Final Regulations Explain Automatic Extensions for Federal Disasters

The IRS has the discretion to grant extensions of up to one year for certain tax actions for those impacted by federal disasters. The Further Consolidated Appropriations Act, 2020, created a mandatory 60-day extension for certain deadlines. Now, final regulations clarify these rules (T.D. 9950). Here are some key points to remember:

• The mandatory extension rule does not supplant IRS discretion to provide extensions. For example, the IRS extended the filing deadline to August 2, 2021, for victims of spring storms and tornados in Tennessee that took place between March 25 and April 3, 2021 (IR-2021-112).
• Time-sensitive acts subject to the mandatory 60-day extension period include those acts for which the IRS may grant more time under its discretion, such as filing returns and paying estimated taxes. It also includes making contributions and rollovers to qualified retirement plans, removing excess contributions, and taking distributions from qualified retirement plans and IRAs. It does not include depositing payroll taxes, although the IRS frequently abates penalties in disaster situations.
• The 60-day postponement period begins on the earliest “incident date” specified by FEMA; it ends 60 days after the latest incident date. For example, a hurricane whips into an area on September 15, with flooding through September 20. The FEMA declaration begins September 15. The 60-day postponement period ends 60 days after September 20.

The mandatory rule applies to an individual with a principal residence located in the disaster area, a taxpayer with a principal place of business (other than the business of being an employee) which is located in the disaster area, a relief worker, any taxpayer with records necessary to meet a deadline are maintained in the disaster area, and anyone visiting the area who is killed or injured by the disaster. For joint filers, only one spouse needs to qualify.

The final regulations generally apply to federally declared disasters on or after December 21, 2019, the date the mandatory rule was enacted.