Special tax relief for Hurricane Harvey victims

By elitecpas | August 31, 2017 |

In an effort to help those affected by Hurricane Harvey, certain tax filing deadlines have been extended and the ability to access certain types of retirement funds, without penalty, is now available for those in the devastated areas. We’ve listed the most relevant data in this post. The full IRS notice can be read at the link below.

From the IRS website:

Hurricane Harvey victims in parts of Texas have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments, the Internal Revenue Service announced today.

This includes an additional filing extension for taxpayers with valid extensions that run out on 10/15/17 and businesses with extensions that run out on Sept. 15.

The IRS is now offering this expanded relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, 18 counties are eligible, but taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 23, 2017. As a result, affected individuals and businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were originally due during this period. This includes the Sept. 15, 2017, and Jan. 16, 2018 deadlines for making quarterly estimated tax payments. For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until Oct. 16, 2017.

A variety of business tax deadlines are also affected including the Oct. 31 deadline for quarterly payroll and excise tax returns. In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after Aug. 23 and before Sept. 7, if the deposits are made by Sept. 7 2017.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year) or the return for the prior year (2016). See Publication 547 for details.

Currently, the following Texas counties are eligible for relief: Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria, and Wharton.

Special relief for Retirement Plan loans and distributions:

In an Announcement and accompanying News Release, IRS has announced that employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Harvey and members of their families. And, while IRA participants are barred from taking out loans, they may be eligible to receive distributions under liberalized procedures. But IRS is not waiving the 10% penalty that applies to early withdrawals.

The IRS-provided relief with respect to retirement plan distributions and loans can be summarized as follows:

The laws relating to qualified employer plans impose various limitations on the permissibility of loans and distributions from those plans. The Code provides that in the case of a 401(k)plan that is part of a profit-sharing or stock bonus plan, elective deferrals may be distributed only in certain situations, one of which is on account of hardship. Similar rules apply with respect to elective deferrals under a 403(b) plan. In general, plans may not permit distributions before the occurrence of certain enumerated events, one being when the participant is faced with an unforeseeable emergency.

The specific details are in the above link, but the gist of this is to allow loans that would not otherwise qualify as such.

Clients affected by this are welcome to contact our office for more details.

Posted in For Individuals and tagged disaster, harvey