The Internal Revenue Service is providing significant tax relief for those impacted by hurricanes Harvey, Irma and Maria – with more expected once Congress finishes debating a comprehensive disaster relief plan that would offer additional help to victims.
Tax Deadlines Postponed
IRS tax relief currently available to residents of Florida, Georgia, Puerto Rico, the Virgin Islands and parts of Texas postpones certain tax deadlines for individuals and businesses in the affected areas. All will have until Jan. 31, 2018, to file returns and pay taxes.
Those eligible for the extended deadline include: individuals with a tax-filing extension from last year that runs out Oct. 16; businesses with extensions that ran out Sept. 15; anyone with quarterly estimated tax payments due Sept. 15 and Jan. 16, 2018; quarterly payroll and excise tax returns due Oct. 31; and calendar-year tax-exempt organizations with 2016 extensions that run out Nov. 15. Information about others eligible for an extension can be found on the disaster relief page on IRS.gov.
Employer Regulations Relaxed
The IRS is also making it possible for employers to let employees cash in and donate vacation, sick and personal leave days to charities providing hurricane relief. Donated leave will not be included on the employee’s income, and employers can deduct the cash payments as a business expense.
Retirement Plan Loans and Distributions
Employer-sponsored retirement plans (such as 401(k)s) will be permitted to make loans and hardship distributions to hurricane victims and members of their families. Someone living outside the disaster area can take out a loan or distribution and use it for a family member who lives in the disaster area. Hardship withdrawals must be made by Jan. 31, 2018.
Uninsured Losses Claims
Uninsured or unreimbursed disaster-related losses can be claimed on either the 2016 or 2017 tax return. IRS Publication 547 has details. Fees for copies (including expedited requests) of previously filed tax returns are being waived by the IRS for disaster area taxpayers.
If you are a disaster-area taxpayer and the IRS contacts you regarding a collection or examination of your records, the agency will take your status into consideration. Information about additional hurricane-specific relief provisions can be found, in English and Spanish, on the IRS pages for Hurricane Harvey or Hurricanes Irma and Maria.
Automatic Relief Process
The IRS will extend automatic relief benefits if you live in the disaster area. If you receive a late filing or late payment penalty notice you should call the number on the notice to have the penalty waived. If you live outside the area but have records in an affected area, the IRS will work with you. In this case, you need to call 866-562-5227 to report your status.
Politicians Weigh In
Legislation to provide additional tax relief for victims of Harvey, Irma and Maria failed to pass in the U.S. House of Representatives under a fast-track process that requires a two-thirds majority. It will likely be reintroduced under a procedure that only requires a simple majority.
Tax Relief Proposals in Play
The legislation, which is expected to pass, will provide Harvey, Irma and Maria victims with the following additional tax relief benefits:
Casualty losses – Storm victims could write off all losses, regardless of whether they itemize and without having to meet the requirement to exceed 10 percent of adjusted gross income in losses.
Retirement account withdrawals – The 10 percent penalty on withdrawing funds from retirement accounts would be waived when using the money to pay for disaster recovery.
Charitable deductions – The current 50-percent-of-income limit on charitable deductions would be lifted for donations to hurricane relief.
Employer credit – Disaster-affected employers would receive a 40-percent-of-wages (up to $6,000 per employee) tax credit.
The Bottom Line
If you have been affected by one of the recent hurricane events in the U.S. (including Puerto Rico), the IRS is already offering tax relief as outlined above. Additional relief in the form of congressional legislation is likely to come once it is passed by both chambers and signed by the president. Meanwhile, the best place to stay up-to-date on hurricane tax relief efforts is on the IRS disaster relief webpage.