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How to File Property Tax Appeals

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Q: I bought my house in 1993. Although its value has declined since then, my property tax bill has not. How can I get this bill lowered? I have been approached by a service that promised to do the work for $65. Should I go with them or try to do it myself? --V.A.

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A: Under a California law approved by voters in 1978, homes are generally valued at their purchase price plus an automatic annual increase of no more than 2%. State law allows this annual increase even if property values are declining.

The critical issue in mounting a successful challenge of your property tax assessment is demonstrating that the assessment is greater than the house is worth on the open market. If you purchased your home recently, it is possible that its current value has declined to less than the value assigned to it at the time of purchase, plus the subsequent 2% yearly increases. However, if you have owned your home for the last decade or so, its actual assessed value for property tax purposes is probably not higher than its resale value.

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The challenge process varies from county to county, but your first step should always be to contact your county assessor’s office and inquire about filing an appeal with the local Assessment Appeals Board. By statute, appeals can be filed only until Sept. 15. Once the appeal is filed, you may have to wait several months for a hearing.

At your hearing, you must prove that the fair-market value of your property is less than the assessment. You are not entitled to argue that during times of declining property values you should not be subject to the annual 2% assessment increase.

Also, although you are challenging your tax bill, you must continue paying it in full.

Despite what enterprising operators may try to tell you, officials of local assessors’ offices say there is virtually no reason for property owners to hire one of the many services offering to help you with the appeals process. In some cases, the services will want half your tax savings--or more--for handling paperwork that you can easily handle yourself.

Even the supporting information that you will need to win your case is all part of the public record--the same tax and property transfer records on file in the county assessor’s and recorder’s offices that these services regularly consult on your behalf. Remember, the reason you’re filing the appeal is to save money. There’s no point in giving a good chunk of it away.

Here’s where to call for information about filing an assessment appeal in each of the counties in Southern California:

* Los Angeles: (213) 974-1471

* Orange: (714) 834-3457

* Riverside: (909) 275-1073

* San Bernardino: (909) 387-3846.

* San Diego: (619) 531-5777

* Ventura: (805) 654-2251

IRA Disbursements Subject to Income Tax

Q: I know that once I reach age 70 1/2 I must begin disbursements from my Individual Retirement Account. However, I did not realize that these amounts were subject to income taxes. Why is this penalty imposed? I thought the point of forced withdrawals was to get these savings dollars back into circulation.--G.S.

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A: Nice try.

But do you really think Uncle Sam would (1) let you sock away thousands of dollars (perhaps even millions) pre-tax; (2) allow you to accrue interest for decades without paying a penny in taxes, and (3) let you withdraw and spend them without extracting his due? Come on!

Withdrawals from IRAs and other tax deferred savings accounts are treated just as any other income and are taxed accordingly. If the withdrawals are made after a taxpayer turns age 59 1/2, no penalties are imposed beyond the income tax.

Transfer 401(k) Funds to IRA to Avoid 20% Tax

Q: Before enrolling in college, I worked at a union job with a tax-deferred savings program fund. I would like to withdraw this money now, but have been told that I will be taxed and penalized by as much as 30%. Is there any way I can avoid this? --P.P.O.

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A: In all likelihood, the account you have is in a 401(k) or similar savings plan that imposes a 10% penalty for early (before age 59 1/2) withdrawals. Further, you probably face an automatic 20% withholding for income taxes when you make your withdrawal.

You could avoid the latter tax by transferring your union account directly into an IRA and making your withdrawal from the IRA. However, it is possible that your union plan requires that all disbursements be made directly to the account holder and not to another account. You should check with your plan administrator to be absolutely sure. However, even if you avoid the 20% withholding at the time of withdrawal, you are still liable for income taxes on the disbursement. And if an insufficient amount is withheld from your earnings, your decision to avoid withholding on the withdrawal could make you liable for an underwithholding penalty.

Our advice? Take the money, pay the taxes and the penalty and get a good education.

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Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Please do not telephone. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.

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Helpful Hints for Boosting Your Savings

* As baby boomers age, that adage about a penny saved becomes more critical. Times on Demand has compiled four articles and two charts with tips on building your savings. A work sheet is included. To purchase, call (800) 440-3441. Order Item No. 2840. To order by mail, send a check to Times on Demand, P.O. Box 60395, Los Angeles, CA 90060. Cost: $6.50, plus $1.50 delivery. Please allow two weeks for mail delivery.

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