The IRS has announced that “affected taxpayers” in areas of Florida, Georgia, Puerto Rico, Texas, and the U.S. Virgin Islands designated as “covered disaster areas” are eligible for the postponement of time to file returns, pay taxes, and perform other time-sensitive acts.
Taxpayers in the categories below constitute “affected taxpayers”:
- Individuals who live, and businesses (including tax-exempt organizations) whose principal place of business is located, in the covered disaster area;
- Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed are in the covered disaster area; and
- All relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.
Affected taxpayers will be given until Jan. 31, 2018 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns.) that have either an original or extended due date occurring on or after Aug. 23, 2017, and before Jan. 31, 2018. Certain fees, penalties, and other administrative costs associated with these filings may be waived so long as the time-sensitive actions are completed on or before Jan. 31, 2018.
Of particular note is information released from the IRS relating to retirement benefits and pension plans. The IRS announced 401(k)s and similar employer-sponsored retirement plans will allow taxpayers the opportunity to make loans and hardship distributions to affected victims and their family members. The IRS is relaxing many of its procedural and administrative rules to allow taxpayers to support those affected by the storms; however, certain employer-sponsored retirement plans will not be waiving the 10 percent early withdrawal penalty.
Lastly, there is additional relief for affected taxpayers who have sustained losses on certain property where insurance or other means of reimbursement are not provided to cover the damage. These losses, better known as casualty losses, include certain loss arising from fire, shipwreck, or in this case storm, in a federally declared disaster area. Taxpayers have the option to claim a casualty loss for this year or the immediate prior year, on their federal income tax return. In order to determine the amount of loss that is deductible under these provisions, taxpayers should look to the fair market value of their property before and after the storm damage. The cost of repairs to property damaged, and not covered by insurance or other means, is acceptable as evidence of the loss of value by the IRS if the taxpayer can show the repairs are necessary to restore the property to its condition immediately prior to the storm, and the amount spent is not excessive or for more than the damage done. Those taxpayers claiming losses should specify the related Hurricane when filing, so as to simplify and expedite the processing of these returns and any potential refunds. Publication 547 provides information on how to determine the amount of the casualty loss.
See IRS webpage “Help for Victims of Hurricanes Irma and Maria” for more information. See also:
*Not admitted to the practice of law.