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: