Property taxes can have lots of issues if you don’t follow the contract.
These issues can appear in all types of real estate.
- Compliance with Filing Requirements
Each area’s personal property tax laws can differ. To prevent overpayments, fines, and interest, it’s important to understand and follow the rules. Relevant deadlines, including whether the deadline is a received by or postmark date; filing on the correct form; return signing and notarization; inclusion of all required attachments; jurisdiction mailing address; and additional conditions for exemptions and abatements, are all items that are often ignored.
- Property Locations
Knowing the annual deadline for when personal property is taxable in a given jurisdiction is important. January 1 is the most popular deadline date for many countries. Fixed asset listings do not always include the level of information required to determine a property’s exact location or legal position. Whether capitalized assets were shipped to the location as of the annual deadline date and the physical location of bulk capitalized assets designated to a regional or central location should be investigated.
- Exemptions and abatements
Exemptions and abatements from personal property taxes limit or subsidize the tax on personal property. The availability and conditions differ from one jurisdiction to the next, so being familiar with your local government’s policies can be very beneficial for your interests in the long run. Some jurisdictions, for example, exempt whole classes of property, including intangibles, inventory, and software, from taxation. Exemptions are available in other states for emissions control equipment and Freeport inventory. Abatements may be eligible for long-term capital projects or under alternative tax-reduction agreements such as PILOTs (payment in lieu of taxes). Obtaining the exemption or abatement often necessitates following a one-time procedure or may include an annual compliance requirement. Failure to meet requirements can result in the loss of the reduction.
- Expensed vs. Capitalized
Capitalization thresholds have changed as a result of new tangible property legislation across the globe. In general, regardless of whether it was expensed or capitalized, all assessable property located in a jurisdiction as of the annual deadline date is reportable. Taxpayers also depend on the fixed asset registry to identify reportable assets, but they can overlook assets that have been expensed.
Supplies are taxed in some countries, which taxpayers often ignore. Taxpayers can face fines and interest if they fail to report omitted property during an audit.
In summary, remember to read and to take thorough notes of your contracts, in order to ensure fair treatment of all parties involved.
written by Bader Albader, market researcher.