Natural disasters and emergencies affect many families and
businesses every year. With the current
weather-related issues in Texas and surrounding states, we want to take a
moment to inform you of the options that victims have that can help them
financially.
Tax Relief
Victims of the latest hurricane may qualify for tax relief. From a casualty loss deduction on a tax
return to assistance payments, here are some of the tax breaks the IRS will give
to relieve people affected:
Special
Casualty Loss Deduction on Federal Tax Return
Special casualty loss rules apply
in a federally declared disaster area.
You can amend your previous year’s Federal return to report current
losses instead of waiting until next year to report losses. This gives you a quick refund (generally
within 45 days). Be aware that you
cannot deduct losses that are covered by insurance or emergency aid assistance. Use IRS Form
4684 to itemize these losses on a tax return.
In general, losses are deductible
if they total more than $100 and more than 10 percent of your adjusted gross
income. Also, keep documentation to
prove that a loss took place due to a disaster.
Include the dollar amount of loss, documentation on who owns or is
liable for the property, and appraisals or photographs of loss. Getting an estimate for damages from an
appraiser, county tax assessor, or another reliable resource is a good
idea. For more information about how to
report a casualty deduction on a tax return, visit the IRS web site at
www.irs.gov.
Extension
to file a return
Affected taxpayers may be eligible to
postpone the filing of returns, paying taxes, and performing other
time-sensitive acts. Due dates vary,
depending on location, and details are posted on the “
Tax Relief in Disaster
Situations” page on
www.irs.gov
website. Taxpayers not in the covered
disaster area, but whose books, records, or tax professionals’ offices are in
the covered disaster area, may be entitled to relief.
For instance, certain deadlines
falling on or after August 23, 2017 and before January 31, 2018, are granted
additional time to file through January 31, 2018. This includes taxpayers who had a valid
extension to file their 2016 that are due on October 16, 2017. It also includes the quarterly estimated
income tax payments originally due September 15, 2017 and January 16, 2018. The IRS automatically identifies taxpayers
located in the covered disaster area and applies automatic filing and payment
relief. However, affected taxpayers who
reside or have a business located outside the covered disaster area must call
the IRS disaster hotline at 1-866-562-5227 to request this relief.
Tax-free
assistance
Disaster victims in a
presidentially declared disaster area generally do not have to pay taxes on
assistance payments they receive. This
exclusion from income applies to expenses compensated by assistance programs
(such as Red Cross or FEMA) that are not otherwise reimbursed by insurance or
other sources.
Other Financial Relief
When disaster hits, there are many agencies and non-profit
organizations that are willing to extend a helping hand. Knowledge of these programs can help you
financially after a disaster hits. Many
of these benefits are tax-free. The
following is a list of some key agencies and a description of their functions:
Federal
Emergency Management Agency (FEMA)
FEMA is a federal disaster aid
program that provides aid to citizens affected by major disasters. They
provide disaster assistance in the form of money or direct assistance. It is meant to help you with critical
expenses that cannot be covered in other ways such as insurance. This assistance is not intended to restore
your damaged property to its condition before the disaster. Here are some of the services available by
FEMA:
*Temporary Housing—They can help
you find a place to live for a limited
time. Money is available to rent
a different place, or a government provided housing unit when rental properties
are not available;
*Disaster-related
medical and dental costs;
*Disaster-related
funeral and burial costs;
*Clothing;
household items, and tools required for your job;
*Necessary educational
materials (computers, school books, etc...);
*Clean-up items
(such as a wet/dry vacuum, dehumidifier);
*Moving and Storage—This includes
expenses related to the disaster or to
prevent additional damage while repairs are being made to home.
For more information on FEMA, visit
their website at
www.fema.gov, or call them
at 1-800-621-FEMA (3362).
American
Red Cross
The Red Cross focuses on meeting
people’s immediate emergency disaster-related needs. They provide temporary shelter, food, and
health and mental health services to assist individuals and families affected
by a disaster. The Red Cross also
handles inquires from concerned family members outside the disaster area,
provides blood and blood related products, and perform many other services to
help people resume their normal daily activities independently. For more information, visit their website at
www.redcross.org.
Small
Business Administration (SBA)
SBA is responsible for providing
affordable, timely, and accessible financial assistance to homeowners, renters,
and businesses of all sizes located in a declared disaster area. Financial assistance is available in the form
of low-interest, long-term loans for losses that are not fully covered by
insurance or other resources. For more
information on SBA, visit their website at
www.SBA.gov,
or call them at 1-800-659-2955.
By: Vincent
Mangiapane, EA
Federal Analyst
CrossLink Professional Tax Software
