Tax Help After Natural Disasters

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Tax Help After Natural Disasters

Tax deadlines are difficult even in the best of circumstances. When a tragedy hits your area, tax payment and filing deadlines may add further stress to an already emotionally and financially stressful circumstance.

According to the National Centers for Environmental Information, 332 natural disasters have struck the United States alone since 1980, with total losses exceeding $2.275 trillion (Consumer Price Index-adjusted to 2022).With an average of more than seven incidents every year, you or someone in your network is likely to have direct contact with the aftermath of a natural catastrophe.

Hurricanes, tornadoes, floods, earthquakes, wildfires, and winter storms are all examples of natural catastrophes. Natural disasters may absolutely impede your capacity to obtain your supporting tax papers or complete your tax return on time, particularly late in the tax filing season. The Internal Revenue Service (IRS) fortunately provides tax assistance to people harmed by natural catastrophes.

Key Takeaways

  • Tax filing extensions, tax payment extensions, and the casualty loss deduction are all common types of tax relief.
  • You may be able to earn an expedited tax refund if you claim the casualty loss deduction.
  • You may deduct your loss if it occurred in a federally designated disaster region as decided by the President of the United States on your previous or current year tax return.
  • If you have already filed your prior year’s tax return, you may claim the deduction using a 1040-X, Amended U.S. Individual Income Tax Return form.

What Must Happen for You to Qualify for Tax Relief?

Before the IRS may provide tax assistance to taxpayers who have been impacted by a natural catastrophe, the Federal Emergency Management Agency (FEMA) must make a major disaster proclamation as directed by the President of the United States. When FEMA chooses a region for its Individual Assistance program, the IRS will provide tax relief to that region. Only if you reside in a federally designated disaster region may you claim the casualty loss deduction, which may result in an expedited tax refund.

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You do not have to live in a federally designated disaster region to qualify for tax filing and payment extensions as an impacted taxpayer. Individuals, business entities or sole proprietorships, and shareholders of a S corporation having tax records in a FEMA-covered disaster region are among those affected.

What Forms of Tax Relief Exist?

Following a natural catastrophe, you may be eligible for a variety of tax breaks. The most prevalent are deadline extensions for filing and paying your taxes. You may potentially be eligible for a casualty loss tax deduction. Additionally, the Small Business Administration (SBA) of the United States may provide financial assistance in the form of catastrophe loans or grants.

Tax Filing and Payment Extensions

If your IRS address is in a disaster-affected region, you will automatically be granted additional time to submit your tax return and make any final tax payments.

Casualty Loss Deduction

You may be eligible for the casualty loss deduction if you live in a federally designated disaster region. This deduction is offered to taxpayers who have suffered property damage or loss as a consequence of the natural catastrophe. You may deduct it from your current-year or prior-year taxes.

If you claim it on your prior-year tax return, you will get a refund sooner. If you have already filed that return, you must update it using Form 1040-X, Amended U.S. Individual Income Tax Return.

Disaster Loans and Grants

In a designated disaster region, the SBA may provide financial assistance to company owners, private charities, homeowners, and renters. You must have submitted all needed tax returns to be eligible. The SBA website has a search function for locating current declared disasters. To qualify for assistance, disasters must be declared by the President of the United States or the Secretary of Agriculture of the United States.

Natural Disasters That Qualify for Tax Relief

Natural catastrophes that qualify for tax relief in 2021 and the states affected include:

  • Hurricane Ida has made landfall in Louisiana, Mississippi, New Jersey, New York, Connecticut, and Pennsylvania.
  • Tropical Storm Fred has made landfall in North Carolina.
  • Tennessee is experiencing severe storms and floods.
  • Wildfires in California
  • Michigan has seen severe storms, floods, and tornadoes.
  • Louisiana is experiencing severe storms and floods.
  • West Virginia is experiencing severe storms and floods.
  • Tornadoes and severe storms in Alabama
  • Kentucky has seen severe storms, floods, landslides, and mudslides.
  • Louisiana is experiencing a severe winter storm.
  • Oklahoma is experiencing a severe snow storm.
  • Severe winter storm in Texas
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Ten disasters in 2022 have already qualified as well:

  1. Tennessee is experiencing severe storms, high winds, and tornadoes.
  2. Storms, gusts, floods, mudslides, and landslides have been reported in Washington state.
  3. Colorado wildfires
  4. In Puerto Rico, severe storms, floods, and landslides have occurred.
  5. Straight-line winds and wildfires in New Mexico
  6. Flooding and severe storms in Montana
  7. Oklahoma has seen severe storms, tornadoes, and floods.
  8. In Kentucky, severe storms, floods, landslides, and mudslides have occurred.
  9. Water scarcity in St. Croix, US Virgin Islands
  10. Missouri is experiencing severe storms and floods.

The IRS website includes a disaster aid page where victims of recent natural disasters may learn about the many sorts of tax assistance that are available to them. All disaster-related tax relief provided in the previous five years is readily searchable.

Other Relevant Tax Items Post-Natural Disaster

To substantiate your catastrophe claims, you may need to get a tax transcript. You may get one by utilizing the IRS website’s Get Transcript Online function, phoning the IRS at (800) 908-9946, or filling out IRS Form 4506-T, Request for Transcript of Tax Return.

If you have to move as a consequence of the natural catastrophe, be sure you notify the IRS. Form 8822, Change of Address, is one method to do this. You may either submit a written statement or inform the IRS orally over the phone. You must have the following identification information on hand if you use the phone:

  • Full name
  • New address
  • Old address
  • Date of birth
  • Social Security number

Frequently Asked Questions

Do I qualify for disaster relief if my tax preparer is in a disaster area, but I am not?

If you are not in a disaster region but your tax preparer is, you may be eligible for tax relief if the location your tax preparer is in is a federally designated disaster area and they are unable to file or pay your taxes on your behalf.

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To request a deferral of your file or payment, contact the Internal Revenue Service (IRS) Disaster Hotline at (866) 562-5227 and explain that your essential tax documents are in a covered disaster region. You will also need to supply the Federal Emergency Management Agency (FEMA) disaster number for the region where your tax preparer lives.

Do I qualify for disaster relief if I am a shareholder in an S corporation located in a disaster area, but I am not in the disaster area?

You are an impacted taxpayer if the S company (or partnership) cannot furnish you with the tax records you need to submit your tax return. Your delay term will overlap with the impacted S corporation’s period (or partnership).

You must contact the IRS Disaster Hotline at (866) 562-5227 one again to explain that your tax records are in a designated disaster region. You will also need to supply the IRS with the FEMA disaster number for the impacted S company (or partnership).

Can I get tax relief on interest on a preexisting outstanding balance during the disaster relief period?

No, there is no tax relief for interest owed on prior-year tax bills. However, if the cause for the late payment is acceptable and connected to the catastrophe, the IRS may consider waiving the late payment penalty.

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