But the #IRS said stated it would grant an automatic extension to individuals and businesses who are victims of Hurricane Harvey. They’ll have until Jan. 31, 2018 to file and pay federal taxes that were due between Aug. 23 and January 2018.
“This has been a devastating storm, and the IRS will move quickly to provide tax relief to hurricane victims,” said IRS Commissioner John Koskinen. “The IRS will continue to closely monitor the storm’s aftermath, and we anticipate providing additional relief for other affected areas shortly.”
Anyone who has been granted an #taxextension to file their 2016 tax return by mid-October can now take until the Jan. 31 deadline to file their paperwork. But, if they owe money for 2016, they’ll still have to pay a late payment penalty and interest. That’s because 2016 payments were due in full on April 18, months before the storm.
Among others that will benefit from the IRS, extension are businesses that file estimated taxes in September and January, as well as employers that file quarterly payroll and excise tax returns.
Like Hurricane Katrina, which was the costliest natural disaster and one of the five deadliest hurricanes in the history of the United States, it’ll take months and even years for many residents of Texas to pick up the pieces after the devastation caused by #HurricaneHarvey.
This comes as small solace, but at least some victims will benefit from certain provisions in the federal tax law. In fact, they may be in line for immediate tax relief by making a special tax return election.
How to #PlanAhead for the Worst
The IRS is doing its part to inform tax professionals. As we head into the midst of hurricane season, it is not only extending tax filing deadlines but it’s also offering a series of 10-minute webcasts relating to #NationalPreparednessMonth (NPM). Simple send an email to SBSE.SL.Web.Conference.Team@irs.gov. Don’t forget to include your name, email address and the session date and time.
The basic tax rules are well-grounded. You can deduct losses from #casualties and #thefts on your personal return for damage to your property caused by events that are “sudden, unexpected or unusual .”
Of course, this includes destruction of property from hurricanes, floods and the like, but not for damage caused by a gradual deterioration.
After insurance proceeds relating to the event have been subtracted, taxpayers must apply two rules to personal property losses:
1. The deductible amount is reduced by $100 for each casualty or theft event.
2. The remainder is deductible only to the extent it exceeds 10 percent of your adjusted gross income (AGI).
For instance, let’s assume that a #Texas resident has an #AGI of $100,000 and suffers an uninsured loss of $20,000 for damage to a home from flooding. Absent other losses during the year, the deductible amount is limited to $9,900. (Note: These two restrictions don’t apply to losses to business property.)
In the event of a natural disaster like Harvey, taxpayers residing in an area designed by the President as a federal disaster area can obtain fast tax relief.
Typically, the deduction for casualty losses is claimed on the tax return for the year in which the casualty event occurs. Thus, for losses incurred in 2017, you typically would deduct a loss on the 2017 return you file in 2018.
However, for losses in a federal disaster area, you may choose to deduct the loss on the tax return for the year immediately preceding the tax year in which the disaster occurred.
In other words, if you qualify, you don’t have to wait to file your 2017 tax return to obtain a tax refund from the IRS. Instead, you can file an amended return for 2016, claiming the loss you incurred in 2017.
Finally, be aware that a taxpayer has 90 days to undo this election. If the election is revoked before the taxpayer receives a refund, he or she then has 30 days to return it.
About the author:
Dr. Cozette M. White is an acclaimed best-selling author, nationally recognized financial analyst and tax strategist, international speaker and philanthropist.
White’s advice has been called upon by ABC and FOX television stations. She has been featured on the numerous radio shows, a recurring voice to millions making regular appearances in various national media outlets, including Black Enterprise, Forbes, Women of Wealth, Upscale, The Huffington Post, and countless newspapers across the country. Women of Wealth dubbed White, “Wealth Builders Extraordinaire.” Recently Dr. White was awarded the President’s Lifetime Achievement Award by President Barack Obama.
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