Wednesday, April 15, 2015

DC Taxes - 2015 & 2016 Update: GOOD and BAD News - Revised Schedule H, This Could Give YOU Money

As many of you know, I have paid special attention to the DC government tax situation.  By clicking my INDEX post you can find all the earlier tax related articles.  Having just finished preparing my own 2014 taxes [as well as the 2015 tax calculations], and comparing the current situation with earlier years, I now have the new information for these years.  We in the DC Statehood Green Party have struggled especially long and hard to bring tax fairness to the lower and middle classes.  We can now report some success.  However, our Council still has a long way to go to restore equity to our people.
     For 2017 I have colored the information below about the improved Schedule H benefit in yellow and other colors.  You are probably eligible if your Adjusted Gross Income (AGI) is $40,000 or less for you (increased to $50,000 for 2016 taxes), and your family unit, if not living alone.  If 70 or older, the AGI limit is $60,000.  You also need to pay rent or property taxes to be eligible.

In an email last week I called attention to the fact that even though our Council approved using some of the tax Revision Commission's (TRC) recommendations, even though they agreed to implement these changes in our Deductions and Exemptions that would put $85,000,000 each year back into our neighborhoods, the small increases they did approve were even less than the federal increases.  Since federal D & E rates are pegged to inflation, this means we continue to fall ever farther behind.  For 2015 taxes a bit more was added by DC relative to federal additions.  See below:

I followed through on my plan to check on the proposed tax rate reductions for upper income earners and businesses.  If you are a lower income earner, it may help you feel a bit better to learn for that group, those rates were unchanged from last year.  We will need to continue to watch like hawks to make sure the Council does not backtrack on the TRC goal of reducing the tax burden to the middle class.  At last year's hearings many were astonished to learn the middle 20% of taxpayers paid more than 11% taxes, while the top 1% and the bottom 20% paid near 6% taxes.
     For 2015 taxes, individuals with adjusted gross income (AGI) exceeding $150,000, personal exemption will be reduced by 2% for each $2,500 above $150,000.  No personal exemption is available for AGI above $275,000.  NOTE:  AGI is the figure at the bottom of page 1 of your Federal 1040 form.
This year's Institute on Taxation and Economic Policy (ITEP) (Jan. 2015) report indicates the middle 20% now pays a little over 10% taxes.  Here is further information from DC Citizens for Tax Justice on impact of some changes. I read ITEP's information on tax changes in 2013 and 2014, but some of their information does not agree with the information on DC's 2014 D-30 and D-40 tax forms.  For example, they report a decrease in the UIC (Unincorporated Franchise Tax).  Having just calculated my own official printed 2014 D-30, I can report the tax rate was still listed as 9.975%.  I'm not sure why Chairman Mendelson reported at last year's Chairmen's Candidate Forum that he had helped reduce the business tax rate by 17%.  Perhaps this is planned for a later year or on a different tax form.  We will have to keep watch on this.

[5/2/16] - I just attended a Ward 7 candidates forum for seniors (In 2016 I was running At Large with the Statehood Green Party in the June 14 primary).  While there I brought up the issue of the Schedule H and potential of getting back up to $1000 from the Office of Tax and Revenue.  Almost no one there knew about this.  Given the number of people in the room, probably as much as $200,000 could be collected by this large group of senior citizens if they file Amended Returns for tax years 2014 and 2015.
     Please note that Amended Returns can be filed for up to 3 years back from the date a return was filed.  Thus you should check to see if you are eligible for 2014, 2015, and now 2016.  If you are late filing the D-40 for a year, simply file that year and include the Schedule H material.  If you already filed the D-40 for a specific year then you WILL have to use the Amended Return, D-40X.

As I hurried to get my taxes sent off to the IRS and OTR in April 2015, I decided to check out the District's D-40 Schedule H. Since in the past, the limitation of eligibility has been a maximum income of $20,000, I was not paying much attention to this particular issue. DCSGP's David Schwartzman had brought this up as an important benefit needing change. I was amazed and pleased to see that SURPRISE, I am now eligible for this benefit.  If I am now eligible, then it means many more of you could also get money back.

Even if you have already sent in your tax returns you can always file an amended return if it will give you money back.  This form has a Line 16a, which is, as explained in the General Instructions, is the place to include the Schedule H property tax credit.   You then explain in Part II that you are eligible for the Schedule H credit, and attach a copy of your completed Schedule H to your D-40X.   If you submitted the FR-127 for an automatic 6 month's extension of time to file your D-40, then you can include the Schedule H in that filing. (wrong, see below)

[4/15/16]  As explained below, I spent the rest of 2015 trying to have Office of Tax and Revenue (OTR) get their records on me straight.  I was also told that I should have waited to send in the Schedule H with the finished D-40.  I did not send the Schedule H to OTR with this year's FR-127 (2015).  It will be interesting to see if this works out better.  I was not called back and received no response to 2 emails trying to get the final information about whether I did or did not owe taxes for 2014.  I also do not know if I had refunds to use for my 2015 taxes.
     If you have had a bad OTR experience, please leave a comment about it.  Here is a tale of woe from someone else.  The OTR personnel mentioned in that link's comments are the same ones I have dealt with.  My impression is that OTR will use any excuse to avoid refunding money.  They will also go back as far as 10 years to deny a license for non payment of taxes.  Even if you paid a tax, if you can't prove it you will have to pay again to get your license.  Keep all payment records forever.

This new and GREATLY improved Schedule H  allows a Tax Filing Unit (members of a household/family/etc.) to earn a total up to $40,000 if under age 70, and up to $60,000 if 70 or over. If you are not living alone, you will have to study the instructions to see if total household income falls within the allowed limits.  There are separate calculations for renters and home owners. A simple Worksheet is provided for computing the Property Tax Credit. You:
1) enter your federal IRS 1040 Adjusted Gross Income (AGI), the dollar amount at the bottom of the first page of the IRS 1040.
2) enter property taxes or 20% of rent paid in 2014,
3) multiply that figure by 3% or 4% as instructed,
4) subtract 3 from 2.   The Credit Limit is $1,000, and you use this or number 4), whichever is smaller as your credit on the Schedule H form.

As an example:
1) AGI = $24,000;
2) Property Tax = $3,300;
3) AGI times 3% = $720;
4) $3,300 minus $720 = $2,580. Since $2,580 is more than $1,000, you can only use $1,000 as the credit on Schedule H.

I wish I could have passed on this information earlier. I am providing links for the Schedule H  and D-40X Amended Return forms below. At any rate, THANK YOU Councilmembers.

[Dec. 2015]  Unfortunately, as soon as I sent in my form for the Schedule H credit, DC's Office of Tax and Revenue (OTR) sent me 3 letters between May and August 2015, saying I owed back taxes, totaling exactly $1000.  They did not say which years, but after I phoned, I then knew which ones, and realized that some of their information was completely wrong.
     Very disturbing was the sentence:  "If you do not respond to this notice within 30 days of its date, the offset will be final."  In other words "you will loose the money identified in the OFFSET NOTICE.  All 3 letters were much more than 30 days before the October 15, 2015 due date for the Automatic Extension.  If you had this happen to you when you tried to benefit from the Schedule H, you should fight the 30 days if they try to take the money permanently before the Oct. 15th due date.
     I have spent the past 7 months trying to get this straightened out, The last time I spoke to OTR, they had verified most of my information, but some questions were still outstanding.  Since they were having computer problems that week, we could not move forward to completion, then people were away for the holidays and in early January, things were still unresolved.  [Stay tuned, and don't fail to fight your own necessary battles.]

It may be too late to use this information with your filing due on April 18th, 2017, but you can always file an amended return if it will benefit you. If you sent an FR-127 Extension of Time to File, you can submit the Schedule H  when you file the D-40. Instructions are unclear as to whether you should submit the Schedule H with the FR-127 or only with the final tax submission. This should be fixed. The Schedule H Instructions say it is due by April 15, 2015. The FR-127 only says to submit full payment of any taxes due by April 15, 2015.  [OTR told me submit Schedule H with the D-40, NOT with the FR-127.  Even if you don't have enough income to file the D-40, you still may be eligible if you pay rent or property taxes.

Here is the link for the fill-in version of Schedule H.

Here is the link for the print, fill out and mail Schedule H. If there are 3 or fewer people in your Tax Filing Unit, then you only need print pages 1, 2, and perhaps 5 (the Computation Worksheet).

Here is the link for the D-40X Amended Individual Income Tax Return.

Good luck, and please pass this information on to as many of your friends, neighbors, and lower and middle class earners that it could benefit.

G. Lee Aikin, DC Statehood Green Party, At Large candidate 2016

ATTENTION COUNCIL MEMBERS:  Last year the Council agreed to follow the Tax Revision Commission's advice and restore our Deductions and Exemptions (D & E) parity with the federal rates which we had in 1973 when we got Home Rule.  UNFORTUNATELY, it was decided to delay the benefits to our low and middle income workers by phasing in this measure over 6 years.  Of all the measures approved by the TRC, this benefit helps the working poor and middle class the most.  Please urge your Council contacts to speed up implementation.

DC BENEFIT falls behind federal benefit in 2015 filings for 2014.  
* In DC the basic D & E benefit for a family of 4 is now $11,050, while the IRS benefit is $28,200.  DC gave a $250 increase while IRS gave $400 more in deductions.  
* For a single, DC is now $5,875, and IRS is $10,150.  DC increases $100, IRS adds $150. 
* For a couple under 65, the DC figure for 2014 is $7,600, while the IRS is $20,300 (talk about a marriage penalty!).  DC raised the benefit by $150, the IRS raised it by $300.  
     Thus we continue to fall ever further behind this benefit we had in 1973.  In other words Council gives LESS than inflation.  

[4/15/16]  Despite some increase, DC BENEFIT still is well behind the federal benefit in 2016 filings for 2015.  The Exemption is $1775 per person.  The Standard Deduction varies.
* In DC the basic D & E benefit for a family of 4 is now $15,450, while the IRS benefit is $28,600.   * For a single, DC is now $6,975, and IRS is $10,300.
* For a couple under 65, the DC figure for 2015 is $11,900, while the IRS is $20,600 (still quite a marriage penalty!).  
     While given somewhat larger increases for DC than last year, we still have a long way to go to catch up to the federal benefit.  Urge the Council to speed up the benefit and stop earmarking big money for the developers and gentrifiers.

Does this make you angry enough to do something about it?  My next step will be to see what benefits have been given to high income earners and report them.  [See above for this info.]

Obviously, we need funds to make everyone happy.  So, here is one idea to raise money that should benefit all who might participate.  Anyone with a car already pays for ONE parking sticker.  However, some have a regular need to drive and spend time somewhere else besides their home.  They might be caring for a sick/elderly relative or child regularly, or managing/renovating a second property, or need their car for their job. 

So this idea is to allow drivers to buy a second or even a third parking sticker for the area where they need to spend other time.  There should be definite limitations:  1) not within a certain number of blocks of a Metro stop, 2) not within certain downtown limits, 3) not near sports arenas or Convention Center on days or evenings when there are events scheduled.  This still leaves many places where a person could effectively use one or more extra parking stickers.  They could only be used in ONE CAR so should not harm the parking rights of anyone else.  Surely a WIN/WIN for DC tax revenue and the public.  

If you would benefit from this idea, PLEASE COMMENT.  A Council staff members asked me if I had any idea how many might want to use this benefit.  I did not know the answer.