Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location to be a major disaster area. With hurricanes, floods, and other natural disasters affecting so many homeowners and businesses throughout the US this year, here is some useful information about disaster-related tax relief that taxpayers should know about including:
Immediate relief. If you have damaged or lost property in a location declared by the President as a major disaster area, you may be able to get some money back from the IRS right now. Please call the office for more information.
Tax filing and penalty relief. The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.
Taxpayers who live outside the disaster area. In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization. Don’t hesitate to contact the office if you need assistance with this.
Disaster-related losses. Individuals and businesses who suffer uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2016 return normally filed next year), or the return for the prior year (2015).
Retirement plan hardship distributions. Finally, employees and certain members of their families who live or work in disaster area localities affected by Hurricane Matthew who participate in employee sponsored retirement accounts such as 401(k)s, 403(b) tax-sheltered annuities, and state and local government employees with 457(b) deferred-compensation plans may be eligible to take loans and hardship distributions without incurring the 10 percent early withdrawal tax penalty.
Tax Relief Specifically for Victims of Hurricane Matthew
Hurricane Matthew victims in much of North Carolina and parts of South Carolina, Georgia and Florida have until March 15, 2017, to file certain individual and business tax returns and make certain tax payments. This includes an additional filing extension for those with valid extensions that were due on October 17, 2016.
This expanded relief applies to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for either individual assistance or public assistance. In addition, taxpayers in counties that are added later to the disaster area will automatically receive the same filing and payment relief.
The tax relief postpones various tax filing and payment deadlines that occurred starting on October 4, 2016. As a result, affected individuals and businesses will have until March 15, 2017, to file returns and pay any taxes that were originally due during this period. This includes the January 17 deadline for making quarterly estimated tax payments.
For individual tax filers, it also includes 2015 income tax returns that received a tax-filing extension until October 17, 2016. However, because tax payments related to these 2015 returns were originally due on April 18, 2016, those are not eligible for this relief.
A variety of business tax deadlines are also affected including the October 31 and January 31 deadlines for quarterly payroll and excise tax returns. It also includes the special March 1 deadline that applies to farmers and fishermen who choose to forgo making quarterly estimated tax payments.
In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after October 4 and before October 19 if the deposits are made by October 19, 2016.
Ready to Help
Please call the office if you have any questions about the impact of a natural disaster on your tax situation or need assistance figuring out what you need to do next.