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Tax and Financial Relief Options for Flood Victims


Tax and Financial Relief Options for Flood Victims

Natural disasters and emergencies affect many families and businesses every year.  With the current weather-related issues in Texas and surrounding states, we want to take a moment to inform you of the options that victims have that can help them financially.

Tax Relief
Victims of the latest hurricane may qualify for tax relief.  From a casualty loss deduction on a tax return to assistance payments, here are some of the tax breaks the IRS will give to relieve people affected:

  • Special Casualty Loss Deduction on Federal Tax Return
    Special casualty loss rules apply in a federally declared disaster area.  You can amend your previous year’s Federal return to report current losses instead of waiting until next year to report losses.  This gives you a quick refund (generally within 45 days).  Be aware that you cannot deduct losses that are covered by insurance or emergency aid assistance.  Use IRS Form 4684 to itemize these losses on a tax return.
  • In general, losses are deductible if they total more than $100 and more than 10 percent of your adjusted gross income.  Also, keep documentation to prove that a loss took place due to a disaster.  Include the dollar amount of loss, documentation on who owns or is liable for the property, and appraisals or photographs of loss.  Getting an estimate for damages from an appraiser, county tax assessor, or another reliable resource is a good idea.  For more information about how to report a casualty deduction on a tax return, visit the IRS web site at www.irs.gov.
  • Extension to file a return
    Affected taxpayers may be eligible to postpone the filing of returns, paying taxes, and performing other time-sensitive acts.  Due dates vary, depending on location, and details are posted on the “Tax Relief in Disaster Situations” page on www.irs.gov website.  Taxpayers not in the covered disaster area, but whose books, records, or tax professionals’ offices are in the covered disaster area, may be entitled to relief.
  • For instance, certain deadlines falling on or after August 23, 2017 and before January 31, 2018, are granted additional time to file through January 31, 2018.  This includes taxpayers who had a valid extension to file their 2016 that are due on October 16, 2017.  It also includes the quarterly estimated income tax payments originally due September 15, 2017 and January 16, 2018.  The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief.  However, affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this relief.
  • Tax-free assistance
    Disaster victims in a presidentially declared disaster area generally do not have to pay taxes on assistance payments they receive.  This exclusion from income applies to expenses compensated by assistance programs (such as Red Cross or FEMA) that are not otherwise reimbursed by insurance or other sources.

Other Financial Relief
When disaster hits, there are many agencies and non-profit organizations that are willing to extend a helping hand.  Knowledge of these programs can help you financially after a disaster hits.  Many of these benefits are tax-free.  The following is a list of some key agencies and a description of their functions:

  • Federal Emergency Management Agency (FEMA)
    FEMA is a federal disaster aid program that provides aid to citizens affected by major disasters.    They provide disaster assistance in the form of money or direct assistance.  It is meant to help you with critical expenses that cannot be covered in other ways such as insurance.  This assistance is not intended to restore your damaged property to its condition before the disaster.  Here are some of the services available by FEMA:
    • Temporary Housing—They can help you find a place to live for a limited time. Money is available to rent a different place, or a government provided housing unit when rental properties are not available;
    • Disaster-related medical and dental costs;
    • Disaster-related funeral and burial costs;
    • Clothing; household items, and tools required for your job;
    • Necessary educational materials (computers, school books, etc...);
    • Clean-up items (such as a wet/dry vacuum, dehumidifier);
    • Moving and Storage—This includes expenses related to the disaster or to prevent additional damage while repairs are being made to home.

    For more information on FEMA, visit their website at www.fema.gov, or call them at 1-800-621-FEMA (3362).

  • American Red Cross
    The Red Cross focuses on meeting people’s immediate emergency disaster-related needs.  They provide temporary shelter, food, and health and mental health services to assist individuals and families affected by a disaster.  The Red Cross also handles inquiries from concerned family members outside the disaster area, provides blood and blood related products, and perform many other services to help people resume their normal daily activities independently.  For more information, visit their website at www.redcross.org.
  • Small Business Administration (SBA)
    SBA is responsible for providing affordable, timely, and accessible financial assistance to homeowners, renters, and businesses of all sizes located in a declared disaster area.  Financial assistance is available in the form of low-interest, long-term loans for losses that are not fully covered by insurance or other resources.  For more information on SBA, visit their website at www.SBA.gov, or call them at 1-800-659-2955.

Recent Tax Updates

Reminder of the Federal Refund Delay for Upcoming 2018 Filing Season
Dec 13, 2017

Preparer Due Diligence Requirement Expansion Reminder
Nov 30, 2017

PTIN Renewal and Last Day to File a Return Electronically
Nov 13, 2017

Hurricane Relief Tax Law Changes
Nov 1, 2017

Important Upcoming IRS Update to e-Services Accounts
Oct 10, 2017

Tax and Financial Relief Options for Flood Victims
Sept 5, 2017

Warning to Tax Preparers of New Phishing Scam that is Attempt to Steal Passwords
Aug 8, 2017

IRS Security Summit Launches “Don’t Take the Bait” Education Campaign Aimed at Tax Preparers
Aug 1, 2017

IRS Announces Which ITINs Will Be Expiring at End of 2017 and That They Are Now Accepting Renewal Applications
July 27, 2017

IRS Use of Private Debt Collection Agencies
June 20, 2017

Additional Updates
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