Dems accuse IRS of ‘political payback’ against blue-state taxpayers

Democrats are raising questions about restrictions from the IRS on people prepaying their property taxes, accusing the agency of targeting blue-state taxpayers.

In a letter Monday, Democrats on the House Ways and Means Committee asked acting IRS Commissioner David Kautter to explain why the agency decided to warn taxpayers they might not be able to deduct prepaid 2018 property taxes on their 2017 returns.

“We view this as a clear case of bureaucratic overreach, and now, as a result, many of our constituents are losing a valuable deduction—and consequently part of their hard-earned income,” they wrote.

The GOP tax law signed by President Trump in December limits deductions on state, local and property taxes to $10,000.

That led to many taxpayers who expected their taxes to go up to prepay their property taxes, particularly in blue states with high property values such as New York and California. {mosads}

But in December the IRS warned those taxpayers that they might not be able to deduct those prepaid taxes on their 2017 tax returns. The agency said 2018 prepaid taxes could only be deducted if the property taxes were assessed and paid in 2017. Unless a local assessment office had already carried out a tax assessment for a taxpayer’s property, they would be unable to deduct any prepaid taxes on the property.

The letter also cites reports that Treasury Secretary Steven Mnuchin threatened to enforce these IRS rules, including through potential audits.

“Now, after this confusing and disorganized process, the Treasury Secretary is indicating that the IRS leadership will pursue aggressive enforcement against these taxpayers,” the letter adds. “We are surprised and dismayed at this expression of IRS priorities, and we are angry to read of this naked political payback against taxpayers in ‘blue’ states.”

Democrats said the IRS’s guidance on prepaid taxes came late in the year and only added to the confusion over a GOP bill they said was rushed through Congress.

The letter asks the acting IRS chief to explain how the agency decided to not allow deductions of prepaid property taxes as well as any plans for real estate audits.

It also asks for information on the number of people who claimed itemized deductions for property tax prepayments and where they reside.