Navigating IRS Disaster Relief

  • Tax strategies
  • 10/4/2022
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Key insights

  • Hurricane Ian tax relief is automatically provided to any taxpayer with an IRS address of record in Florida. The IRS will also work with any taxpayer who lives outside the federally declared disaster area but whose records necessary to meet a deadline are located in the affected area.
  • If you sustained damage to your business, home, or property, consider whether a casualty loss deduction could help you.
  • If you have employees affected by natural disaster, Section 139 allows business owners to help employees during a federally declared disaster through tax-free qualified disaster relief payments.

Navigating disaster relief?

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If you, your business, or your employees have been affected by a natural disaster, the relief options below may be of help.

Extended deadlines for Hurricane Ian victims

On September 29, the IRS issued a news release announcing that various tax return and filing payment deadlines beginning September 23, 2022, have been postponed until February 15, 2023, for certain victims of Hurricane Ian.

The tax relief is automatically provided to any taxpayer with an IRS address of record located in the federally declared disaster area, which includes the entire state of Florida. You do not need to contact the agency to get this relief.

Deadlines postponed until February 15, 2023, include:

  • 2021 individual returns with an extension to October 17, 2022
  • Quarterly estimated income tax payments due on January 17, 2023, and the quarterly payroll and excise tax returns normally due on October 31, 2022, and January 31, 2023
  • Business and exempt organization returns with an original or extended due date starting September 23, 2022, including, among others, calendar-year C corporations with extensions to October 17, 2022, and exempt organizations with extensions to November 15, 2022

Additionally, penalties on payroll and excise tax deposits due on or after September 23, 2022, and before October 10, 2022, will be abated as long as the deposits are made by October 10, 2022.

The IRS will also work with any taxpayer who lives outside the federally declared disaster area but whose records necessary to meet a deadline are located in the affected area. This relief is obtained by calling the IRS at 866-562-5227.

Disaster relief in Alaska and Puerto Rico

Similar relief was provided last week to individuals and households that reside or have a business in the Regional Education Attendance Areas of Bering Strait, Kashunamiut, Lower Kuskokwim, and Lower Yukon, in Alaska and were affected by Typhoon Merbok’s severe storm, flooding, and landslides. For that disaster, tax filings and payments falling on or after September 15, 2022, and before February 15, 2023, are postponed through February 15, 2023.

Those affected by Hurricane Fiona in Puerto Rico were extended comparable relief as well.

Deduction for damaged or lost property

If you sustained damage to your business, home, or property, consider whether a casualty loss deduction could help you.

Disaster losses, not covered by insurance or other reimbursements, are generally deductible in the year incurred (i.e., 2022). However, under Section 165(i), taxpayers may elect to deduct any loss occurring in a disaster area and attributable to a federally declared disaster in the tax year immediately preceding the tax year in which the disaster occurred on an original or amended return for such preceding tax year (i.e., 2021).

Work with a tax professional to help you determine if you qualify and how to proceed.

Disaster relief to employees may be tax-free

If you have employees affected by natural disaster, Section 139 allows business owners to help employees during a federally declared disaster through tax-free qualified disaster relief payments. Typically, any gift from an employer is taxed; however, Section 139 qualified disaster relief payments are tax-free to the employee and are fully deductible by the employer.

Qualified disaster relief payments can be used to help employees offset the cost of certain expenses such as reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a disaster, and necessary repair or rehabilitation of a personal residence or repair not otherwise compensated for by insurance.

How we can help

If you have questions regarding disaster relief or postponed tax deadlines, please contact us. CLA’s state and local tax professionals can help guide you through these changes.

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