The start of summer also marks the beginning of hurricane season for the south and eastern parts of the United States and the start of wildfire season in western parts of the United States. While no one ever wishes that disaster strikes, there’s always the possibility.
For those who have had the misfortune of dealing with a major disaster or are worried that you might one day, the IRS does have solutions. Despite popular belief, the IRS does not have it out for anyone. In fact the IRS is in the habit of helping people and businesses dealing with a major disaster.
How Do I Know if I Qualify?
The first thing you need to establish is whether or not the disaster you experienced was large and impactful enough for it to be declared a natural disaster by the Federal Emergency Management Agency (FEMA). This is important because the IRS only recognizes incidents that were declared emergencies by FEMA.
For a list of the qualifying events, you can visit the IRS here.
Have I Met All Tax Deadlines Following the Disaster?
If FEMA has declared your event an emergency, then the IRS extends several deadlines for business owners including payroll taxes, quarterly estimates and even filing your return. Note that this is an extension, which means while they may not be due now, those taxes will eventually be due.
Make sure you plan and prepare for that bill so you’re not surprised when the deadline finally arrives.
How Can I Get Tax Relief Quickly Following a Disaster?
One of the key things the IRS does to try and help disaster victims immediately is to allow them to amend their tax returns from the previous year. This is important because it means the taxpayer can receive a disaster-related tax refund without waiting.
In addition to allowing these amended returns, the IRS also expedites the processing of the returns to make sure refunds are handed out as quickly as possible. For details on amended returns visit the IRS website here.
When you amend your return, it’s important that you look at the casualty loss deduction and itemize your return if necessary.
According to the IRS, “A casualty loss can result from the damage, destruction, or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption. A casualty doesn’t include normal wear and tear or progressive deterioration.” (For full details, visit the IRS website here.)
Make sure that any deductions you take are calculated after you receive an insurance reimbursement or take the potential reimbursement out of the amount you’re deducting. The IRS doesn’t let you double dip by getting a tax deduction for a loss and getting a payout from insurance.
What if I Don’t Live in the Disaster Area, but I’m Still Affected?
The IRS tries to cover all of its bases when it’s dealing with taxes so there are no loopholes for people. That’s why the agency actually has a policy to deal with people that are affected by the disaster even if they do not live in the disaster area. Affected parties include people whose tax preparers operate in the disaster area and people involved in business partnerships or corporations that operate in disaster areas.
For full details, you can visit the IRS website here.
Extra Relief for Major Disasters
The IRS also understands that some disasters are more devastating than others and therefore have a bigger financial impact on businesses, that’s why extra tax relief can be added on in some situations.
For example, in 2017 businesses in parts of Florida and Texas affected by the hurricanes received up to $2,400 in deduction per employee.
It’s important that you talk to your tax professional about any deductions that may be available to you or your business following a major disaster. The advice offered in this article is not based on your specific situation and therefore may or may not be the best advice for you. If you need help making sure you get the best tax benefit for your situation, you can always contact us here at The Tax Credit Group.