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Prepayment of taxes to avoid Trump tax reform mostly a no-go in Pa.
So, according to news reports from several states, people have been flocking to tax collectors to pre-pay their 2018 real estate taxes, in hopes of being able to deduct them from their 2017 taxes. In Pennsylvania, however, the law doesn't allow such ...
By David Wenner
It's a Pennsylvania law built on at least one solid plank: to prevent Pennsylvania tax collectors from pocketing 2017 taxes and using 2018 taxes to hide the theft
But right now, it's also preventing many Pennsylvania property owners from cashing in on a temporary loophole that might give them a lower tax bill than they would otherwise pay under the new tax law recently passed by Congress with the approval of President Donald Trump
The new law will put a $10,000 cap on the amount of local taxes, including real estate taxes, that taxpayers can deduct from their taxable income in 2018.
For some taxpayers, especially those living in areas with high property and local tax rates, that could cost them serious money[The new law also increases the standard deduction, which could offset those losses for many, or result in lower taxes overall.]
So, according to news reports from several states, people have been flocking to tax collectors to pre-pay their 2018 real estate taxes, in hopes of being able to deduct them from their 2017 taxes.
In Pennsylvania, however, the law doesn't allow such prepayment, according to various expertsAnd if a particular municipality or taxing body decides to try, it could set off a chain reaction of problems, and potentially run afoul of the Internal Revenue Service, which late Wednesday stated a policy that seems to narrow the possibilities for early payment
Three experts interviewed by PennLive said state law essentially makes it illegal to collect 2018 taxes during 2017
"There's nothing in the tax law that allows for pre-payent," said John Gross, the treasurer for Cumberland County
In much of Pennsylvania, people pay their taxes to an elected local tax collectorIn some cases, a municipality or county collects some or all local taxes
Janis Creason, the treasurer for Dauphin County, said state law prevents tax collectors from collecting taxes for a new year before the old one is settledIt means that 2017 taxes will officially be settled by a mid-January deadlineThat prevents them from accepting 2018 taxes in advance of that, according to Creason and others
She said that portion of that law is designed as a protection against fraud, as it would prevent a tax collector from stealing money and using new tax revenues to cover it up
She said there are assorted other nuances of the law that could lead to confusion and legal problems up if a tax collecting entity decided to allow pre-payment of 2018 taxes"There are so many ripples," she said.
Still, some Pennsylvania taxing entities are tryingThe City of Harrisburg said Wednesday that people can begin prepaying 2018 real estate taxes, and the city will accept payments postmarked through Dec31
But at roughly the same time, the IRS posted the notice that seemed intended to narrow the possibilities for making a prepayment that can legally be applied to 2017A Harrisburg official couldn't immediately be reached on Thursday morning to discuss what impact that stance might have
Meanwhile, Creason said it's unusual to hear of people rushing to pay their taxesPeople usually try to delay.
"It would be great for the county to have an [early] infusion of money," she said"I just don't see a way to do it, based on what we know."
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