Jay A. Finn CPA, LLC
Certified Public Accountant
11500 Northwest Fwy. #581
Houston, Texas 77092
September 10, 2017
Hurricane Harvey IRS Tax Extension Deductions Penalty Waivers and Other Relief
We extend our thoughts and prayers to all of you affected by the 2017 Hurricanes. Following these disasters, we offer the following paper and a brief explanation. Taxpayers in the following counties will be eligible for a hurricane Harvey IRS tax extension, flood deductions, disaster penalty waivers and other IRS tax relief.
IRS disaster relief coverage includes the following 39 counties in Texas:
Texas: Aransas, Austin, Batrop, Bee, Brazoria, Calhoun, Chambers, Colorado, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Hardin, Harris, Jackson, Jasper, Jefferson, Karnes, Kleberg, Lavaca, Lee, Liberty, Matagorda, Montgomery, Newton, Nueces, Orange, Polk, Refugio, Sabine, San Jacinto, San Patricio, Tyler, Victoria, Walker, Waller and Wharton.
IRS disaster relief coverage includes the following 17 counties in Florida, 4 municipalities in Puerto Rico and 2 U.S. Virgin Islands (as of Sept. 13th, 2017):
U.S. Virgin Islands: The islands of St. John and St. Thomas.
Puerto Rico: The municipalities of Canóvanas, Culebra, Loíza, and Vieques.
Florida: Broward, Charlotte, Clay, Collier, Duval, Flagler, Hillsborough, Lee, Manatee, Miami-Dade, Monroe, Palm Beach, Pinellas, Putnam, Sarasota, and St. Johns Counties.
Jay A. Finn, CPA, LLC, offers a 10-minute free phone consultation followed by another 20-minute free office consultation for those affected by the Harvey or Irma Hurricanes. Many taxpayers are trying to figure out how to pay for the damage. Some have insurance, and many insured or otherwise are eligible for FEMA relief for your home or other property.
Herein is the outline with brief explanations. Please note once more that the followings statements, unless stated otherwise, apply to Federally declared disaster areas:
1) Tax filing and tax paying extensions:
The IRS has granted any taxpayer affected by Harvey and Irma victims as it relates to extended filings beyond the six-month extension of September 15 and October 16, respectively until Jan. 31, 2018. These include, but are probably not limited the tax filings of an individual, corporation, an estate or trust, partnership, S corporation, and employment tax returns. There may be other tax filing obligations not mentioned herein that had a deadline occurring on or after Aug. 23, 2017 (and as to Irma occurring after September 4, 2017). Other timely returns such as the Retirement form 5500 have also been granted an extension to file.
2) Important relief for taxpayers in collections or audit
All those affected taxpayers who are contacted by the IRS for the debt collection or even an audit examination should explain that they or their business were affected by the hurricane or flood. Upon notification, the IRS will consider a delay of enforcement or may reschedule your appointment. Some such contact may include but not limited to, Automated collection service (ACS) via post, office auditor or an office or home visit by a revenue officer. The IRS may even grant relief for those under IRS criminal investigations by a special IRS agent.
3) What is Not Covered:
While the IRS is offering relief by allowing an additional extension to January 31, 2018, it is not an extension to pay. Payments for personal returns were due on April 18th, 2017 and business (such as corporate and partnerships) were due on March 15, 2017).
4) Tax deduction whenever reporting Casualty losses with or without insurance
A) There is no waiver of 10% deductible of AGI before you can deduct a loss tax on your 1040 personal return and you must add it to itemized deductions on Schedule A, so you need to have otherwise enough to itemize rather than taking the standard deduction. There is also a $100.00 deductible per casualty, but in one year you only take 10% off for all disasters. However, your home and its adjacent property are considered one casualty.
B) Also for taxpayers in a federally declared disaster area, have the option of claiming disaster-related casualty losses on the 1040 income tax return for either the year in which the event occurred or the prior year. Getting the greatest tax benefit may require amending your tax return. Doing taxes in a natural disaster year requires tax planning but can yield considerable rewards.
5) Special computations for gains after insurance, rentals, and abandonment of property
These issues remain complicated. You should consult your CPA or tax advisor either before or at time of filing.
6) Partnerships, Corporations, Estates, and Trusts, etc. deductibles of 10% may not apply
Please discuss this delicate matter with your CPA or tax preparer.
7) Hardships in Retirement plan distributions or loans
If you have a retirement plan, you may access any monies quicker. Also, the IRS will not institute the six-month ban on contributions in defined benefit programs. There are other reliefs for immediate relatives or other dependents outside the disaster area to access their retirements early to help out their families.
8 Charitable and work leave issues
Another program allows employees to trade their vacation, sick or personal leave in exchange for cash payments by the employer through Jan. 1, 2019 should they wish to donate to a charity which has provided relief for the victims of the hurricanes.
8) Proof of Loss
Of course, you must have some adequate proof of your loss. Therefore, in disaster areas, some reconstructing is going to be allowed. Thereby, you need one or more of the following: Pictures before and after at least. Or you may have other documentation such as receipts, witnesses or insurance companies showing the casualty loss.
Also, in the absence of any of the above, you may need to acquire sworn statements from outside parties including your relatives, friends or employees.
We encourage as much investigation into the disaster relief as soon as you can recover from any trauma incurred.
Again, we wish you well from all of our management and staff,
Jay Allen Finn, CPA
Jay A. Finn, CPA, LLC