Victims of Hurricanes Harvey and Irma Have Tax Relief Options
Businesses and individuals affected by hurricanes Harvey and Irma have several options to consider when filing tax extensions.
Victims of hurricanes Harvey and Irma may qualify for tax relief from the Internal Revenue Service. President Trump has declared that a major disaster exists in Texas and Florida, and businesses and individuals will receive tax relief.
The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster areas. For instance, taxpayers with certain deadlines falling after Aug. 23 and before Jan. 31, 2018, are granted additional time to file through Jan. 31, 2018.
This includes taxpayers who had a valid extension to file 2016 tax returns, quarterly estimated income tax payments originally due on Sept. 15 and Jan. 16, 2018, and the quarterly payroll and excise tax returns normally due on Oct. 31. In addition, penalties on payroll and excise tax deposits due on or after Aug. 23 may be abated. Check with your tax advisor or the IRS for more details.
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 that falls within the postponement period, the taxpayer should call the telephone number on the notice to ask the IRS to abate the penalty.
The IRS automatically identifies taxpayers located in covered disaster areas and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at (866) 562-5227 to request this tax relief.
Covered Disaster Area
It is important to note that only counties in a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.
Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief.
In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area, and any individual visiting the covered disaster area who was killed or injured as a result of the disaster, are entitled to relief.
Grant of Relief
Under section 7508A, the IRS gives affected taxpayers until Jan. 31, 2018, to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), that have either an original or extended due date occurring on or after Aug. 23, and before Jan. 31, 2018.
Affected taxpayers that have an estimated income tax payment originally due on or after Aug. 23 and before Jan. 31, 2018, will not be subject to penalties for failure to pay estimated tax installments as long as such payments are paid on or before Jan. 31, 2018. The IRS also gives affected taxpayers until Jan. 31, 2018, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 23 and before Jan. 31, 2018.
This relief also includes the filing of Form 5500 series returns that were required to be filed on or after Aug. 23 and before Jan. 31, 2018, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.
Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.
Mitch Reitman is the Managing Principal at Reitman Consulting Group. He can be reached at (817) 698-9999.
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