Need Sanity Check:DC Homestead Exemption Revoked -- Based on Rental Ad in Craig's List!!!!

[Anonymous]

Is it me? Our accountant discovered while preparing our taxes, that we had paid an extremely large amount of DC taxes. Turns out DC had flagged our homestead exemption based on a rental ad they saw on Craig's List for an apartment we rent out hen, so they claim, failed to locate the records in their database that verify our residency. DC never notified us. Never asked us for verification of our residency. DC billed our mortgage company for back taxes (to the date of the rental ad) and added penalties and interest. Of course, the company paid then jacked up our escrow requirement to cover the shortfall. DC has several weeks to straighten it all out but based on my experience with them I am concerned that they won't. In the meantime, they are sitting on thousands of dollars that belong to my mortgage company.

Again, is it me? How did this all happen without our even being notified? Please help me make sense of this. I am livid and disgusted.

[Anonymous]

Huh?

[Anonymous]

the DC gov't monitors craigslist??? wow

[Anonymous]

I don't 100% follow your post - were you renting out your primary residence or a portion of your house? Also it sounds like your taxes must be folded in as part of your mortgage - so what I also don't get is why your mortgage company didn't let you know - you didn;t notcie the change in your mortgae bill? If you pay your property tax directly to the city, then they have to contact you about these types of issues. Whenever we have refinanced or purchased a home, my husband always refuses to have the mortgage company pay the property tax becuase then you always have a middleman. I know trying to chase down mistakes with DC gov't can be a pain in the *ss but I would also lay some blame with your mortgage company for not letting you know as well.

[Anonymous]

I don't understand. Are you renting space at that address? If so, then isn't it correct that you do not qualify for the Homestead exemption?

[Anonymous]

We were notified by letter when they mistakenly thought we were no longer eligible for a homestead exemption. I think they have to do it...

[Anonymous]

OP here. The escrow account was reevaluated after the mortgage company received the huge tax bill. The increased payment doesn't kick in until June1. I agree that the mortgage company should have checked with me before paying up. But they didn't and now it isn't their problem, it's mine because they recoup their money from me if DC doesn't refund first.

The homestead exemption rules do not preclude one renting out a portion of their residence -- as long as it IS their legitimate residence and this has been mine for more than a decade. We never received a letter from DC -- they just revoked the exemption and billed the mortgage company.

Just an incredibly stupid situation...

[Anonymous]

I don't know anything about the Homestead exemption rules in particular, but several years ago, the DC government presented our mortgage company with a duplicate bill and the mortgage company paid it and charged it to us. It took almost a year to get it all worked out (i.e., until we were fully reimbursed and paying what we actually owed instead of the inflated amount). After that, we switched it so that we pay our own taxes and don't go through an escrow account.

[Anonymous]

There was a studyrecently which said that some high percentage of homestead exemption claims are bogus, so DC is cracking down. They are selectively auditing parts of the city. Given that it is DC, I am sure you can imagine how well thought out this all was.

We were audited along with many people in our neighborhood. You had to submit something like three separate pieces of documentation and sign some statement to prove you lived there year-round. My favorite part? The audit was conducted by the DC Office of Tax and Revenue. One of the documents you were required to submit? Your previously filed DC tax returns!

OP, I am somewhat surprised renting out part of yoru property does not make you ineligible, but I have not looked into it. However, I can tell you this entire program is very poorly thought out and that I would contact your council member's office about it. Ours was very helpful in helping with the neighborhood uproar when we all got our audit notices. The forms were ambiguous and poorly worded - shocker, I know.

[Anonymous]

According to this, you should have received a letter. You might want to read this and the FAQ link:

http://otr.cfo.dc.gov/otr/cwp/view,A,1330,Q,635491.asp

[Anonymous]

We got a notice about 1.5 yrs ago from DC gov first asking us to prove residency; we weren't living there and had forgotten to change it. The definitely did not go straight to lender.

But, good luck getting anyone at tax bureau to answer any questions, especially if it's an issue in your favor. On a separate outstanding DC tax issue I've written 10 letters to them over the course of six years. DC owes us money and has made us submit our 2002 taxes THREE times. I've written twice to CFO, Mr. Ghandi, and once to the mayor. Guess how many times I've heard from them. One! It was a cryptic e-mail, which had I written from work would have gotten me fired. It was literally gobbeldygook. I responded and nothing. I seriously don't know how anyone can be employed there, with MY tax dollars. My next avenue is to find a reporter... Sorry, just needed to vent!

[Anonymous]

OP. even though our mortgage company pays our property tax bill out of escrow, we still receive a bill every 6 months. Did you not receive a property tax bill when DC revoked your homestead deduction retroactively and imposed back taxes ?

As for your mortgage company, they probably did the right thing. The rationale for the property tax escrow is not guarantee that their lien on the the property is never second to a property tax lien. Even if the imposition of the tax was unjust, once it was imposed, it was prudent for the mortgage company to pay it and increase your escrow requirements.

By the way, OP, I see on the OTR website that DC is going through a three- to five-year reconfirmation audit to check that everyone receiving the homestead deduction actually deserves it. Is there any chance that you received a request for documentation but it fell through the cracks? Perhaps this has nothing to do with craigslist.

[Anonymous]

PP here. I meant "to guarantee".

[Anonymous]

And now that we understand OP's situation better, let's consider the crazy Craigslist issue. Taking definitive action on what they find there? If I wanted to screw someone I'd just need to post a bogus rental listing and the DC tax office will handle the rest of the prank for me? While I'm semi-impressed that DC is savvy enough to use CL as an investigative resource it's crazy to take action (cancel tax exemptions, etc.) based on it alone, and w/o notice to the individuals affected?. I'm not litigiously-minded typically, but I almost think you could have an interesting, media-ready lawsuit here.

[Anonymous]

OP here. I received no letter. Period. Renting out a portion of one's home does NOT disqualify one. Period. If it did, it would amount to a sort of double whammy since I pay taxes on the rental income. So not clear to me that I was part of the audit at all. Since I DO live in my home, I would have seen any correspondence.

Seems like a conflict of interest and hyper-aggressive pursuit of money -- I'm talking $12k that they are holding on to that they know is not theirs and all they have to do is return it to the mortgage company. They told me earlier this week that they could not reinstate me because "their system was down".

Which council member's office was it that was helpful? A call to the case worker in mine has gone unanswered. More great government service.

I don't mind the escrow requirement at all.

I have not seen a tax bill because the huge amount was taxes at the investor rate plus penalties and interest from last Sept to present and I get billed twice a year so there must have been a timing glitch.

I have no issue with being audited -- if that is really what they did or intended to do. I object to never being asked to provide proof of residency before this action was taken.

Even if I HAD seen it on my tax bill, I submit that it would be a jackass way to issue notification of revocation. The info was all there on the website once I looked but who cruises websites like that? We pay our mortgage by automatic draft and the payments did not change. Yet...

I think I will get creative if they don't get more forthcoming. Does anybody think requesting a meeting with them would help?