Despite IRS warning, property tax stampede rolls on
Thursday, December 28, 2017
Crain's Chicago Business
An Internal Revenue Service warning failed to staunch a taxpayer stampede to prepay property taxes by year end, before the federal tax overhaul takes effect. And some accountants say the IRS advisory won't matter much, in Cook County at least.
Through Wednesday, 47,000-some Cook County taxpayers had forked over nearly $313 million. Another 16,000 paid almost $100 million by mid-day on Thursday. Will County by Wednesday took in $16.4 million, five times a week-old projection.
Property owners are rushing to blunt the impact of a $10,000 cap on state and local tax deductions inserted into the tax measure. In theory, payments made before Jan. 1 qualify as 2017 deductions under the old law's unlimited ceiling on state and local deductions.
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However, on Wednesday, the IRS said not so fast. It issued a statement that could endanger many of the prepayments, cautioning, "A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed."
In Cook County, property tax bills are not finalized until August for the previous tax year, in line with the county's history of issuing bills a year in arrears. Tax professionals think this fact, coupled with prepayment limits equal to the 55 percent of the previous year's bill (the traditional first installment), gives comfort to Cook County taxpayers.
"The liability is a 2017 liability—and that's not the case in every other state," says Dan Wolf, a CPA and partner at Wipfli in Northbrook. "I think this leaves Cook as still being OK. They seem to have been left intact by this announcement."
Cook County Treasurer Maria Pappas has argued that case—but not formally. "What can I tell you?" she said today. "It's the same thing we have on our website: Ask your accountant!"
Stan Lazar, managing partner of tax and consulting firm Shepard Schwartz & Harris in Chicago, adds, "I don't think it's a big fight the IRS is going to pick. They've got more on their plate . . . I doubt it will be the subject of a specific IRS exam. There's just not enough money involved for a particular taxpayer."
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Will County permitted two years of prepayments, but after the IRS weighed in, the county advised taxpayers to limit themselves to one year's. "We have some people who are reconsidering those decisions" to prepay, according to deputy treasurer Brian McDaniel, who says of the IRS: "They did not do anyone any favors on clarity."
Other collar counties like DuPage and Lake set a maximum of 105 percent of the previous tax bill.
"Call volumes are excessive at this time," says a recorded message by the DuPage County treasurer's office. Treasurer Gwen Henry could not be reached. Her voicemail said she was out of her office "working with the taxpayers" and "won't get to voicemail until probably Saturday, and I think that's going to be a little late."
One room of a few in an incredibly, ridiculously long line to pay estimated 2017 property taxes in DuPage County. Shame on you @PeterRoskam! We need new representation! Support @Carole4IL06 #FlipThe6th #TaxScamBill pic.twitter.com/epY44ycSvC— Kim Reed (@KimReed3) December 28, 2017
Phone calls to the Lake County treasurer's office went unanswered yesterday. Treasurer David Stolman last week said payments must be received by today—a Dec. 29 postmark wouldn't do. Now, it will suffice, according to the Waukegan News-Sun. Pappas said her office would be open from 9 a.m. to 5 p.m. on Sunday, New Year's Eve.
McDaniel said payments have been averaging $5,800, compared with an typical annual bill of $2,300. One taxpayer wanted to prepay 10 years in advance (and was rebuffed), he said.
"It's crazy; it's unprecedented; it's bizarre," he says of lines out the door. On Tuesday, 1,100 prepayments were made, quadruple last year's 260 total.
.@PeterRoskam See these long lines at DuPage County tax office today. PPL pre-paying 2018 property taxes. @NBCNews pic.twitter.com/bYSj3YOT2s— Illuminator (@WakeUpDJTVoters) December 26, 2017