Tax traps lurk for new home buyers
Avoiding tax penalties is a crucial component to staying on a productive financial path, but for some homeowners, a proactive approach is necessary.
When Tina Vernon was elected to the Nevada County tax collector’s position in 2010 and assumed office, one of the first things she noticed was that new homeowners were often unfairly getting stuck with late penalties and interests on tax bills, of which they were not aware.
“In 2011, I saw it happen a lot and I just felt it was not right,” Vernon said.
What Vernon is referring to, is a process whereby when property is transferred to new ownership, the new owner becomes responsible for the tax bills associated with the given property.
Often if an individual buys property in a three-month window from August to October, tax bills associated with the property are not delivered in time for the Dec. 10 payment deadline due to the amount of time it takes the county clerk-recorder and assessor to process the necessary paperwork. Nevertheless, even if the owner doesn’t receive the bill, he or she is responsible for paying any outstanding taxes.
California tax code stipulates that it is the homeowner’s responsibility to obtain the bill, Vernon said. The law further states that failure to receive a bill does not permit the Tax Collector to excuse penalties on late payments.
“It’s all about timing,” Vernon said.
The initial penalty stands at 10 percent of the tax payment, and interest accrues at 1.5 percent per month and 18 percent per year.
“The penalties are steep,” Vernon said.
If an individual buys a home in October, for instance, the tax bills attached to the property are often not transferred to the new property owner’s name in time for the Dec. 10 deadline.
Typically, the new property owner is not even aware he or she is delinquent on taxes until the next round of annual bills are mailed out the following November, by which time significant penalties and interests have taken effect, Vernon said.
“We are just encouraging people to be proactive,” Vernon said.
It is human nature to attempt to avoid paying taxes, especially if someone hasn’t received a bill, but Vernon said such an approach to property taxes could be costly.
“If somebody has a hard time paying their bill, we are willing to work with people,” Vernon said.
Residents can visit http://www.mynevadacounty.com/nc/ttc/Pages/Tax-Bill,-Status-and-Payment-History-.aspx online to check their current tax bill status.
Homeowners who pay a property tax bill through online bill pay services with a financial institution should process the payment at least 10 days before the Dec. 10 deadline. The financial institutions send a physical check to the tax collector’s office and do not postmark; thus, if people procrastinate, they face late penalties even if the payment is electronically processed in advance of the due date, Vernon said.
In addition to annual taxes, new homeowners will likely be responsible for supplemental property taxes.
Any time a property is sold or improved, the value of the property is reassessed by the county; if reassessed at a higher value, buyers will receive a supplemental bill in addition to the annual bill. If the property is reassessed at a lower rate, owners will receive a refund.
California home prices rose in September to a four-year high as the supply of properties for sale remained tight. The median price for new and existing houses and condominiums in California reached $287,000, up 15.3 percent from $249,000 in September 2011, according to DataQuick.com, a real estate website. The median rose $6,000 from August to reach its highest level since $301,000 in August 2008.
The average Nevada County home sold for $228,500 in September. That number is higher than the yearly average, which lists the median cost for residences sold at $218,500, up from $120,000 year to date sold by this time in 2011.
The majority of the county homes sold thus far in 2012 have been under $349,000 with the largest portion, 436 homes, sold in the $199,999 and under category. While that group of homes continued to be popular in September, 48 more homes were sold in the $200,000 to $349,999 category.
To contact Staff Writer Matthew Renda, email firstname.lastname@example.org or call (530) 477-4239.
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