Hurricane Idalia has left a devastating impact on various parts of the United States, particularly in Florida and South Carolina. As communities grapple with the aftermath, there is a silver lining: tax relief measures have been put in place to alleviate some of the financial burdens for affected individuals and businesses. This blog post provides a comprehensive guide on the tax relief options available, the eligibility criteria, and how to go about claiming these benefits.
Understanding Hardship Tax Relief
Hardship tax relief is a provision that allows taxpayers facing financial difficulties due to unforeseen circumstances, such as natural disasters, to access special allowances or exemptions under the tax code. For those affected by Hurricane Idalia, understanding the concept of hardship tax relief can be crucial in navigating the financial challenges that come in the wake of such a disaster.
What is Hardship Tax Relief?
In the context of natural disasters like Hurricane Idalia, hardship tax relief often comes in the form of relaxed rules and extended deadlines for tax payments and filings. The IRS may also offer specific relief measures, such as the ability to access retirement funds without the usual penalties, to help taxpayers cope with the financial strain caused by the disaster.
Types of Hardship Tax Relief
Special Disaster Distributions
One form of hardship tax relief available to those affected by Hurricane Idalia is the option to take a special disaster distribution from retirement plans or individual retirement arrangements (IRAs). These distributions are not subject to the additional 10 percent early distribution tax that usually applies to withdrawals made before the age of 59½.
Hardship Withdrawals
Some retirement plans offer what are known as “hardship withdrawals.” These are withdrawals made due to immediate and heavy financial need, and they may be available to those affected by Hurricane Idalia. Each plan or IRA has specific rules and guidance for their participants to follow.
Penalty Abatement
The IRS may also abate penalties for the failure to make payroll and excise tax deposits due on specific dates, provided the deposits are made by the respective end dates.
The Basics of Tax Relief for Hurricane Idalia Victims
Eligibility Criteria
The IRS has announced tax relief measures for individuals and businesses affected by Hurricane Idalia in specific areas designated by the Federal Emergency Management Agency (FEMA). In Florida, 46 out of 67 counties qualify for this relief, while all 46 counties in South Carolina are eligible.
Filing and Payment Deadlines
The IRS has postponed various tax filing and payment deadlines for affected taxpayers. The new deadline for filing various federal individual and business tax returns and making tax payments is now February 15, 2024.
Automatic Relief
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the IRS to get this relief.
Specific Tax Relief Measures
What tax deadline is extended to February 15?
The February 15 tax deadline is a special extension granted by the IRS to individuals and businesses affected by Hurricane Idalia. This extension applies to various federal individual and business tax returns and payments that were originally due during a specific period.
What Does the February 15 Deadline Mean?
The IRS has postponed various tax filing and payment deadlines for those affected by Hurricane Idalia. The new deadline for filing federal individual and business tax returns and making tax payments is now February 15, 2024.
Types of Taxes Covered
The February 15, 2024, deadline applies to the following:
- Individual Tax Returns: Individuals who had a valid extension to file their 2022 tax return, which was originally due to expire on October 16, 2023, now have until February 15, 2024.
- Quarterly Estimated Tax Payments: The deadlines for payments that were originally due on September 15, 2023, and January 16, 2024, have been extended to February 15, 2024.
- Quarterly Payroll and Excise Tax Returns: These are normally due on October 31, 2023, and January 31, 2024. The new deadline is February 15, 2024.
- Partnerships and S Corporations: For calendar-year partnerships and S corporations whose 2022 extensions were due to run out on September 15, 2023, the new deadline is February 15, 2024.
- Corporations: For calendar-year corporations whose 2022 extensions were due to run out on October 16, 2023, the new deadline is February 15, 2024.
- Tax-Exempt Organizations: For calendar-year tax-exempt organizations whose extensions were due to run out on November 15, 2023, the new deadline is February 15, 2024.
Penalty Abatement
Penalties for the failure to make payroll and excise tax deposits due on or after August 27, 2023, and before September 11, 2023, in Florida, and between August 29, 2023, and September 13, 2023, in South Carolina, will be abated as long as the deposits are made by the respective end dates.
Claiming Disaster-Related Losses
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 (2023) or the return for the prior year (2022). Taxpayers have extra time—up to six months after the due date of the federal income tax return for the disaster year—to make this election.
Exclusion from Gross Income
Qualified disaster relief payments are generally excluded from gross income. This means that affected taxpayers can exclude amounts received from a government agency for reasonable and necessary personal, family, living, or funeral expenses, as well as for the repair or rehabilitation of their home.
Retirement Plans and IRAs
Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10 percent early distribution tax.
How to Claim Tax Relief
Contacting the IRS
If you are an affected taxpayer but do not have an IRS address of record located in the disaster area, you should call the number on any late filing or late payment penalty notice you receive to have the penalty abated.
FEMA Declaration Numbers for Florida and South Carolina
Be sure to write the FEMA declaration number (DR-3596-EM for Florida and DR-3597-EM for South Carolina) on any return claiming a loss.
Are hurricane evacuation expenses tax deductible?
Generally, no, although certain losses might be. Hurricane evacuation can be a costly endeavor, involving expenses for travel, lodging, and other necessities. Given the financial burden, many people wonder if these expenses are tax-deductible. While the IRS does offer some tax relief for victims of natural disasters like Hurricane Idalia, the deductibility of evacuation expenses is not straightforward.
Casualty and Theft Loss Deductions
The IRS allows taxpayers to claim casualty and theft loss deductions for losses suffered due to events like hurricanes. However, these deductions typically cover property damage or loss, rather than evacuation expenses. The Tax Cuts and Jobs Act of 2017 further restricted this deduction to federally declared disaster areas.
Charitable Assistance
In some cases, charitable organizations provide financial assistance to individuals affected by natural disasters, including help with evacuation expenses. Such assistance is generally not considered taxable income and could offset the need to seek a deduction.
FEMA and Other Government Assistance
Financial aid received from FEMA or other government agencies for evacuation or other disaster-related expenses is generally not considered taxable income. However, this aid could reduce the amount of any casualty loss deduction you can claim.
Record-Keeping
While evacuation expenses are generally not tax-deductible, keeping detailed records of all disaster-related expenses is advisable. This can be helpful if tax laws change or if you need to substantiate claims for insurance or other forms of assistance.
Conclusion
While the IRS offers various forms of tax relief for victims of natural disasters, the deductibility of hurricane evacuation expenses under current tax law is limited. However, other forms of financial relief may be available, such as charitable assistance or hardship distributions from retirement accounts.
Conclusion
The tax relief measures for those affected by Hurricane Idalia are a welcome respite during these challenging times. Taxpayers should be aware of these provisions to make the most of the financial relief offered. For more information, visit the IRS disaster relief page or consult with a tax professional.
For a free consultation with one of our experienced tax attorneys, call 312-345-5440, or contact us by email today.
