We, at GBH, share your pain at this time of disaster. But there is a bright spot in the tax law. All of the counties affected by Hurricane Harvey have been included in a Federal Disaster Area declaration. There are specific tax benefits to anyone in the counties affected, whether you suffered a casualty or not.
The IRS has announced a tax return deadline extension for anyone living in the Federal Disaster Areas or using a tax preparer located in the area for tax returns due on or after August 23, 2017, and before January 31, 2018, are now due on January 31, 2018. This applies to both income tax returns and the payroll reports due on October 31, 2017. All required estimated tax payments are extended to January 31, 2018, as well. Any payroll and excise tax deposits due between August 23, 2017, and September 7, 2017, will have any penalties abated as long as they are deposited by September 7, 2017.
While we don’t recommend delaying filing your return all the way to January, if your records are affected, it is good to know that there is some additional time available to reconstruct them. One of the big benefits of the delay can be that it gives you an extra three months to make any qualified plan contributions. Additionally, the IRS has relaxed procedural and administrative rules that apply to retirement plan loans and hardship distributions. Employees with a 401(k) or an IRA may be able to access those funds. Again, consult with your GBH tax advisor regarding the new rules.
If you suffered a casualty loss in the flood, or due to the loss of power at your home or business, there are two options on the deductibility of the loss. It can be claimed in the year the event occurred or the prior year. In this case, a loss could be claimed on either your 2016 return (including an amended return, if you have already filed) or your 2017 return. You should consult with your tax advisor here at GBH to see which year it will be most advantageous to claim the loss. Some of the factors to be considered are the time value of money, the possibility of tax rate changes due to tax legislation, the taxes actually paid/payable in the year the loss is to be claimed, etc. The loss can currently only be claimed as an itemized deduction, but Congress may allow a deduction similar to that for the Tropical Storm Sandy victims.
In calculating the amount of your loss, the loss is the amount not reimbursed by any insurance claims. The loss can include the following:
1) The value of the possessions (including cars, personal property, etc.) damaged by the storm;
2) The value of items in your refrigerator and freezer lost due to power issues (this can be significant if bought at the Rodeo auction, for example);
3) The increased cost of food over what it would have cost at your home;
4) The cost of temporary housing;
5) The cost of removing trees damaged in the storm;
6) The cost to restore your home to its condition prior to the storm, including cleaning, repairs, and landscaping;
7) Additional costs incurred for child care that would not have been incurred.
For more information, visit the IRS website.