October 5, 2023 10:11 pm

Have You Been Affected By A Natural Disaster?

It’s hurricane season! Did you know many taxpayers affected by disaster situations qualify for tax relief? When the President declares a federal disaster, the IRS issues a disaster announcement. The announcement includes the listed state(s) and counties eligible for relief. For example, just recently, on September 13, 2023, the IRS announced tax relief for individuals and businesses affected by Idalia in 28 of the 159 counties in Georgia as well as similar relief provided to Florida and South Carolina. The relief the IRS granted, postponed the individual tax extension deadline from October 16, 2023 to February 15, 2024.

There are several different forms of tax relief available for those affected by natural disasters. One form of relief is a tax filing extension for those affected as mentioned in the example above. When a natural disaster hits, the last thing taxpayers are focused on is filing their tax return on time. The IRS has a history of understanding and responding to taxpayers’ needs in these types of situations by postponing deadlines for filing.

Another form of relief is making donations and natural disaster assistance tax free.

Victims of federally-declared disasters often find themselves in need of financial aid, but don’t need the burden of a tax liability associated with assistance received. The IRS has allowed qualified organizations to provide tax-free assistance to individuals in need.

Additionally, the tax law provides assistance to taxpayers through casualty loss deductions on the tax filing. This key provision allows victims in a federally declared disaster area to file an amended return for the previous tax year to get a refund quickly rather than waiting for the disaster year to end. If you didn’t originally itemize on your return from the prior year, you may benefit from amending your return to take advantage of the tax break. Casualty loss does not to translate dollar-to-dollar reimbursement of hardship expenses, but can help reduce your taxable income resulting in a lower tax obligation.

Finally, it is important to consult with a tax professional regarding these types of IRS relief to ensure reporting is accurate. It is also very important to always have good records of the disasters and proof as to why you should qualify for relief. Photos or videos of damage, receipts and canceled checks of expenses, insurance claims, and records/announcements from the Federal Management Agency (FEMA) are all examples of documentation that can prove your exclusion of income and limit tax exposure. If adequate information can not be provided to the IRS, you risk not being eligible for relief.

Resources: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations ; https://www.irs.gov/newsroom/irs-georgia-taxpayers-impacted-by-idalia-qualify-for-tax-relief-oct-16-deadline-other-dates-postponed-to-feb-15