Over the past several weeks, homeowners across the United States were swift to pre-pay their 2018 property taxes, hoping to take one last shot at a federal deduction in 2017 that will be drastically scaled back with a $10K cap under the new tax-code signed into law by President Trump.
In affluent states or jurisdictions such as Loudoun with disposable income and high property values, local treasury offices were inundated by homeowners pre-paying their 2018 property taxes so they could deduct those payments before the cap takes effect.
In response to the public’s hasty interpretation of a new tax code, the Internal Revenue Service (IRS) announced and clarified that those prepayments could only be deducted in limited circumstances – unless taxes were assessed prior to December 31, 2017, prepayments would not be deductible. This invalidated taxpayers’ efforts and caused many who prepaid to request their money back.
Locally, thousands of Loudoun County residents fell into the same misinterpretation and prepaid property taxes to the Loudoun County Treasurer’s Office.
According to a January 3 press release by the Treasurer’s Office, Between December 27 and December 29, just two days, 2,298 Loudoun taxpayers paid a total of $11,209,800 in taxes.
As this fury of prepayment began, Loudoun County Treasurer, Roger Zurn reminded residents that the county does not assess property tax until the first quarter of 2018 and while the county accepts prepayment of real estate and personal property in accordance with state law, Zurn urged residents to consult their tax advisors before prepaying taxes.
As the IRS clarification came out, Zurn anticipated the frenzy of taxpayers who would request a refund.
To ensure whether refunds should or even could be given, Zurn sought a legal opinion from the Office of the County Attorney.
Based on the opinion, the Treasurer’s office does not have “any legal authority to issue” refunds on “voluntarily” submitted prepayments.
“To those that wanted to change their minds, I apologize but I must follow the laws even those that I might not necessarily agree with,” Zurn wrote on December 28. “As Virginia is a Dillon rule state, authority must be expressly given from the State or the County is prohibited from doing anything not expressly stated. There were two Virginia Supreme Court rulings that approximately addressed this issue from which the [County Attorney’s] opinion is derived.”
However, any resident who prepaid for 2019 or beyond, and requesting a refund, those funds will be classified as overpayments for 2018 and a refund will be processed.
Whether they are labeled prepayments or overpayments, taxpayers who submitted payment did so a few months ahead of schedule and their payment will be credited to the new tax assessment.
“Taxpayers may rest assured that the monies have been properly accounted for and posted to the proper accounts. We regret any issues that may have arisen from these uncertainties,” stated Zurn.
For those taxpayers who are requesting a refund of 2019 or beyond overpayment will have to wait several months.
“We will return the overpayments once the levy has been determined by the Board of Supervisors which is typically done by mid-April,” said Zurn. “Taxpayers who wish to have the overpayments sent back should send an email stating their desire for their overpayment for future years to be returned along with their name and account number to this email by no later than March 31, 2018. We anticipate having the money returned to those requesting it by the end of May.”
Fairfax and some other jurisdiction have agreed, under the circumstances, to refund prepaid 2018 property tax to those requesting a refund although they will become due in a few months.