Hundreds Line Up to Prepay Taxes, Hope to Preempt New 2018 Tax Code
PREPAYING TAXES: Hundreds of Princeton homeowners waited in line at the Municipal Building last week to prepay their 2018 taxes before the new tax plan goes into effect, limiting the amount of money you can deduct for state income, sales, and property taxes to $10,000.
By Donald Gilpin
There were long lines last week outside the tax collection office, filling the hallway of Princeton’s Municipal Building. But even after waiting for almost an hour, the early taxpayers were patient and mostly upbeat, no doubt buoyed by the prospect of saving maybe a few hundred, maybe thousands on their taxes.
Hoping to cash in for the last time on the federal deduction on tax payments that will be capped at $10,000 in 2018 under the new tax code signed two weeks ago by President Trump, those prepaying plan to claim their payments on their 2017 federal income tax returns. But it’s not clear if the IRS will allow all of the deductions claimed.
Gov. Chris Christie on Wednesday issued an executive order directing municipalities to accept pre-payments for at least the first and second quarters of 2018. Tax payments in person, according to the town website, were due by 5 p.m. on December 28, since municipal offices were closed on Friday, and mailed payments had to be postmarked before the end of the year on Sunday.
Also last Wednesday, the I.R.S. announced that those prepayments could be deducted only by paying property taxes that have been assessed in 2017 — an issue for many localities in states with high taxes and property values where local tax offices have been swamped with early tax payers and assessments for 2018 have not been delivered. Tax payers in Princeton, however, have had assessments for the first two quarters in hand for several months. Most of the 40-50 people in line last Thursday morning were ready with their checks and their assessment bills for the first two quarters.
Finally approaching the front of the line after waiting about 45 minutes, Joan DeStaebler of Humbert Street didn’t know if her effort would be rewarded. “Will it save me money? It might,” she said. She had read on the municipal website that since she wanted to prepay for more than one quarter, she needed to mail or bring payment to the office before 5 p.m. Thursday.
In line behind DeStaebler, Art Kraus of Princeton-Kingston Road was more confident as he held up his check for his February and May payments. “I ran the numbers,” he said. “This will save me a few hundred dollars.”
Robert Tignor of MacLean Circle, with his check for $8,400 to pay for the next six months, was hopeful of saving even more. “According to my understanding you have to have a copy of the bill. I heard you can mail in your payment, postmarked before Sunday, but I decided not to take that chance,” he said. “I’m getting a receipt.”
Most tax experts warn that there could be some difficulties ahead as controversy continues to surround the details of the hastily-completed tax bill. Many taxpayers cannot afford to prepay taxes, and others cannot be certain whether prepayment of taxes will benefit them or simply provide an interest-free loan to the municipal government.
Some tax experts have warned that homeowners who usually pay their property taxes through an escrow account could face an audit if they prepaid at the local tax office because the payments reported to the I.R.S. on their tax forms could differ from what the banks report on the forms they use to report to the I.R.S. Also, those subject to the alternative minimum tax (AMT) will apparently derive no benefit from prepaying their taxes.
“Due to the rush job that Congress put through and the ensuing lack of substantive interpretation, there is a great deal of stress and confusion among taxpayers as well as the tax practitioners who are trying to represent their clients’ best interest, with no definitive interpretation of the law or how it will be implemented,” said Monroe Township tax preparer April Furst.