On August 28, 2017 the IRS issued IR-2017-135 giving certain individuals and businesses in Texas until January 31, 2018 to make certain tax payments and file certain tax returns.
Hurricane Harvey victims in parts of Texas have until January 31, 2018, to file certain individual and business tax returns and make certain tax payments. This includes an additional filing extension for taxpayers with valid extensions that expire on October 16, 2017 (i.e. individuals, C Corporations, retirement plans Form 5500, some trusts, etc.) and businesses with extensions that run out on September 15, 2017 (i.e. partnerships, S Corporations, etc.).
The IRS is now offering this expanded relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, 39 counties are eligible, but taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief.
Currently, the following Texas counties are eligible for relief: Aransas, Austin, Bastrop, Bee, Brazoria, Calhoun, Chambers, Colorado, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Hardin, Harris, Jackson, Jasper, Jefferson, Karnes, Kleberg, Lavaca, Liberty, Matagorda, Montgomery, Newton, Nueces, Orange, Polk, Refugio, Sabine, San Jacinto, San Patricio, Tyler, Victoria Walker, Waller and Wharton.
The tax relief postpones various tax filing and payment deadlines that occurred starting on August 23, 2017. As a result, affected individuals and businesses will have until January 31, 2018, to file returns and pay any taxes that were originally due during this period. This includes the September 15, 2017 and January 16, 2018 deadlines for making quarterly estimated tax payments. For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until October 16, 2017. The IRS noted, however, that because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.
A variety of business tax deadlines are also affected including the October 31 deadline for quarterly payroll and excise tax returns. In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after August 23, 2017 and before September 7, 2017 if the deposits are made by September 7, 2017. Details on available relief can be found on the disaster relief page on www.IRS.gov.
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.
In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.
Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016). See IRS Publication 547 for details.
The tax relief is part of a coordinated federal response to the damage caused by severe storms and flooding and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.
For information on government-wide efforts related to Hurricane Harvey, please visit: https://www.usa.gov/hurricane-harvey
Casualty Losses - Victims of Hurricane Harvey
Hurricane Harvey was the cause of extensive damage throughout the Gulf Coast Region. President Trump issued a disaster declaration making our region eligible for federal assistance. One of the benefits of this declaration is that taxpayers who suffered losses from Harvey have the option to amend their 2016 federal income tax returns to deduct the disaster related losses and receive an immediate tax refund or wait to deduct the Harvey related losses on their 2017 federal income tax returns.
DRDA, PLLC is here to help you through these challenging times. The following information is presented as an overview of what is needed to receive your tax deduction and benefit.
The information required to determine the amount of the casualty loss is:
1. the adjusted basis in the property before the casualty,
2. the decrease in the fair market value of the property as a result of the casualty,
3. and the amount of any insurance reimbursement you receive.
The adjusted basis in the property is generally what was paid for the property plus the cost of any improvements to the property. If your property records were lost in the disaster, you can try to obtain copies. For example, if the damage was to your personal residence, you could contact the title/escrow company or bank who handled the sale. For other items of personal property, you can use catalogs, advertisements, etc. to determine the cost.
The fair market value after the loss is generally determined through an appraisal. Absent an appraisal, the cost of cleaning up or making repairs is acceptable as evidence of the decrease in fair market value under the following conditions:
1. The repairs are actually made.
2. The repairs are necessary to bring the property back to its condition before the casualty.
3. The amount spent for repairs is not excessive.
4. The repairs take care of the damage only.
5. As a result of the repairs the value of the property after the repairs is not more than the value of the property before the casualty.
For personal property (i.e. non-business property), each loss is reduced by $100 and then all losses for that year are reduced by 10% of your adjusted gross income for that year. Losses from personal property are itemized deductions taken on Schedule A of the federal income tax return.
Losses on business and income-producing property (i.e. rental properties) are not subject to these limitations/reductions.
If the loss deduction for the year exceeds your income for that year, you may have a net operating loss, which can be carried back two years to lower your tax in prior years and obtain a refund of tax from the prior years.
Our thoughts and prayers are with all of you who were affected by Hurricane Harvey. DRDA stands ready to help you. If we may be of assistance, please don’t hesitate to contact our office at 281-488-2022.