Irma IRS Relief for FL and the Caribbean Similar to Harvey
I know, I know...you've been sitting around thinking 'when am I going to see another blog about hurricane tax relief?!'. Your wait is over, my friends! This piece provides a summary of the various reliefs being granted by the IRS and includes links to previous pieces that explain certain topics in greater detail.
If you read my previous posts about Harvey most of this will be a reiteration, but not all. There are some differences between the relief being offered for FEMA-declared Irma disaster zones vs. FEMA-declared Harvey disaster zones. Therefore, I will provide a very basic summary here and indicate differences. IRS press releases don't have a reputation for being 'easy-reading' or something that one would enjoy curling up with on the beach so feel free to reach out if you need assistance understanding any of this. I am more than happy to help and point you in the right direction.
As a reminder, the below is just a summary and many situations present unique circumstances. Please read the releases thoroughly or contact a tax professional to help you navigate the best course of action for your situation. Also, as a reminder, all of the below only applies to areas declared by FEMA as eligible disaster zones. If you are not within those zones, other relief may be available.
1) Don't stress about making filing deadlines for 2016 personal or corp returns currently on extension, for payroll returns or for tax payments. If you had a payment or filing requirement after Sept. 4th in FL or Sept. 5th in the Caribbean, the deadlines have been extended to January 31st, 2018 for returns or tax due in the period commencing with those dates. More detail on updated filing dates and what can be delayed is in the following link. As of now, the differences between date extension relief granted for Irma and Harvey are extremely limited.
2) The IRS is allowing you to use your 401(k) and similar employer-sponsored retirement plans, without penalty, for various hardships (rebuilding, food, shelter,etc) if you are in the FEMA-declared zones. Important to note that IRAs ARE NOT INCLUDED in this relief but they may qualify for distributions under eased rules. The retirement plan usage can be done as hardship distributions or loans.
Another important item of note: someone who lives OUTSIDE THE FEMA ZONES can make loans form their retirement plans to sons, daughters, parents, grandparents or other dependent who lived or worked INSIDE THE FEMA disaster area. So, if you have family who needs help and you are in a position to do so, there is an allowance for that in this relief.
In addition to normal hardship rules for retirement plan usage, those in FEMA-declared zones can also use distributions for food and shelter. There is a lot to consider when deciding to use your retirement plan to rebuild and the rules are numerous and often confusing. Therefore, if this is something you'd like to consider, seek counsel from a tax professional, investment professional, FEMA or the IRS (FEMA and the IRS will provide free information and help the best they can).
The 401(k) usage relief is similar to Harvey.
3) Casualty losses can generate significant, and fairly immediate, tax refunds and/or savings. A casualty loss is a deductible property loss that you can claim on your tax return. Casualty losses occur when property is damaged, destroyed or lost due to a disaster AND you suffer a net financial loss. To potentially generate quick-ish cash flow, you are allowed to amend 2016 returns and have refunds issued against previously paid tax by claiming casualty losses on the amended returns. If you are not in a rush, you can also claim casualty losses on your 2017 return when you file it. You don't have to amend 2016 returns to take advantage of casualty losses. This is a fairly complicated topic so please read the linked piece and then contact a tax professional, the IRS or FEMA if you need guidance. IMPORTANT NOTE: You can claim casualty losses even if you do not live in a declared disaster zone. However, you must live in a declared area to use the provision allowing you to take the loss on your 2016 return. Anyone outside of a declared disaster area can only claim the loss on 2017 returns or beyond.
4) I wrote a piece on the ability to use vacation, sick or personal days as a donation vehicle to help the Harvey recovery effort. As of 9/15, the IRS HAS NOT released anything indicating that this will apply to Irma as well. So, for now, this is limited to Harvey recovery efforts. I will update this if the IRS issues any new guidance relating to IRMA. If you are interested in how the leave-based donations worked for Harvey, see the following link. (UPDATE: Irma is now eligible for leave-based donations...link to press release below, For details, please read my post about ho this worked for Harvey. The programs are parallel).
That's the summary of IRS relief to this point. If they issue any relevant additional guidance, I will amend this piece or post something additional. Remember, FEMA and the IRS will provide free guidance via phone and at certain locations where available. Tax professionals should be able to help with all mentioned in this article as well.
Our thoughts are with all those effected by these disasters.
Important Links:
Localities granted federal disaster status as of 9/15/2017:
Caribbean: The islands of St. John and St. Thomas
Puerto Rico: The municipalities of Culebra, Vieques, Canóvanas and Loíza
Florida counties: Brevard, Broward, Charlotte, Clay, Collier, Duval, Flagler, Hillsborough, Lee, Manatee, Miami-Dade, Monroe, Orange, Palm Beach, Pasco, Pinellas, Polk, Putnam, Sarasota, St. Johns Counties and St. Lucie
Texas counties: Austin, Batrop, Colorado, DeWitt, Fayette, Gonzales, Hardin, Jasper, Jefferson, Karnes, Lavaca, Lee, Montgomery, Newton, Orange, Polk, Sabine, San Jacinto, Tyler, Waller and Walker Counties
