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TAX RELIEF AVAILABLE TO VICTIMS OF HARVEY, IRMA AND MARIA
The Internal Revenue Service is providing relief to individuals and businesses in Florida, Georgia, Puerto Rico and the Virgin Islands, as well as parts of Texas, who were victims of -
* the Hurricane Harvey disaster area on or after August 23, 2017,
* the Hurricane Irma disaster area on or after September 4, 2017, and
* the Hurricane Maria disaster area on or after September 16, 2017.
Affected individuals and businesses will have until Jan. 31, 2018 to file any returns and pay any taxes due. Those eligible for the extra time include:
* Individuals who requested an automatic extension to October 16, 2017 to file the 2016 Form 1040 or 1040A. Relief is limited to the filing of the return and not the payment of any tax liability due. Since tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.
* Calendar-year businesses that requested and received an extension to September 15 or October 15, 2017 to file calendar-year 2016 tax returns.
* Individuals with quarterly estimated tax payments due on September 15, 2017 and January 16, 2018.
* Businesses with quarterly payroll and excise tax returns due on October 31, 2017.
* Calendar-year tax-exempt organizations who requested and received an extension to November 15, 2017 to file Form 990.
The IRS will waive late deposit penalties for federal payroll and excise tax deposits normally due during the first 15 days of the disaster period.
Special relief is available for employer-sponsored leave-based donation programs that aid hurricane victims. Employees can elect to exchange their vacation, sick or personal leave in exchange for cash payments the employer makes to charities providing relief. The value of the donated leave is not included in the employee’s income, and the employer can deduct these cash payments to charity as a business expense.
401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to hurricane victims and members of their families through January 31, 2018. A person living outside of a hurricane disaster area can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or dependent who lived or worked in the disaster area.
The IRS is also waiving the usual fees and expediting requests for copies of previously filed tax returns for disaster area taxpayers, especially helpful to anyone whose copies of these documents were lost or destroyed by the hurricane.
Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred, the 2017 return normally filed next year, or the return for 2016, the prior year.
If taxpayers affected by the hurricanes are contacted by the IRS on a collection or examination matter they should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.
Further information on hurricane relief provisions can be found online at - https://www.irs.gov/newsroom/tax-relief-in-disaster-situations.
Congress has passed, and Trump has signed into law, H.R. 3823, the "Disaster Tax Relief and Airport and Airway Extension Act of 2017".
The disaster relief component of this Act makes temporary changes to the Tax Code for individuals and businesses who were affected by the hurricanes.
The Act –
(1) eliminates the current requirement that the allowable deduction for net casualty losses from the hurricanes must be reduced by 10% of Adjusted Gross Income;
(2) eliminates the current requirement that taxpayers must itemize deductions on Schedule A to claim a casualty loss deduction (the deduction will be treated as an additional Standard Deduction – and this additional deduction will be allowed in calculating the Alternative Minimum Tax);
(3) provides an exception to the 10-percent early retirement plan withdrawal penalty for premature distributions related to hurricane relief;
(4) allows for the re-contribution of retirement plan withdrawals for home purchases cancelled due to the hurricanes;
(5) provides flexibility for loans from retirement plans for qualified hurricane relief;
(6) temporarily suspends the 20%, 30% and 50% limitations on charitable contribution deductions to qualified organizations associated with hurricane relief made before December 31, 2017;
(7) creates an “Employee Retention Credit” of 40% of wages (up to $6,000 per employee) paid for employers that conducted an active trade or business in the hurricanes on the date of the disaster and the active trade or business for which was rendered inoperable for some period of time following the disaster; and
(8) allows taxpayers to use earned income from 2016 to calculate the 2017 Earned Income Tax Credit and Child Tax Credit.