Deadline for the School Tax Relief Exemption is Fast Approaching!

By Freed Maxick on December, 5 2013
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By: Amanda Roth, CPA

More than 2.6 million New York State property taxpayers receive the School Tax Relief exemption (STAR). Due to the State’s massive undertaking to flush out $1.9 billion in fraud, taxpayers now have to reapply for the benefits.

Enacted in 1998, the STAR program provides a partial exemption from school taxes for most homeowners with incomes less than $500,000 on their primary residence. The state's enhanced STAR program provides an additional benefit for senior citizens. The registration will not affect this year's tax bills, nor will it affect enhanced STAR. Seniors are required to register every year to receive the enhanced STAR exemption. New York has among the highest property taxes in the nation, and the program funded by the state aims to blunt some of the pain. In 2011, homeowners saved on average $641 through STAR and $1,205 for enhanced STAR.

Homeowners should have received a letter, instructing them to reapply for the STAR program online or by phone by Dec. 31, 2013. People will need to verify their salaries, Social Security numbers and primary residence. The initiative, approved as part of the state budget last March, will seek to stop some property owners from claiming the tax breaks on multiple homes. The state first attempt to weed out fraud dealt with tightening eligibility for the STAR program. In 2011, the growth in STAR exemptions was limited to 2 percent a year. A year earlier, it was limited to those earning $500,000 or less. A recent audit conducted in March determined still widespread abuse of the STAR program, and the state is hoping to save at least $1 million a year from the new system. The audit, from Comptroller Thomas DiNapoli, found that the program had duplicate and improper exemptions for property owners. He said the state lost out on $13 million during the 2010-11 fiscal year and potentially $73 million by 2016.

This the first time in 15 years that such a request for reapplication has been made and in order to ensure the continuation of the tax break, homeowners will need to fill out the new application. In an attempt to educate taxpayers before the deadline, the tax department has undertaken a series of outreach events across New York State to make people aware of the new requirement, such as attending public meetings and hosting a tent at the State Fair in Syracuse. If people miss the deadline the state will notify local assessors to strip taxpayers of their STAR benefits when school-tax bills go out in fall 2014. There will be an appeals process for those who may miss the deadline, but it could be laborious and require STAR tax breaks to be refunded to people after the full tax bill is already paid.

Many local assessors are bracing for an influx of panicked calls from those who have missed the deadline. The worry is that if people aren’t paying attention to the state’s new registration, they won’t do anything about this until they get hit with higher taxes.

The new registration for basic STAR will only be for one year, but new property owners will have to go through the process in future years, as well as file with the local assessor's office. The state is also toughening penalties for fraudulent STAR claims. This new initiative will allow the state tax department to use Social Security numbers to determine if homeowners are getting more than one STAR benefit.

 

Contact Us

If you have questions about the new registration program call (518) 457-2036, or visit the New York State Department of Taxation and Finance.

For information about how Freed Maxick CPAs can help guide and manage your individual or business tax strategies, contact us to learn more.

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