Can you explain the new car tax?

April 23, 2013 22:58 by Consumer Ed

Dear Consumer Ed:

I’m confused about the new car tax.  If I sell my car to my sister, will she have to pay tax?

Consumer Ed says:  

For the answer to this question, we went to the Georgia Department of Revenue, for whose assistance we are most grateful.

Let’s look at the specifics about the tax before exploring whether your sister will have to pay the new tax.  It is called the title ad valorem tax (“TAVT”) and was passed by the 2012 Georgia General Assembly with additional amendments made during the recent 2013 legislative session.  It became effective on March 1, 2013, and, until December 31, 2013, the current TAVT rate is 6.5% multiplied by the “Fair Market Value” of the vehicle.  To determine the Fair Market Value of a new motor vehicle, use the greater of the retail selling price or the value listed in the Department of Revenue motor vehicle assessment manual. Then reduce that number by any rebate or cash discounts you received from the dealer. For a used vehicle, the Fair Market Value is the usually the amount listed in the Department of Revenue motor vehicle assessment manual.  Whether the motor vehicle is new or used, there is a reduction for the trade-in value before the TAVT is imposed when the vehicle is purchased at a dealership. 

With the new tax, vehicles purchased on or after March 1, 2013 and titled in Georgia are exempt from sales and use tax and the annual ad valorem tax, i.e. the “birthday tax”.  Instead, the purchased vehicles are subject to the new, one-time TAVT.  Vehicles purchased through a private sale (non-dealer sale) that were previously exempt from sales tax are now subject to the TAVT.  If you purchased the car between January 1, 2012 and March 1, 2013 and had the car titled in Georgia, you are eligible to opt in to the new TAVT system, which will allow you to avoid the annual ad valorem tax after you opt in.  If you qualify to opt in, you will get credit for any sales tax and ad valorem tax previously paid up to the amount of TAVT due.  However, if the sales tax and ad valorem tax previously paid is less than the TAVT due, you will need to make up the difference when you opt in.  This option may only be exercised through February 28, 2014.

Your sister, as an immediate family member, may or may not have to pay the TAVT when she purchases the car from you.  An "immediate family member" is defined as your spouse, parent, child, sibling, grandparent or grandchild.  It is very important to remember that both you and your sister will have to complete an affidavit affirming that you are immediate family members. 

For immediate family members who buy or inherit a vehicle, their obligation to pay the TAVT depends on whether you, as the former owner of the vehicle, have already paid the TAVT.  If you have not paid the TAVT and are paying annual ad valorem tax on the vehicle, your sister has two options: (1) continue to pay annual ad valorem tax on the vehicle, and therefore not be subject to the TAVT; or (2) your sister may elect, at the time she purchases your vehicle, to pay the TAVT based on the current Fair Market Value of the vehicle at the applicable rate for the current year (i.e. 6.5% of the Fair Market Value for 2013) On the other hand, if you were eligible to opt in to the new system and did opt in, or if you otherwise paid the TAVT when you first acquired the vehicle, then her TAVT rate will be 0.50% of the value of the car when she purchases it from you.

Don’t forget that vehicles subject to the TAVT are still subject to the $18 title application fee at the time the vehicle is titled.  Vehicle owners must also annually register their vehicles in their home county and pay the associated $20 renewal fee. 

For more information about the TAVT, visit the Motor Vehicle section of the Georgia Department of Revenue website at http://motor.etax.dor.ga.gov/motor/MVDOnline.aspx.

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Issuing a 1099 to someone without a Social Security Number

March 9, 2012 19:20 by Consumer Ed

Dear Consumer Ed: 

How can you issue a 1099 to a contractor who will not provide his Social Security number or his Federal ID number?  Can you send the 1099 to the IRS without this information?

Consumer Ed says: 

It appears that not all contractors are required to have a Social Security Number (SSN) to work in the United States.  Many are issued a Tax Identification Number (TIN) by the IRS.  The TIN may be used on Form 1099 instead of the SSN.  If the contractor does not provide a TIN or SSN, leave the box for the TIN or SSN blank on the Form 1099.  The IRS may impose a penalty if a 1099 form is submitted without a TIN or SSN.  However, the penalty will not apply if you can show the lack of information was due to an event beyond your control or due to significant mitigating factors.  You must also be able to show that you acted in a responsible manner and took steps to avoid the omission of this information, such as by writing the contractor to ask for this information.

Before proceeding, you should contact the IRS at 1-800-829-4933 to ensure that you have a full understanding of these requirements. 

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Disputing Property Taxes

November 2, 2011 19:46 by Consumer Ed

Dear Consumer Ed:

I received a letter from a private consultant offering to dispute my property taxes with the county. The value of my house has declined significantly in the last year and it is now worth much less than what the property tax bill shows.  Should I accept this offer? How do I know if it's legitimate?

Consumer Ed says: 


If you believe the board of assessors incorrectly calculated the value of your home, you can appeal the assessed value. You do not need a consultant to assist you. The time within which an appeal must be filed may vary from county to county.

The letter you received may or may not be legitimate. Many legitimate companies are currently sending out letters advertising their services in connection with tax appeals. However, new and different scams are discovered all the time, so be careful and thoroughly research the business or person who sent the letter to you.  For example, in 2010, Oregon property owners were flooded with fraudulent solicitations to send in $189 to get their property taxes lowered. The letters, which were made to look like official government documents, stated that due to the drop in property values, residents needed to file for a reassessment of their property taxes. The letters included a purported adjusted assessment and the amount of projected tax savings resulting from an appeal, provided the property owner signed an authorization and included a check for the company's fee.  Similar letters were also sent to residents in California in late 2009.  Even though these property tax scams occurred in different states, it is important to be aware of them because this scam could start occurring here in Georgia.

There are various ways to discover whether a business or person is "legitimate".  If a corporation sent the letter to you, you can look up its name on the Secretary of State's website (www.sos.ga.gov) to see if it is an actual legal entity.  However, just because the corporation is a legal entity is no guarantee that it employs truthful and fair business practices.  If you think you may be interested in its services, you should ask the business to provide references from past customers and, if the company claims to be a member of any professional organizations, you may want to contact the organizations to see whether the business is in good standing.  You can also visit the Better Business Bureau's website (www.bbb.org) to see if anyone has submitted any complaints about the business. 

Two additional things to remember. First, avoid paying money to a business up front. There are many reputable companies who will not charge you in advance. In fact, some companies calculate their fee as a percentage of your first year's tax savings, while others will bill you on an hourly basis and submit a detailed bill for the actual hours they have worked to pursue the appeal.  Second, nevercontract with a company that guarantees a tax reduction; no legitimate company would make such a promise.

If you are not confident that the business or person is legitimate, you may prefer to appeal your property taxes yourself.  In fact, even if the letter you received was from a legitimate business, appealing your property taxes yourself could cost substantially less than hiring someone to do it for you and should not take too much of your time. For information on how to appeal a property tax assessment, go to the Georgia Department of Revenue's website.

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