State tax deductibility of all Mello-Roos charges threatened beginning tax year 2012

[Coronita]

[quote=briansd1]As some people might say, enforce the laws already on the books.[/quote]

Brian, have you started paying sales tax for all the things you buy on amazon? Or are you still not reporting that, like the last time you admitted?

[Coronita]

[quote=no_such_reality]OCR. Simple scan, compare, flag deviation for free money and penalties.[/quote]

And are they going to check the scanned bills are consistent?

[UCGal]

[quote=flu]…Ooooooooh a total of $31 that can’t be deducted…. 🙂 You probably could inflate your charitable contributions by that amount if you wanted.

(Not directing this at you… Just I think the deductibility of a lot of things I think are miniscule for a lot of people….

Now if you happen to live in 4S or Scripps paying $400/month for Mello Ruse(sic)…Well, yah I guess you’re kinda screwed.[/quote]

LOL – I know… I don’t have mello roos, HOA etc.. So I had to go with what I do have. And a lot of folks living in older neighborhoods in the city of San Diego have bills like mine.

And if it’s just the 1% that’s deductible… that’s only 90% of my bill… 10% would no longer be deductible.

I was trying to make the point that this is going to affect everyone to some extent. Folks with MR and HOA get hit harder, though.

As to whether the state will audit it… I assume they’ll have computers that will pull in the data. The same way they compare w2 wages you state, to what your employer states.

If they’re not doing that, then why wouldn’t we lie about EVERYTHING on our taxes… Say we made less $$, earned less interest and capital gains, paid more payroll deductions…. I assume the system is being put in place to automatically verify these numbers.

[Coronita]

[quote=UCGal][quote=flu]…Ooooooooh a total of $31 that can’t be deducted…. 🙂 You probably could inflate your charitable contributions by that amount if you wanted.

(Not directing this at you… Just I think the deductibility of a lot of things I think are miniscule for a lot of people….

Now if you happen to live in 4S or Scripps paying $400/month for Mello Ruse(sic)…Well, yah I guess you’re kinda screwed.[/quote]

LOL – I know… I don’t have mello roos, HOA etc.. So I had to go with what I do have. And a lot of folks living in older neighborhoods in the city of San Diego have bills like mine.

And if it’s just the 1% that’s deductible… that’s only 90% of my bill… 10% would no longer be deductible.

I was trying to make the point that this is going to affect everyone to some extent. Folks with MR and HOA get hit harder, though.

As to whether the state will audit it… I assume they’ll have computers that will pull in the data. The same way they compare w2 wages you state, to what your employer states.

If they’re not doing that, then why wouldn’t we lie about EVERYTHING on our taxes… Say we made less $$, earned less interest and capital gains, paid more payroll deductions…. I assume the system is being put in place to automatically verify these numbers.[/quote]

Unless they are linking to the county assesor’s office and doing a direct download of the information, or unless the county is reporting directly to the state, it still lends itself to fraud, especially these days when photocopying is so easy.

[bearishgurl]

I just thought of a potential quagmire affecting the deductibility of MR of those affected CA taxpayers’ Federal return. All of the figures from the Federal Return are reported to the the FTB in an electronic tax return filing, incl line 6 of Schedule A (used to report property taxes for a principal residence).

If the FTB’s software can flag both (electronically-filed) returns, it would be reasonable to believe that the CA taxpayer would not be able to report a different property tax amount on line 6 of Schedule A than they do on line 73 of their Form 540, without getting flagged.

Again, FTB workers would have to be available to go thru paper tax return filings which include a copy of the taxpayers Federal return to determine the property tax amount reported to the IRS on their Schedule “A” filed with their Federal return. These “human scanners” could actually be their lowest-paid clerical workers or even temporary contract help.

It would be worth it for the FTB to go thru all this for its “debut tax year (2012)” this because the prevention of present and future deductibility of MR is for the life of the taxpayer’s ownership of that parcel if that ownership period does not exceed the life of the bonds . . . a potentially long-overlooked HUGE income tax revenue stream to the State!

Edit: Here is the actual link referred to by First Tuesday:

https://www.ftb.ca.gov/individuals/Real_Estate_Tax_Deduction/index.shtml

[bearishgurl]

I just ran across this (1/9/12) article:

…The difference between deductible and non-deductible property taxes is not a new rule. Mello-Roos fees, which pay for roads, schools, fire stations and other public facilities in new developments, have not been deductible from state income taxes since the legislature authorized the special assessments 30 years ago.

Many property owners, however, routinely deduct the entire amount of their property tax bill from their state income taxes instead of only the parts that legally are deductible. Others just use the amount on the Form 1098 that their mortgage holder paid to the county tax collector on their behalf.
Until now the Franchise Tax Board didn’t to go after them. A new computer system being installed this year, however, will allow the agency to distinguish the portions of property tax bills that are deductible and non-deductible, said Daniel Tahara, a FTB spokesman.

He said the new scrutiny of property taxes is not due to any political pressure to increase tax revenues to close the state’s gaping budget deficit. “Every year we look at areas of non-compliance and this happened to be one that came up,” he said.

Tahara said the agency is announcing the new rules now so taxpayers can make any adjustments this year for their 2012 state tax filing next year.
He said the FTB had planned to impose the new rules on 2011 tax filings due this April, but held off after getting “negative feedback” from tax preparers and the public…

(emphasis added)

see: http://economy.ocregister.com/2012/01/09/state-targets-property-tax-payers/101799/

[Coronita]

[quote=bearishgurl]I just ran across this (1/9/12) article:
(emphasis added)

see: http://economy.ocregister.com/2012/01/09/state-targets-property-tax-payers/101799/%5B/quote%5D

No need for emphasis here. Everyone here already knows this BG.

[Coronita]

[quote=bearishgurl]I just thought of a potential quagmire affecting the deductibility of MR those affected CA taxpayers’ Federal return. All of the figures from the Federal Return are reported to the the FTB in an electronic tax return filing, incl line 6 of Schedule A (used to report property taxes for a principal residence).

If the FTB’s software can flag both (electronically-filed) returns, it would be reasonable to believe that the CA taxpayer would not be able to report a different property tax amount on line 6 of Schedule A than they do on line 73 of their Form 540, without getting flagged.

Again, FTB workers would have to be available to go thru paper tax return filings which include a copy of the taxpayers Federal return to determine the property tax amount reported to the IRS on their Schedule “A” filed with their Federal return. These “human scanners” could actually be their lowest-paid clerical workers or even temporary contract help.

It would be worth it for the FTB to go thru all this for its “debut tax year (2012)” this because the prevention of present and future deductibility of MR is for the life of the taxpayer’s ownership of that parcel if that ownership period does not exceed the life of the bonds . . . a potentially long-overlooked HUGE income tax revenue stream to the State![/quote]

You’re thinking way too hard.

It’s called electronic copy of and photoshop. How does the state plan to go about verifying the submitted paperwork’s numbers are real? Not saying people are going to do this. But this system is flawed. For it to work, state needs to be able to tap into the countys’ systems. Or the counties need to be able to send a form to the state directly.

And guess what? State ain’t gonna have money to put a system like this in place in the forseeable future.

A random audit *might* expose a tax cheat, but otherwise a photoshopped bill it’s not going to trigger any computer system flag because a computer isn’t going to be able to tell a real form from a fake…

Anytime you depend on the filer to fill “forms” as proof of information, that’s a flawed design. That’s exactly why 1099’s need to be sent from banks/financial institutions directly to the IRS/FTB.
Otherwise, counting on a taxpayer to send in the paperwork is just plain stupid.

This is just one of many ways I can think of that folks can rig the system… This is the most bold (arguably most stupid way of doing it, because it only bypasses the electronic “eyes”, but not the human eye in case of a random audit). There are a bunch other ways I can think of how it can be gamed from that angle.

I’m not condoling anything illegal. I just like pointing out flawed systems, and it is a very flawed system. But to most people’s point out here, most people probably aren’t going to go that extreme and send in doctored statements…

[briansd1]

[quote=flu][quote=briansd1]As some people might say, enforce the laws already on the books.[/quote]

Brian, have you started paying sales tax for all the things you buy on amazon? Or are you still not reporting that, like the last time you admitted?[/quote]

No I don’t pay use tax on stuff I buy online… But if the state had some way of enforcing it, I will.

I think that Amazon has agreed to start collecting taxes on CA sales sometimes later this year.
http://articles.latimes.com/2011/sep/08/business/la-fi-amazon-tax-20110908

I now do most of my shopping in Philadelphia where there’s no sales tax on clothing, and in Delaware where’s there’s no sales tax at all.

[bearishgurl]

[quote=flu]You’re thinking way too hard.

It’s called electronic copy of and photoshop. How does the state plan to go about verifying the submitted paperwork’s numbers are real? Not saying people are going to do this. But this system is flawed. For it to work, state needs to be able to tap into the countys’ systems. Or the counties need to be able to send a form to the state directly.

And guess what? State ain’t gonna have money to put a system like this in place in the forseeable future.

A random audit *might* expose a tax cheat, but otherwise a photoshopped bill it’s not going to trigger any computer system flag because a computer isn’t going to be able to tell a real form from a fake…

Anytime you depend on the filer to fill “forms” as proof of information, that’s a flawed design. That’s exactly why 1099’s need to be sent from banks/financial institutions directly to the IRS/FTB.
Otherwise, counting on a taxpayer to send in the paperwork is just plain stupid.

This is just one of many ways I can think of that folks can rig the system… This is the most bold (arguably most stupid way of doing it, because it only bypasses the electronic “eyes”, but not the human eye in case of a random audit). There are a bunch other ways I can think of how it can be gamed from that angle.

I’m not condoling anything illegal. I just like pointing out flawed systems, and it is a very flawed system. But to most people’s point out here, most people probably aren’t going to go that extreme and send in doctored statements…[/quote]

flu, I can’t see this *new* FTB software being “glitch free” the first year of operation either without legislation requiring county assessors to send only the ad valorem tax portion of each of their parcels to the FTB.

Perhaps such a bill is in the pipeline now. I will research this issue later tonight.

And good luck with all your copy/paste and photoshop ideas, flu :=0

[Coronita]

[quote=briansd1][quote=flu][quote=briansd1]As some people might say, enforce the laws already on the books.[/quote]

Brian, have you started paying sales tax for all the things you buy on amazon? Or are you still not reporting that, like the last time you admitted?[/quote]

No I don’t pay use tax on stuff I buy online… But if the state had some way of enforcing it, I will.

I think that Amazon has agreed to start collecting taxes on CA sales sometimes later this year.
http://articles.latimes.com/2011/sep/08/business/la-fi-amazon-tax-20110908

I now do most of my shopping in Philadelphia where there’s no sales tax on clothing, and in Delaware where’s there’s no sales tax at all.[/quote]

Um, in one of your previous posts you said, and I quote
“I’ll start paying my sales taxes when I buy from amazon or out of state when people start reporting their property taxes correctly”… Would you like me to dig up that thread?

Backpeddling, are you?

[bearishgurl]

[quote=UCGal]Sure you couldn’t legally deduct mello roos in the first place… but most folks did.

Now the state will be able to look at your itemized bill since you have to provide that info along with your parcel number.

For those of us that live in non HOA areas… it seems like it might apply to various bond measures as well…[/quote]

Upon reviewing my tax bill, it appears the voter-approved school and CC bonds ARE part of the ad valorem portion of a property tax bill and thus ARE and will CONTINUE to be deductible.

Following UCGal’s example, she is correct.

For example – from my bill:

FIXED CHARGE ASSMTS: PHONE
CWA WTR AVAILABILITY 858-522-6900 10.00
VECTOR DISEASE CTRL 800-273-5167 5.86
MWD WTR STANDBY CHRG 866-807-6864 11.50
MOSQUITO SURVEILLANC 800-273-5167 2.28

Acc to the FTB website, a total $29.64 of the tax bill of my primary residence will not be deductible beginning next year.

I do not live in a MR-encumbered CFD, either.

[briansd1]

[quote=flu]
Um, in one of your previous posts you said, and I quote
“I’ll start paying my sales taxes when I buy from amazon or out of state when people start reporting their property taxes correctly”… Would you like me to dig up that thread?

Backpeddling, are you?[/quote]

It’s a figure of speech, flu…

But I won’t lie or photoshop documents.

My personal policy is never lie. You don’t have to tell everything, but never lie.

[Coronita]

[quote=bearishgurl]
flu, I can’t see this *new* FTB software being “glitch free” the first year of operation either without legislation requiring county assessors to send only the ad valorem tax portion of each of their parcels to the FTB.

Perhaps such a bill is in the pipeline now. I will research this issue later tonight.

[/quote]

You’re missing the entire point. Where is the state going to come up with the money to build this “system”. Hello???? We’re in the red, which budget is this going to come from?

[quote]
And good luck with all your copy/paste and photoshop ideas, flu :=0
[/quote]

You really underestimate how flawed this thing is. This took 2 minutes. Not that hard when things are online and in html…

[img_assist|nid=15861|title=your tax bill|desc=|link=node|align=left|width=1000|height=800]

Also, I’m curious how the CA state systems are going to deal with all the different ways that each county’s assessment forms look. After all, the property tax forms are nowhere near standardized…exposing yet a bunch more technical issues….

Care to be in riverside county?

[img_assist|nid=15862|title=your tax bill redux|desc=|link=node|align=left|width=800|height=1000]

[Coronita]

[quote=briansd1][quote=flu]
Um, in one of your previous posts you said, and I quote
“I’ll start paying my sales taxes when I buy from amazon or out of state when people start reporting their property taxes correctly”… Would you like me to dig up that thread?

Backpeddling, are you?[/quote]

It’s a figure of speech, flu…

But I won’t lie or photoshop documents.

My personal policy is never lie. You don’t have to tell everything, but never lie.[/quote]

You just did.

Anyway, my entire point was that this system is flawed. For me, it doesn’t matter because like I said, I get hit by AMT anyway. But I’m going to enjoy watching CA try to figure out a budget to handle this monstrousity of a half caked system, in a state already deep in red ink…. Heck, just a few years ago, the systems couldn’t handle changing payroll because they let go of all the cobol programmers handling the payroll systems! Yes, cobol. I know…

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