In the wake of a natural disaster, most individuals are focused on filing insurance claims, recovering or preserving any property that survived the event, and otherwise coping with the long-lasting impacts of the disaster. One thing that many people don’t think about is how they’re going to file their taxes. Thankfully, the IRS recognizes that victims of natural disasters have other matters they need to focus on, and so they offer a number of tax relief benefits for those in disaster areas. Here’s what you need to know about qualifying for and claiming this relief.
Must Be a Federally Declared Disaster
While even small, localized disasters can have major consequences, unfortunately, not every act of nature will qualify you for tax relief. The IRS will typically only offer disaster-related tax relief to those within a federally declared disaster area. This means that the Federal Emergency management Agency has declared the event as a natural disaster and assigned it a disaster declaration number.
If you’ve been the victim of a flood, wildfire, hurricane, or other large natural disaster, check the IRS’s list of qualifying disaster areas to find the disaster designation for that event, as well as the FEMA disaster declaration number. You’ll need this information when it comes time to file your return.
Requesting an Extension of Filing and Payment Deadlines
If you are physically located within a designated disaster zone, you don’t need to worry about any upcoming filing or payment deadlines. The IRS will automatically identify any taxpayer located within the disaster area, and provide an extension for any upcoming filing or payment due dates. This can even apply to quarterly tax payments.
However, if you live outside of the disaster area, but your ability to file or pay is somehow impacted by the disaster, you can still request these extensions. Examples of individuals this may apply to include:
- Those who own a business in the disaster area, but live outside of it
- Those whose tax preparers live within the affected area, making them unable to file or submit payment on their clients’ behalf
- Anyone else who may have necessary tax documents located in or originating from the disaster area.
In cases such as these, the IRS won’t be able to automatically identify you for disaster-related tax relief. Instead, you’ll need to call the IRS disaster hotline at 866-562-5227 to request the extensions.
Claiming Casualty Losses
Natural disasters frequently damage or destroy personal property. This may include damage to your home, destruction of vehicles, and loss of personal items. While most of these types of losses are covered by homeowners’ insurance, some are not. In cases where the loss is not covered by insurance or reimbursed in some other way, you may be able to deduct your losses on your tax return.
This can typically be done on either the return for the year of the event, or the previous year’s tax return, if that has not yet been filed. You can find instructions for claiming this deduction on Form 4684, Casualties and Thefts. However, we strongly recommend that you work with an accountant that has experience with complex tax returns in Provo, as these kinds of deductions can be tricky. Be sure when you file this return that you include the disaster designation and disaster declaration number mentioned earlier.
Receiving Free and Expedited Copies of Returns
In floods, fires, and other types of disasters, it is common for important documents and paperwork to be destroyed, lost, or damaged beyond repair. This is why the IRS offers free copies of past returns to individuals in impacted disaster areas. They will waive the usual fee for receiving a new copy of an old return, and will expedite your request.
To qualify for this, you either need to be automatically identified as residing in a disaster area, or you need to request the relief via the hotline number provided above.
If you’ve been the victim of a natural disaster and you’re worried about upcoming tax deadlines, contact our offices today. We’ll help you to determine if you qualify for the IRS relief efforts described above, and help you to claim them. We’ll also assist you with filing your return. Our CPAs are highly experienced with complex tax returns in Provo, and we can help ensure you get every deduction possible in an effort to lighten your burdens in the wake of a disaster. Call now to book an appointment.