Proposed Legislation Could Decrease Boomers’ Property Tax Burden

4 Baby BoomersA new initiative to decrease the property tax burden faced by baby boomers in the state of California has received the requisite 585,407 signatures to appear on the general ballot in November, according to the Secretary of State’s office.

The proposed legislation would amend Proposition 13, a 40-year old property tax law still valid in California. Under its terms, a property’s assessed value is equal to the price it was purchased by the current homeowner for. Their annual property taxes are 1 percent of whatever that value is.

The new legislation would allow California homeowners over 55 years of age who are moving within the state to incorporate their previous home’s assessed value when calculating their property taxes, often reducing their overall tax burden considering the value of California real estate today.

The structure is complicated, so an example is helpful. If a current homeowner purchases a new property for $1 million while selling another for $500,000 with an assessed value of $250,000, current law would calculate their property taxes solely on the new property’s $1 million purchase price.

Under the proposed legislation, the tax burden would instead be calculated by adding the old property’s assessed value ($250,000 in the example above) to the difference between the sale prices of the new ($1 million) and old ($500,000) properties for a total of $750,000. This figure is considerably lower than it would be under the original Proposition 13.

In addition, homeowners will receive tax relief if they purchase a property for less money than they sell their existing property for. For instance, if the homeowner in the example above purchases a new property for $300,000 instead of $1 million, that figure will be halved for the purpose of calculating property taxes.

Supporters of this initiative claim that the measure will encourage older homeowners to sell their homes, adding inventory to California’s booming housing market. Alexander Creel, Vice President of the California Association of Realtors, noted that many older homeowners no longer like or need their current homes, but hang onto them to avoid higher property taxes when his organization originally proposed the legislation.

However, opponents are concerned by the state’s loss of property tax income. The measure will reduce tax revenues collected by California’s counties by $150 million annually, according to the Legislative Analyst’s Office. Furthermore, the figure projects to increase to up to $1 billion annually in the future. Another analysis concluded that approximately 20 percent of the tax revenues collected by California counties are derived from property taxes. This could compromise the core services provided by cities, schools, county governments, and special districts that rely on property tax income.

This forecast generally makes the proposed legislation unpopular with local governments and districts around California. For example, the California State of Counties‘ (CSAC) Board of Directors voted on Thursday, May 17, 2018 to oppose the initiative. Dorothy Johnson, Legislative Representative of the CSAC, was quoted in a recent interview categorizing the measure as a “direct threat” to the

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Mel B. Hit With Tax Lien

In the case of former Spice Girl Mel B and her now ex-husband Stephen Belafonte, it appears that somebody forgot to take care of their joint business in the heat of a not-super-friendly divorce. As a result, the US Internal Revenue Service has filed a tax lien against the couple with regard to their 2016 taxes.

The $274,863.99 which the IRS claims is owed to them has not been quantified beyond the bare filing of a tax lien. In other words, it is not known at this time as to whether this is a question of a shortfall in payment, a complete failure to file, or some sort of other tax dispute. Nor is it known as to whether this is something largely attributable to the business dealings of Mel B or of her former husband, although it is most likely something chargeable to her account since she was the true breadwinner of the family during their ten year marriage.

What does come to mind for many ordinary people is that a quarter of a million dollars and change is a lot of money for unpaid taxes in a single year. It makes one wonder what the actual income involved might have been. Still, while undoubtedly embarrassing, the likelihood is that this will all get cleared up in due course. Most likely, this matter is tied in to the usual difficulty in disentangling business and financial affairs during a divorce proceeding.

Our tax attorneys specialize in resolving tax liens! If you have received a tax lien notice from the IRS, call us now at 1-866-TAX-TAX-5.

Mel B. Hit With Tax Lien

In the case of former Spice Girl Mel B and her now ex-husband Stephen Belafonte, it appears that somebody forgot to take care of their joint business in the heat of a not-super-friendly divorce. As a result, the US Internal Revenue Service has...

read more

Can I Deduct Pet Expenses From My Taxes?

One question that our tax attorneys in San Francisco get asked frequently is "Can I deduct pet expenses from my taxes?". As is the case with most issues relating to your taxes, the answer is more complicated than a simple yes or no. The new tax...

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Can I Deduct Pet Expenses From My Taxes?

One question that our tax attorneys in San Francisco get asked frequently is “Can I deduct pet expenses from my taxes?”. As is the case with most issues relating to your taxes, the answer is more complicated than a simple yes or no.

The new tax laws have changed many assumptions that formerly governed how people arranged their business and personal affairs in order to take maximum advantage of the previous tax regime. One of the relatively unknown parts of the code deals with the potential tax consequences of our animal companions. So, first off, calling them pets is likely to kill any chance of actually gaining some deduction for the expense of your fur friends.

It is therefore necessary to approach the current tax code provisions with the idea in mind that these living creatures perform some sort of necessary medical or professional function which renders the cost of their upkeep deductible. Anyone who owns a junkyard is most likely going to be able to deduct the cost of a large, vicious hound without getting too much flak from the tax examiners. Someone who operates a babysitting service out of their apartment will probably need a lot of paperwork to justify taking the same deduction for their own business.

Of course context is really what this is all about. A medical office or restaurant that keeps a fish tank can probably write off some of the costs, whereas keeping a tank full of exotic tropical fish in your home is likely to be adjudicated as a hobby. The biggest gray area, and one which is likely to see a big uptick in activity, is in the field of service animals.

In the past, a service animal was something along the lines of a Seeing Eye Dog- an obvious medical necessity and easily deductible. Nowadays, however, the designation of Service Animal is increasingly being applied in the field of mental health. This is creating an intrusive explosion of animals into areas once largely out-of-bounds for them, such as the cabins of passenger airplanes and a host of retail outlets. It should also be mentioned that the designation is not restricted to the usual household pets. Incidents have been reported of people insisting that pigs, chickens, and other barnyard or even semi-feral creatures are their service animals and thus exempt to the usual proscriptions against entry into formerly-restricted public spaces.

While there are undoubtedly a great many people who truly require the solace of their service animals, the need to replace formerly-valid-but-now-verboten deductions with something else is clearly leading up to the point where millions of pets are soon going to be declared as essential service animals and claimed as legitimate write-offs. This, in turn, is going to lead to a massive IRS tightening of the rules once the trickle of pet exemptions turns into a tidal wave of revenue loss to the government.

Eventually, of course, a body of legal precedent and agency guidance will be built up on the

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San Francisco Improves Self Service Tax Portal

Not every upgrade of a municipality’s infrastructure is genuinely newsworthy. In some ways, the recent announcement by the City of San Francisco that it has streamlined and improved its self service tax payment portal falls into this category of announcement. In ordinary circumstances, this would hardly be news at all.

When one considers the pride with which this news is conveyed by by the city, however, an interesting backstory suggests itself. Their description of this new tax payment system speaks about how citizens can go online, search for various meta-terms which will call up all of their tax payment history and billing, and then generate a single standardized form which will permit them to easily pay their taxes with it.

Conversely, the new system also allows people to quickly and easily make their tax payments online. As an added bonus, the system also automatically generates friendly reminders about when tax payments are due and provides for various other forms of consciousness raising that will, as they say, help reduce late payments and other forms of mistakes made by the general public, such as perhaps paying the right sum towards the wrong account.

While all of these things are admirable, one large question pops up when one thinks about the whole idea that San Francisco, High Priestess of the high-tech world, is just now setting up a system capable of doing these things. Far from being revolutionary, this is actually a case of someone playing catch-up to the rest of the world– which has been utilizing similar technologies for years. What sort of system have Bay Area taxpayers been suffering under prior to this new rollout?

San Francisco has apparently been working on updating their previous system since April of 2016 and serendipitously managed to have it up and running in time for the unexpected flood of business that came at the end of 2017, when the President’s new tax bill changed the way in which local tax payments were treated for federal tax purposes. Given the drastic decrease in the deductibility of these payments for the 2018 calendar year and beyond, many Bay Area residents rushed to pay their taxes before the close of business on December 31st, 2017 to take advantage of one last writeoff before the new tax regime became law.

To its credit, the new system, which replaced and unified four older platforms, performed extremely well. It handled an eight-fold surge in self service tax payments compared to the usual sedate pace of payments at the end of a calendar year. The chaos and recrimination that would have ensued in the event of any glitches cropping up would have been ruinous, so the long horizon which the city employed on its deployment schedule has proven the wisdom of the idea that a patient approach on such a key part of the city’s basic IT infrastructure is better than rushing a buggy system into action prematurely.

In that regard, the IT planners who designed and built the new … Read More

Supreme Court to Rule on Mandatory Online Sales Tax

Woman making online purchase with credit cardThe US Supreme Court will soon issue its opinion on the case of South Dakota v. Mayfair, which concerns the ability of the 50 states to charge an online sales tax to retailers who sell goods inside their jurisdictions, but are actually selling from a physical platform located outside of their jurisdiction.

As often happens, SD v. Mayfair is not just intended to settle things in South Dakota but to serve as a foundational exemplar that will create a legal precedent to guide the court system in the vast number of other cases slowly grinding through the system. Simply put, the Supreme Court has judged that the hour has arrived to issue a definitive ruling on the subject of online merchandising that revisits the 1992 ruling in Quill Corp. v. North Dakota.

At the time of the mail order-oriented Quill ruling, e-commerce had not yet been invented, so it is certainly proper to provide some clarification of the interstate commerce aspects of online merchandising. On the face of it, the case appears to be one of local Mom-and-Pop David versus online behemoth Goliaths such as Amazon, but there are many subtle shades of variation in the overall classifications.

The large online retailers are likely to argue that there are many small retailers doing business online which depend on this one slight tax advantage conferred to offset the numerous blessings that larger operations enjoy– such as wholesale purchasing power. Certain well-known online vendors, among whom are the aforementioned Amazon and eBay, serve as host platforms that provide enormous amounts of opportunity to small-scale vendors who would have no chance of staying in business without access to the sales that grow in virtual land.

Regardless of their actual sympathies, they are certainly hoping to capitalize on concern for the little guy as a cover for their own extensive operations. An additional argument and one that truly concerns them personally is the idea that an unfavorable ruling could lead to the need to stay abreast of ever-changing tax laws and rates in more than 12,000 jurisdictions in the United States alone. This is probably the most fascinating part of the case.

After all, it’s reasonable to think that large corporations might be better equipped to handle those 12,000 separate tax rates than any of their smaller online rivals. So, on the face of it, it would seem like a South Dakota victory in the case would be in their own ultimate best interest. Yet they remain firmly on the opposite side of the case. Given the competing interests at stake, the position of the behemoths seems to be that allowing the little guys to stay in the game by paying no taxes is preferable to dealing with 12,000 distinct tax jurisdictions as the cost of rubbing them out.

After all, the whole point of giving the Federal government authority over interstate commerce is to avoid exactly this sort of commerce-strangling bureaucracy for everyone involved. Yet the continuing decline of local retailers does appear

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What Happens If I Pay My Taxes Late?

Failing to file your federal income tax return by the filing deadline could be costly if you owe the IRS money. You could be assessed penalties and interest on the money you owe and this can really add up over time. If you are due a refund from the IRS there is no penalty for filing late, however, you should be certain that you are actually due a refund to avoid any issues.

There is a 5% late filing penalty for all monies owed each month and part of a month that the debt goes unpaid. These charges are accrued for a period of 5 months and the cap on this penalty is 25% of the unpaid balance.

If your unpaid balance is 60 days or more past due to an additional minimum fee of $205 or 100% of the unpaid balance will be assessed whichever is the least of the two amounts. The minimum amount that is charged however does not lessen the impact of the 5% per month that has accrued for 5 months which can be significantly greater.

In addition to the previously mentioned charges, an additional 0.5% late payment penalty will be applied to your unpaid tax bill plus any interest every month and part of a month that the balance goes unpaid.

The deadline to file your taxes for 2018 is April 17th and if you request an extension for six months, the filing deadline is October 15.

Note that requesting an extension will not offset your obligation to pay. You must pay approximately 90% of your owed taxes for 2017 to avoid any penalties and interest.

In order to avoid paying penalties and interest, it is suggested that you try to avoid any penalties by filing your tax return on time by the filing deadline. Even though you may owe the IRS and can’t pay right away, it is best to file your return by the deadline to avoid penalties, if not request an extension.

If you request an extension you may offset the late payment penalty only if you have already paid at least 90% of what you owe for your 2017 tax return. The remaining 10% can be paid by the extended filing date.

If you foresee that you are going to be late paying your taxes, it is suggested that you try to pay some of the money when you file your return. This reduces the number of penalties and interest because it will be applied to a lesser amount.

The final suggestion is that if you are going to file a late return and can’t pay what you owe; if you can show ‘reasonable cause’ why you filed late and can’t pay your taxes, the IRS will not charge you with penalties. However, ‘reasonable cause’ is not something that is outlined or defined by the IRS and they make their decision based on each individual case.

If you owe less than $50,000, you may be able to request to pay

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