe dream as CPAs eye early retirement

Post by jserraglio » Wed Dec 27, 2017 11:04 am

Wall Street Journal

Filers line up at municipal offices before the GOP law kicks in; ‘It’s been insane here’
Homeowners across the nation are rushing this week to prepay their property taxes for 2018 before the Republican tax law kicks in Jan. 1 and effectively raises the levy on higher-end homes.
The new legislation, which President Donald Trump signed into law last week, caps at $10,000 the amount of state and local taxes that filers can deduct from their federal tax bill. That means those whose tax bills regularly exceed that amount could benefit by paying more tax in 2017, when the deduction has no limit.
Municipal offices in a number of states saw a busy post-Christmas rush on Tuesday as taxpayers calculated the effects of the new law. In Fairfax County, Va., where property values have risen sharply in recent years, hundreds of people lined up at the government center to prepay. Across the Potomac River, in Montgomery County, Md., the county council held a special session Tuesday morning to pass legislation allowing residents to prepay their taxes.
The new tax law “is a middle-class tax hike for us, and we’re trying to postpone at least some of that for at least one more year,” said Montgomery County Council President Hans Riemer.

In Massachusetts, local treasurers welcomed the sudden surge in tax receipts. “It’s been insane here,” said James McAuliffe, the town treasurer in the Boston suburb of Milton, adding that he went to the bank Tuesday morning to deposit early property-tax receipts and would likely have to go again in the afternoon.
“Thank you, Mr. Trump, for solving my cash-flow issues,” said Mr. McAuliffe, who estimated that about half the residents of his municipality would hit the new $10,000 cap. “It’s become a very expensive town.”
The $10,000 limit also covers state and local income and sales taxes, but lawmakers drafting the bill barred people from prepaying those other levies. “It left it up to the localities whether or not they would allow you to prepay” property taxes, said Nicole Kaeding, an economist at the Tax Foundation.
Some officials urged caution on prepaying property taxes, given that the new law didn’t address the issue. In New Jersey, most towns aren’t encouraging residents to prepay amid questions about whether the Internal Revenue Service would allow tax filers to take the deduction early, said Michael J. Darcy, executive director of the New Jersey State League of Municipalities.
The IRS didn’t return a request for comment.
Officials in Westchester County, N.Y., just north of New York City, said the county wouldn’t be able to calculate final tax obligations for each of its municipalities before year’s end. Connecticut, meantime, isn’t allowing prepayment of property taxes.
Nationwide, about a quarter of taxpayers deducted their real estate taxes in 2015, the latest year available, shaving roughly $5,000 from the average tax bill, according to Tax Policy Center data. At least one taxpayer in three deducted those taxes in Virginia, Maryland, New Jersey and Massachusetts.
“This matters most in areas that have higher levels of state and local income taxes,” Ms. Kaeding said. “Think the D.C. area, New York, California, Connecticut, New Jersey.”
The drafters of the tax bill say the unlimited deduction simply cost the federal government too much money and encouraged big spending by state and local governments.
Congress’s Joint Committee on Taxation estimates the real estate tax deduction resulted in about $33 billion less revenue for the federal government in 2016. The $10,000 cap was intended to raise new revenue and offset some of the effect of the legislation’s tax cuts.
Many of those worried about less of a property-tax deduction next year could still see a lower overall tax bill, because the GOP tax package also lowers federal income-tax rates, said Kim Rueben, a senior fellow at the Tax Policy Center.
As property values have appreciated, homeownership has often been the best-performing family asset, especially in expensive coastal states. Yet the rush to prepay property taxes on Tuesday reflects how the increased tax liabilities for some homeowners may erode the so-called wealth effect of rising property values.
Home prices nationwide were up 6.2% in October from the previous year, according to data from the S&P CoreLogic Case-Shiller National Home Price Index released Tuesday, up from a 6.1% year-over-year increase in September. The increase in home values has been accelerating for 16 consecutive months.
Weston, Mass., has some of the highest property taxes in the state, averaging around $18,000, said town treasurer Peter Forcellese. Local officials are getting 60 to 70 calls a day from people with questions about prepaying.
On Friday, several hundred residents came in to prepay, and a steady stream is expected all week, he said. “There is definitely a lot of activity,” Mr. Forcellese said. “There are a lot of folks looking to get the tax payment in and get inasmuch as they can.”
Sacramento County, Calif., is allowing residents to pay by year-end a property-tax installment due next April. Some would pay even more if they could, but the county isn’t yet accepting payments for tax bills further out, county spokeswoman Kim Nava said.
Santa Clara County, in high-cost Silicon Valley, said collections for April 2018 installments already total $422 million, compared with $303 million at this time last year.
Bethesda, Md., resident Leroy Walters said he planned to prepay his taxes because he typically gets above the new $10,000 cap in state and local income and property taxes. “We would even be willing to borrow against a home-equity line of credit in order to prepay,” said Mr. Walters, a retired Georgetown University professor.
In Virginia, Fairfax County tax officials told residents they could prepay their estimated 2018 tax but couldn’t guarantee that payments received after Tuesday would be processed by year’s end. That announcement sent a rush of people to the tax collector’s office.
“What we’re seeing today is unprecedented,” said Scott Sizemore, director of revenue collection for Fairfax County. “People seem to be taken aback by the line, but they seem to have anticipated there would be a potential wait.”
In New York state, Gov. Andrew Cuomo on Friday signed an executive order setting in motion the process for paying 2018 property taxes in advance and suspending laws that limit partial tax payments. Local officials who administer that process are scrambling to make accommodations.
In Livingston County, in New York’s upstate Finger Lakes region, the county is offering to answer residents’ questions about how much they will owe in 2018 so that they can mail in checks beginning Friday, even if their town tax collectors’ office is closed.
“With the holidays this creates a bit of a challenge,” said County Administrator Ian Coyle.
Last edited by jserraglio on Sun Dec 31, 2017 7:26 pm, edited 5 times in total.

lennygoran
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Re: Affluent homeowners rush to pay taxes early and avoid GOP tax hike

Post by lennygoran » Wed Dec 27, 2017 5:16 pm

I just sent Warren county NJ property tax payments for the first 2 quarters of 2018-did it on/line--don't know if it will help me but I at least wanted to give it a try. I also contacted my mortgage company on this so they have time to deal with the mortgage payments for next year. Regards, Len [fingers crossed]

jserraglio
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Last-Minute Rush to Prepay Taxes Gives Way to Confusion and Anger

Post by jserraglio » Thu Dec 28, 2017 10:49 pm

NYT

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.
But late on Wednesday, the Internal Revenue Service issued new guidance that those people may not be able to save the money after all, because a loophole that they were hoping to exploit might be narrower than thought. So when Donald X. Clavin Jr., Hempstead’s receiver of taxes, showed up to work Thursday morning, the lines were still there — but residents had fresh questions. Mr. Clavin had few answers.
“Everybody on line, they’re going, ‘Don, are we going to be able to do this?’ ” Mr. Clavin said. “And I can’t give them a yes or a no.”
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.
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.
“It’s fun if you’re a tax lawyer,” said David Herzig, a professor of tax law at Valparaiso University. “I’m not sure it’s fun if you’re a person going through it.”
The confusion this week stems from the provision in the new tax bill that caps the previously unlimited deduction for state and local taxes, and the I.R.S. guidance about the ability of people to prepay property taxes this year.
In Hempstead, and in other high-tax, high cost-of-living communities across the country, tax bills routinely run far above the new $10,000 threshold once state income and local property taxes are taken into account. In Nassau County, which includes Hempstead, the average state and local tax deduction in the county, including property taxes, topped $20,000 in 2015, among the highest in the country, according to data from the I.R.S.
The new cap does not take effect until January, however. The tax bill explicitly prevented people from prepaying state income taxes, but it did not address prepayment of property taxes. That gave homeowners a brief window to pay their 2018 property taxes in 2017, and to take the full deduction when they file their federal returns this spring.
Officials in Chicago, Washington, Fairfax, Va., and other communities reported huge surges of residents prepaying taxes, often showing up in person, checks in hand. Democratic politicians, who have opposed the bill, egged them on, arguing that the bill targeted states that tend to vote for Democrats.
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.
Even Chris Christie, the Republican governor of New Jersey and an early supporter of Mr. Trump’s, on Wednesday signed an executive order instructing local officials to accept prepayments.
The I.R.S. memo, however, threw many of those efforts into question. The memo said that property taxes paid this year would be subject to the old 2017 rules — but only if the taxes are actually assessed in 2017. That means that payments based on estimated assessments, or for years further in the future, probably would not qualify for the deduction.
Final answers might not be available anytime soon. The I.R.S. guidance left plenty of room for interpretation and was, in any case, nonbinding.
But the memo had an immediate impact. In Prince George’s County, Md., the County Council had been planning to hold an emergency session on Thursday to discuss letting residents prepay their taxes, a step already taken by neighboring Montgomery County. But within hours of the memo’s release, the council canceled the meeting.
Dannielle M. Glaros, chairwoman of the Prince George’s County Council, said the I.R.S. guidance left her little choice. T he decision to cancel the meeting resolved the immediate uncertainty, but it did little to ease residents’ larger confusion about the effects of the bill.
“It’s this sense of unknown,” Ms. Glaros said. “That is what’s creating a lot of this anxiety that we’re seeing.”
Anxiety — and also anger. Steve Halliwell, who lives with his wife, Anne, in Irvington, a village in Westchester County, N.Y., began asking town officials several weeks ago about paying next year’s property taxes this year. Mr. Cuomo’s executive order last week was meant to make that possible.
But the order came too late for the county’s residents: Officials there said this week that they would not be able to issue tax assessments by the end of the year.
“There are a lot of angry people here because they feel powerless and they are not used to feeling powerless,” Mr. Halliwell said. “This shows the venal side of politics.”
Other communities happily accepted the money — but offered no guarantees that prepaying would work out for taxpayers.
In Clarkstown, in Rockland County, N.Y., residents began lining up at the tax office before 9 a.m. on Thursday. The line snaked down the hall as hundreds of residents waited to get their property tax bill and then pay it. Outside, the parking lot was so crowded that police officers directed traffic.
“We brought in extra staff and extended the hours,” said George Hoehmann, the town’s supervisor. “We have gotten thousands of calls. Normally, it would be quiet this time of year, but there is a lot of anxiety because people don’t know what the impact of the tax bill will be.”
In the last two days, more than 3,500 people came in to prepay their 2018 property taxes, 2,000 of them on Thursday. “I’ve seen nothing like this ever,” said Mr. Hoehmann, who has been town supervisor for three years and was a councilman for seven years before.
Mr. Hoehmann said he believed the town’s residents would get the tax break under the I.R.S. ruling. The town had already assessed the 2018 property tax bill, allowing residents to prepay their town, county and special district taxes in 2017, he said.
But he also made no promises.
“Ultimately that’s between the individual taxpayer and the I.R.S.,” he said. “We advised people to speak to their accountant. What we wanted to do was give them the opportunity.”
Some taxpayers took the uncertainty in stride. Chacko Kurian, who lives in Rockland County, was in line Thursday morning to pay some of the $30,000 in property taxes he owed on his house, which he described as a “mansion” with a fish pond and a waterfall.
Mr. Kurian, a 70-year-old retired engineer for the Metropolitan Transportation Authority, said he did not know whether prepaying his taxes would work out. But he figured it was worth the risk.
“My accountant said prepay and see what happens,” Mr. Kurian said. “You can’t fight the system. It is what it is.”

lennygoran
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Re: Last-Minute Rush to Prepay Taxes Gives Way to Confusion and Anger

Post by lennygoran » Fri Dec 29, 2017 8:59 am

jserraglio wrote:
Thu Dec 28, 2017 10:49 pm
“My accountant said prepay and see what happens,” Mr. Kurian said. “You can’t fight the system. It is what it is.”
Yeah while I didn't use an accountant a friend of mine says he will do that-he also said he's going to prepay-well I prepayed and will just have to wait and see how it all plays out. Just shameful the lack of thought and guidance that went into that tax bill for the rich. Regards, Len :(

jserraglio
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Re: Last-Minute Rush to Prepay Taxes Gives Way to Confusion and Anger

Post by jserraglio » Sun Dec 31, 2017 10:25 am

Wall Street Journal

Accountants face long hours, anxious clients, but ‘it’s never been a better time to be a CPA’

When Mark Astrinos is asked what he does, the response is typically muted. “I’ll just say, ’I’m a CPA,’ and the conversation will end,” said the certified public accountant and financial planner with Libra Wealth LLC in San Francisco.
Not lately, though. Thanks to the sweeping tax-overhaul bill passed by Congress and signed this month by President Donald Trump, people now “light up and they’re so intrigued and they want to know how they’ll be affected,” he said.
In part because of the attention, Mr. Astrinos said, “It’s never been a better time to be a CPA.”
Tax professionals suddenly have found themselves at the center of the cultural conversation. Fine points of pass-through business income and the state-and-local-tax deduction are now the stuff of everyday small talk.
“You realize how relevant it is, and you realize how important it is to helping your clients,” said Adam Katz, a PricewaterhouseCoopers LLP tax partner specializing in international taxes. “You find yourself at the center of a lot of very important discussions.”
But CPAs are paying a price for that cachet: 16-hour days, carry-in pizza for every meal and postponed or canceled time off for the holidays. They have had to scramble to bone up on each complex, shifting version of the tax overhaul and field waves of inquiries from anxious clients.
“I’ve been in every morning about 6:30, go home to eat around 6, back online, check out around 9:30,” said Jeff Watkins, a tax attorney and CPA who works with wealthy clients at EKS&H LLLP in Denver. “I sent an email yesterday to a bunch of clients saying I’ll work through the weekend trying to figure things out.”
Ken Bagner, a CPA who heads the tax practice at Sobel & Co. in Livingston, N.J., plans to still stay home with his family between Christmas and New Year’s. But he expects to have to work a good deal during that time, too, to make sure his clients are prepared. The firm, for instance, hosted a webinar for its clients this week on the new tax bill.
I’m going to have to walk them through it,” he said. “My wife might not be so happy.”
It hasn’t been easy for tax experts—even if the measure’s complexity makes it likely to prove lucrative for them.
“I chuckle in one breath and start sweating in the other,” said Michael Eisenberg, a principal with Squar Milner Financial Services LLC in Encino, Calif.
Mr. Eisenberg said he and his colleagues have been “getting inundated by clients with questions.” They have been working extra-long hours so they could spend the Christmas holiday at home, but afterward “it’s going to be crazy again.”
The process has been even more difficult because the provisions of the overhaul kept changing, right up to the final version in mid-December.
Some CPAs felt compelled to quickly learn each new version and follow every twist and turn. “You find yourself reading pages and pages of legislation trying to figure out what it means,” PwC’s Mr. Katz said. “It’s like a big jigsaw puzzle.”
Others preferred to wait until the law was finalized. “I was trying to stay away from learning about laws that are not yet law,” said Jeffrey Baddish, a CPA at Shalik Morris & Co. in Woodbury, N.Y.
December is always busy for tax preparers as they help clients position portfolios before a new tax year begins. But the rush to get the tax overhaul enacted by Christmas, and the uncertainty about many of its provisions until the very end, has made the pace especially hectic this year.
Mr. Watkins, of EKS&H, is trying to help some clients with multiple homes prepay their property taxes by the end of the year, before the new law limits taxpayers’ ability to deduct those taxes. One client who has two homes in Colorado and a home in Hawaii could save tens of thousands of dollars by prepaying. “We’re trying to figure out the math,” he said.
Sushma Pansari, a CPA at Optima Taxes in San Mateo, Calif., had been advising some Uber Technologies Inc. employees on whether they should accept a SoftBank Group Corp. tender offer for their Uber shares. But that calculation got affected dramatically by a tax-bill provision allowing employees of some private companies like Uber to defer income from their company-granted shares for up to five years.
That led to Ms. Pansari’s firm “ripping up whatever planning we already did,” she said, to revise its analysis and help clients sort out what to do. “There’s a lot of rush to figure it out.”
Mr. Eisenberg, of Squar Milner, has a client in her 80s who has dementia and significant health-care expenses, and at one point during the consideration of the bill it appeared the deduction for out-of-pocket medical expenses could be repealed. Ultimately, it was retained and temporarily expanded, but “her family members were concerned ’is she going to run out of money’” if those costs were no longer deductible.
Mr. Eisenberg analyzed her situation, and “we believe she should still be OK,” he said. “We’re almost like a financial therapist, if you will. We’re trying to calm people down.”
All that work will have a payoff, at least: CPAs acknowledge the complexity of the new overhaul is likely to ensure demand for their services remains high. There is no more talk that tax rules would be so simple that returns could fit on a postcard.
In particular, changes in the pass-through rules, which govern businesses where the income is reported on the owner’s individual tax return, are “going to create so much work for us,” said Mark Soukup, president of Soukup Bush & Associates, a Fort Collins, Colo., accounting firm. “I hate to be flip, but it’s going to be an accountant’s retirement act.”
Write to Michael Rapoport at Michael.Rapoport@wsj.com

Ricordanza
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Re: Last-Minute Rush to Prepay Taxes Gives Way to Confusion and Anger

Post by Ricordanza » Mon Jan 01, 2018 12:19 pm

jserraglio wrote:
Sun Dec 31, 2017 10:25 am
Wall Street Journal

All that work will have a payoff, at least: CPAs acknowledge the complexity of the new overhaul is likely to ensure demand for their services remains high. There is no more talk that tax rules would be so simple that returns could fit on a postcard.
In particular, changes in the pass-through rules, which govern businesses where the income is reported on the owner’s individual tax return, are “going to create so much work for us,” said Mark Soukup, president of Soukup Bush & Associates, a Fort Collins, Colo., accounting firm. “I hate to be flip, but it’s going to be an accountant’s retirement act.”
I guess this takes the sting out of Trump's slap at accountants during his recent NYT interview: "I know the details of taxes better than anybody. Better than the greatest C.P.A."

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