Death and taxes. They’re not just certain. They’re certainly confusing.
While we can’t help you decipher death, we can do you one better: our concise 2023 San Diego Tax Guide, with answers to your questions about this year’s tax season.
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Do city and county residents have the same tax due date? Are tax payments due in October? Are you among the one in four people eligible for a valuable credit who didn’t claim it? Did you sell a property in 2022? Did you move to or from California last year?
If so, this guide is for you.
Like tax returns, tax payments are due in October
State and federal tax returns are due Oct. 16 for residents of all of San Diego County, including incorporated communities and unincorporated areas.
If you owe taxes, payment is also due Oct. 16.
“As announced by Governor Newsom, California individuals and businesses impacted by 2022-23 winter storms qualify for an extension to file and pay taxes until October 16, 2023,” the Franchise Tax Board states. Impacted counties include San Diego, Los Angeles and Orange counties.
“The additional relief postpones until Oct. 16, various tax filing and payment deadlines, including those for most calendar-year 2022 individual and business returns,” the IRS states.
Most?
Adam Brewer, a tax attorney with AB Tax Law who specializes in representing people scrutinized by the IRS or a state tax agency, thought of two possible exceptions.
Business taxpayers “file based on a fiscal year instead of a calendar year. I can see where they would be impacted differently,” Brewer said. One more possibility: a heavy vehicle tax has a nonstandard deadline. He added that anyone with questions should consult a tax professional.
No flood or landslide damage? You still have until October
In February the IRS announced the federal tax return filing deadline for certain California counties, including San Diego, was pushed back to Oct. 16. Not long after, California’s Franchise Tax Board extended its own deadline to Oct. 16 for the same counties.
The October deadline shift was prompted by a series of devastating winter storms that caused landslides, flooding and mudslides in parts of California.
But what if the only damage you saw from the recent rains was extra frizz in your hair? Even if you don’t have property that suffered damage — which might allow you to claim a disaster loss deduction — you have the same deadline: Oct. 16.
To recap: Tax returns and payments for residents of most of Southern California, including all of San Diego County, are due Oct. 16. All tax individual filers in the county, whether or not they were directly impacted by storms, have the same deadline: Oct. 16. You don’t have to apply or do anything special to file on or before that date.
And if you are eligible to file by Oct. 16 and get a late notice, you have grounds to challenge it, the IRS says in a news release:
“If an affected taxpayer receives a late filing or late payment penalty notice from the IRS … the taxpayer should call the telephone number on the notice to have the IRS abate the penalty.”
The catch: Most IRS free tax prep help dries up in April
Free tax filing through IRS-vetted providers (for people with an adjusted gross income of under $73,000) is available until the October deadline.
But two other free tax preparation resources — the Volunteer Income Tax Assistance (VITA) for low-income filers and the Tax Counseling for the Elderly, for filers 60 and older— will have limited availability after mid-April.
Sites that have extended their service windows past the summer include:
Alliance for African Assistance
5952 El Cajon Boulevard
San Diego, 92115
619-286-9052
English, Farsi, Spanish
Through: Oct. 16
COPAO
832 E Avenue
National City, 91950
619-403-9288
English, Spanish, Tagalog
Through: Dec. 14
Senior Service Council, Escondido
728 N Broadway
Escondido, 92025
760-480-0611
English, Spanish
Through: Oct. 12
All three require an appointment.
More free tax prep sites: https://irs.treasury.gov/freetaxprep. Most end their programs in April, and a handful in May.
Don’t get burned by “ghost” preparers
Ghost pepper, noun: a spicy hybrid chili pepper.
Ghost preparer, noun: a sketchy tax preparer.
Sketchy, because they claim or feign to offer a legitimate service but their name isn’t listed on the return, so they can disappear if the IRS turns up the heat.
Brewer, the tax lawyer, said he sees this a lot. One client will come to him for help with an audit. That client refers another and another. They all point back to the same preparer.
How to spot these imposters? A red flag is “when the tax preparer is unwilling to sign the dotted line” of the tax return, the IRS says. Taxpayers should never sign a blank or incomplete return, the agency also advises.
If you notice the preparer’s signature is missing from your return, “your alarm should be going off. Because that’s them saying, ‘Hey, I’ll take your money and I’ll prepare your tax return, but I don’t want to have to answer for what’s being put in here,” Brewer said.
The IRS warned these preparers “may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.” They might inflate income to land larger (fraudulent) tax credits or pile on deductions to land a bigger (fraudulent) refund. But the taxpayer is “on the hook for any misinformation on the return.”
Brewer said one common way preparers try to inflate refunds is with fake Schedule C forms, which are used to report business bogus losses.
Lower-income earners are at greater risk for this kind of scam. That’s because people turn to unprofessional tax preparers when they can’t afford the services of a certified public accountant, enrolled agent or attorney.
“They’re more cost-sensitive, so they’re not trying to spend, you know, $500, $600 to go see a CPA,” he said. That bargain preparer might seem like a good value, but it might just be too good to be true.
Give yourself some credit (or a deduction)
Did you earn income of more than $1 and less than $59,187 last year? And was your investment income below $10,300? If you can check off these two boxes, the Earned Income Tax Credit could put thousands of dollars back into your pocket.
In 2021, the average amount refunded to Californians through this credit was $1,857.
Yet more than one in five people nationwide who qualified in 2019 — and one in four in California — didn’t claim it. (That was the most recent year with IRS figures.)
For the tax year 2020, for example, about 222,000 San Diego County federal tax filers claimed the credit, which resulted in refunds of almost $443 million, with the bulk going to people earning between $10,000 and less than $25,000.
Raphael Tulino, a San Diego-based spokesperson for the Internal Revenue Service, said the Earned Income Tax Credit results in “a huge boost of federal funds infused into SD County every year,” he wrote in an email.
By not claiming that credit, people and local economies are missing out, he said.
“It’s really important that as a taxpayer, you take advantage of everything you can possibly take advantage of on a tax return — legally and with your eligibility, of course — to claim that credit and increase your refund,” Tulino said.
Tulino also mentioned credits for child/dependent care, a deduction for teachers who have expenses out of pocket, and benefits for students.
“Don’t overlook tax benefits for education,” he said.
Brewer pointed to one irony: the very people eligible for the Earned Income Tax Credit might be the ones missing tools that can help them claim it.
“The people who would most benefit from these credits being calculated automatically by the software are the ones that can least afford to either buy the software or have access to a computer or pay a tax professional to prepare the return,” he said.
That’s why the VITA tax preparation program is important and goes hand in hand with this credit, Tulino added. It can help low-income tax filers tap credits and get bigger returns — at no cost to them.
How to annoy tax pros and get audited in one simple move
What gets Brewer’s goat: faux experts on social media who school viewers about creative tax loopholes and strategies in preachy little videos.
“I watch these Instagram videos and it just drives me crazy,” he said. “I see one every day where it’s like, you know, ‘6,000 Pound Vehicle.’ There’s one now called the ‘Augusta Rule’ that’s being pushed.”
Both are nicknames for tax hacks that, Brewer says, are big no-nos if you’re not following the law.
“They’re real deductions,” Brewer said, “but as they’re being applied (in social media tips), it’s really just asking to be audited.”
For example: technically, yes, you can buy a 6,000-pound vehicle and deduct it as a business expense. But should you?
“The first requirement for a business deduction is that it’s ordinary and necessary,” he said. “What kind of business are you operating where you have to go and buy a $150,000 (Mercedes) G Wagon? If you’re a real estate agent, maybe you could get away with it, but if you’re selling stuff on Etsy, probably not.”
The IRS offered this bit of advice on its social media savviness website: “People should remember that there is no secret way to fill out a form and simply get a larger refund that they aren’t entitled to.”
The takeaway: Don’t get your tax advice from TikTok.
More than a state of mind: Residency matters
Let’s say you fell in love with San Diego and moved here from Boston. Or decamped from California to Texas, where state taxes are nil. Or you live in San Diego County but opened a Nevada corporation for tax savings.
Whatever you do, don’t assume you or your business are a resident — from a tax perspective — of the state you’re currently living or working in.
“It’s not always cut and dry. How they determine residency for tax purposes is sometimes complicated,” said Levi Anderson, a certified financial planner with EP Wealth Advisors in University City.
That’s especially true if you’ve left San Diego. “A lot of folks consider moving to Arizona or ‘establishing residency’ in another, lower income tax state,” he said. Remote and hybrid work made that more doable in recent years.
But, he continued, “it’s important to really check into what’s required in order to establish residency. It’s not as easy as some folks think that it is. And if somebody’s subject to an audit, they really need to be ready to substantiate their residency in that other state.”
Sold a rental property? This one’s for you
Anyone who sold a residential rental property in the San Diego region in 2022 should be prepared for a potentially sizable tax liability, Anderson said.
That’s because if your property increased in value above what you paid for it — which it likely did, if you sold in last year’s hot market — then the difference between what you paid for it plus improvements (known as the basis) and the depreciated value becomes taxable.
“Right off the bat, you can have this unexpected gain on that investment,” Anderson said.
This can come as a surprise after selling the property.
“All that really great depreciation that you’ve been taking along the way on that property all of a sudden comes back to haunt you,” he said.
One way to defer that tax burden is with a 1031 exchange, which requires working with a qualified intermediary — someone who is licensed to handle these exchanges, he said.
Some of the topics above were informed by questions and suggestions from readers. If you have an idea or question for a future Money guide, please reach out to the Money reporter at [email protected].
Extra credit: During what war did the U.S. first collect income taxes?
A. The War of 1812
B. The Civil War
C. World War I
Answer: See the top item on this timeline: https://www.irs.gov/newsroom/historical-highlights-of-the-irs