Blue Mass Group

Reality-based commentary on politics.

Property tax work-off for senior citizens.Good Civic Engagement?

By

andy Card with senior citizensFrom the July 28 Patriot Ledger.

Holbrook.. Searching for ways to ease the tax burden on aging residents, the town has inaugurated a new program allowing them to work for the town in return for credit against their real estate taxes………..The pay will be the state minimum wage – $8 an hour, and, at least in this first year, there will be a $500 cap for each participant. There is also only one $500 credit per household.Studies have also shown the program also helps towns because when elderly residents sell and move, their homes are often purchased by a families who add children to the schools.

Well at least Holbrooks most famous homeboy, former State Rep. and former Chief of Staff to President George Bush, seen here with local senior citizens, should have enough in his savings acount so he won't have to work at the local library (still open) for $8 bucks an hour to get a $500 credit on his property tax.

cross posted at ONE Massachusetts 

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    • The property tax credit for the elderly (aka income tax evasion made legal) has been around for quite a while.  Several towns I’m aware of have the program. Often the towns use the seniors to shelf books in the local library.  

      • included in the gross income of the participating senior citizens according to CCA 200227003. I believe Rep. Frank has tried to pass a bill excluding the payments from income but has been unsuccessful up to this point. A similar bill did pass last year exempting property tax abatements for volunteer firefighters and EMTs, but to the best of my knowledge the seniors should be including the abatements in their income and the towns should be paying FICA taxes on the amounts abated.

        • No question that it’s taxable income.  

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          p>But, notice upthread I called it the income tax evasion made easy.  Most of the towns are cute enough to realize that if they keep the amount under the 1099 limits then the seniors have a low risk of getting caught if they don’t report it on their tax returns.

          • but the towns are really putting themselves at risk if they’re not paying the FICA taxes on the abatements. I don’t know enough about the nuts and bolts of FICA remission, but if the names of the seniors are associated with the FICA amounts remitted then the chances of getting caught increase.

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            p>Come to think about it, this is hourly wage paid for services provided, why doesn’t it just go on a W-2?  

            • I don’t know how deeply the towns have thought about this, but I know how it works in practice.

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              p>All the old folks have a list of jobs the town needs:  library shelfing, tidying up in some of the offices are two big ones.  

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              p>They all sign up for ‘shifts’ throughout the year and the supervisor sign off when they’e completed their hours.

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              p>Then they fill out their abatement and get their tax bill reduced.

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              p>The town that I’m familiar with, doesn’t send out a W-2 or 1099, maybe on the theory that no money changed hands.  I suppose I could make a decent argument that they’re not employees, so the Town has no W-2 obligations and because it’s not up to the 1099 limits, no 1099 is required.

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              p>The ones receiving the rebate have a reporting obligation for income tax and SE tax, but don’t report because they have no 1099 or W-2.  Absent those forms, the chances of IRS catching them is practically 0, no?

            • Here’s the answer.

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              p>By statute, the amount earned isn’t subject to Mass income tax or is not considered earnings for Unemployment purposes.

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              p>It’s a Loophole!

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              p>Also, the State acknowldges that the amounts earned are subject to FICA and Federal, but (and I’m assuming this) keep it under the 1099 amount to avoid IRS scrutiny.  See here and in particular, the weasel words of Section E.

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              p>The State’s program has created a herd of blue haired tax evaders!

              • The state law also provides that the amount by which property tax “is reduced in exchange for the provision of services” are not income, wages, or employment for state taxation, withholding, unemployment insurance, or workers’ compensation purposes. However, the senior citizens are public employees for purposes of municipal tort liability.

                So, under MA law, the payments to the senior citizens are not income or wages for purposes of MA state tax.  However, the IRS has held that they are income for Fed tax purposes.  The MA law can’t bind the IRS evaluation of whether the abatements are included in Fed income, and the IRS has said as much because the CCA held that the payments are income.  The CCA goes on to state:

                a senior citizen must include in income and wages for Federal Insurance Contributions Act (FICA) purposes (i) the $500 tax abatement and (ii) the employee portion of the FICA tax, if paid by the town and not reimbursed by the senior citizen…The rationale for concluding the abatement is income is that it is compensation for services. The conclusion that a town’s payment of the employee portion of the FICA tax is also income and wages is based on the principle that payment by an employer of the income taxes assessable against an employee
                constitutes additional income taxable to the employee.

                So the IRS considers the seniors to be employees for FICA purposes and considers the town to be compensating the seniors for services provided.  Even the MA law considers the seniors to be employees for tort liability purposes.  Here are the Form W-2 Instructions:

                every employer engaged in a trade or business who pays remuneration for services performed by an  employee, including noncash payments, must file a Form W-2 for each employee

                Based on this I think that the towns should be issuing W-2s to the seniors.  And if they don’t then I say CLOSE THAT LOOPHOLE!

    • Which is the strangest do you think?

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      p>1. limited to low income seniors only?

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      p>2. displacing public employees who get a living wage?

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      p>3. displacing volunteers?

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      p>4. prospects of patronage?

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      p>5. insurance and workman’s compensation issues?

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      p>6. inappropriate use of Andy Cards picture?  

          • But isn’t Holbrook just implementing now, what dozens of towns and cities across Massachusetts have been doing for years?

            • that provides this kind of “opportunity” for certain low income senior citizen home owners to “work off” $500 from their property tax bill. Looking forward to being informed otherwise.

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              p>You are right in that Clause 41C of Section 5 of Chapter 59 already allows homeowners over 65 to apply for an abatement on their property tax. Frankly, I’ve never filed for my abatement in the City of Boston, because I think the Mayor, God bless him, could put the money to better use…so I like to think it’s being directed to the summer jobs programs in my neighborhood.    

      • This sounds like a wonderful program, for the people who really need it. My town has this program and it bugs me a little to have seniors living in $500K or $600K or even $1M+ houses with no mortgage, but are not paying any real estate taxes because their income is below the standard.

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        p>There should be a “asset” test in addition to an “income” test to see if you can skip taxes. In lieu of this, there should be a program where elderly people can have their taxes “accrued” and the town can put a lien against their houses. That way if they can’t afford the tax bill it would accumulate and then the estate will pay it before the Will gets executed.

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        p>Also, FYI, the current plan (in my town) does not allow people who’s houses are in a “trust” qualify for working off their taxes.

  2. Looks like something I’d like to read regularly but I’m often too lazy to go from site to site.  

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