August 7, 2012

A natural disaster can occur anytime and anywhere across the country.

Regardless of whether it’s a tropical storm, a flood, a wildfire or some other disaster, it’s important to remember that individuals and businesses do have tax relief options available to them when these events occur. So far in 2012 alone, there have been 19 federal disaster declarations.

Potential relief options available

The IRS may:

  • Postpone certain deadlines for taxpayers or businesses in a disaster area
  • Waive failure to deposit penalties
  • Extend deadlines for making income tax payments
  • Extend deadlines for making contributions to various accounts that normally have strict deadlines
  • Waive usual fees to provide previously filed returns to taxpayers

Those who qualify for tax relief

Four types of individuals or businesses may qualify for tax relief:

  • Those who live in the area of the disaster as listed in the Treasury Regulations [Treas. Reg. Section 301.7508A-1(d)(1)]
  • Those who live outside of the disaster area who are directly affected by the disaster as described in the Treasury Regulations [Treas. Reg. Section 301.7508A-1(c)]
  • Those who assist in the relief effort and meet the requirement to be affiliated with a recognized government or philanthropic organization
  • Anyone killed or injured as a result of the disaster while visiting the disaster area

Casualty losses

Usually a taxpayer must deduct a casualty loss in the year it occurs. If the casualty loss is the result of a federally declared disaster that occurred in an area warranting public or individual assistance (or both), the taxpayer can choose to deduct that loss on the current-year return or an amended return for the tax year immediately preceding the tax year in which the disaster occurred.

If a taxpayer chooses to submit an amended return, the loss is treated as having occurred in the preceding tax year. This will normally result in a refund for the taxpayer. If taxpayers have personal property losses that are not covered by insurance, they should fill out Form 4684 as part of their individual tax return.

Affected taxpayers who receive a penalty notice from the IRS should call the telephone number on the notice to have the IRS overturn any interest, late filing or late payment penalties that would otherwise apply.

The IRS has a disaster hotline that can be reached at (866) 562-5227 for individuals or businesses with questions related to disaster relief. They can also reference IRS Publication 547.

Steve Keske
Jannsen & Company, S.C.
Office in Pewaukee, Wis.

This article was originally posted on August 7, 2012 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at