As Iowans recover from the recent derecho storm and the wildfires continue to burn in California, there is tax-related help for those who may be affected. From extending deadlines to tips for preparing for a natural disaster headed your way, The IRS has recently made several announcements to assist impacted taxpayers.
Victims of the Iowa derecho storm, which started on August 10th and the California wildfires that began on August 14th now have until December 15, 2020, to file various individual and business tax returns. This means individuals with a valid extension to file their 2019 return on October 15, 2020, will now have until December 15, 2020, to file. The IRS noted, however, that because tax payments related to these 2019 returns were due on July 15, 2020, those payments are not eligible for this relief.
The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. The current list of eligible localities is always available on the disaster relief page on IRS.gov. Similarly, relief is available to employers, tax-exempt organizations, and businesses located in eligible disaster relief localities.
The December 15, 2020, deadline also applies to quarterly federal estimated income tax payments due on September 15, 2020, and the quarterly employer payroll and excise tax returns normally due on October 31, 2020. It also applies to tax-exempt organizations, operating on a calendar-year basis, with a valid extension until November 15, 2020. Similarly, businesses with valid extensions also have the additional time including, among others, calendar-year corporations whose 2019 extensions run out on October 15, 2020.
In addition, penalties on payroll and excise tax deposits due after August 10th (for the Iowa storm) and August 14th (for the California wildfires) and before August 31st, will be abated if the deposits are made by August 31, 2020.
Tips for Preparing for Natural Disasters
August is the height of hurricane season in the U.S. With an unprecedented two storms (Marco and Laura) affecting the Gulf Coast simultaneously, more storms in the coming months may impact other areas of the country through the season. To help citizens, the IRS outlines key tips to create or maintain an emergency preparedness plan. A well-thought-out plan is a critical component for surviving natural disasters. Taxpayers, whether individuals, organizations, or businesses, should take time now to create or update their emergency plans.
A solid plan includes securing and duplicating essential documents, creating lists of property, and knowing where to find information once a disaster has occurred.
- Secure key documents and make copies
Taxpayers should place original documents such as tax returns, birth certificates, deeds, titles, and insurance policies inside waterproof containers in a secure space. Duplicates of these documents should be kept with a trusted person outside the area of the taxpayer. Scanning them for backup storage on electronic media such as a flash drive is another option that provides security and portability.
- Document valuables and equipment
Current photos or videos of a home or business’s contents can help support claims for insurance or tax benefits after a disaster. All property, especially expensive and high value items, should be recorded. The IRS disaster-loss workbooks in Publication 584 can help individuals and businesses compile lists of belongings or business equipment.
- Employers should check fiduciary bonds
Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider. The IRS reminds employers to carefully choose their payroll service providers.
- Rebuilding documents
Reconstructing records after a disaster may be required for tax purposes, getting federal assistance or insurance reimbursement. Those who have lost some or all their records during a disaster can visit IRS’s Reconstructing Records webpage as one of their first steps.
Find complete disaster assistance and emergency relief details for both individuals and businesses on IRS.gov.
As local tax laws vary from state to state, and even from town to town, other tax relief may be in play due to the COVID-19 pandemic. Contact your tax advisor to discuss other strategies that may help you, your family or your business deal with delays in filing or economic loss from a natural disaster. If you or someone you know has been affected by recent natural disasters, please share this information.