Tax-Related Items To Keep in Mind When Disaster Strikes - Nov 2020
Contributed by : Mukesh Makker
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Unfortunately, disaster can strike at any time. If you've been affected by a disaster this year, here are six tax-related things to keep in mind that usually happen after a major disaster strikes:
1. FEMA Declaration of Major Disaster Area
Before the IRS can authorize any tax relief, FEMA must issue a major disaster declaration and identify areas that qualify for their Individual Assistance program. Recent examples of federally declared disaster areas include the California and Oregon wildfires, Iowa derecho, and Hurricanes Delta, Sally, and Laura.
2. More Time to File and Pay
Individuals or businesses located in the disaster area whose address of record is located in an area identified by FEMA for their Individual Assistance program automatically receive extra time from the IRS to file returns and pay taxes.
Generally, these affected taxpayers have until the last day of the Extension Period to file tax returns or make tax payments, including estimated tax payments, that have either an original or extended due date falling within this Period. The IRS also abates interest and any late filing or late payment penalties that would normally apply during these dates to returns or payments subject to these extensions.
3. Casualty Loss Tax Deduction
Taxpayers who have damaged or lost property due to a federally declared disaster may qualify to claim a casualty loss deduction. This deduction can be claimed on a current or prior-year tax return. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year's return could result in a greater tax saving, depending on other income factors.
4. Disaster Loans or Grants
The Small Business Administration offers financial help to business owners, homeowners and renters in a federally declared disaster area. To qualify, a taxpayer must have filed all required tax returns.
5. Prior Year Tax Return Transcript
If you need a tax transcript to support your disaster claim, you can obtain free transcripts by using Get Transcript on the IRS website to access your transcripts immediately online. You can also request mail delivery. You can also call 800-908-9946 to request mail delivery or submit Form 4506-T, Request for Transcript of Tax Return.
If you need a copy of their tax return file Form 4506, Request for Copy of Tax Return. The IRS waives the usual fees and expedites requests for copies of tax returns for taxpayers who need them to apply for disaster-related benefits or to file amended returns claiming disaster-related losses. To speed up the process, when filing Form 4506 (or Form 4506-T), taxpayers should state on the form whether the request is disaster-related and list the state and type of event.
6. Change of Address
After a disaster, some people might need to temporarily or permanently relocate. If this applies to you, you will need to notify the IRS of your new address by submitting Form 8822, Change of Address.
For questions about this and other federal disaster relief that might be available, please contact the office.
| About Author |
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Mr. Maker is a certified Public Accountant and serving the South Asian community since 1993.
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Website: https://www.taxmaker.com/newsletter.php#7
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