Sandy: Extended Tax Relief

The IRS has expanded the tax relief granted to individuals affected by hurricane Sandy.  This comes as no big surprise given the fact that the IRS had initially given a meager 7 additional days to file employment tax returns that were due on October 31st.  The IRS is now expanding relief categories and extending the deadline to February 1, 2013.  Also, the IRS has now identified specific counties that automatically qualify for relief.

Here is a new breakdown of the types of tax requirements with an extended February 1, 2013 deadline:

  1. Fourth Quarter estimated tax payments for individuals
  2. Third Quarter payroll and excise tax returns
  3. Fourth Quarter payroll and excise tax returns
  4. Form 990 series returns required of tax-exempt organizations

Tax relief is automatic for residents of 4 specified counties in Connecticut, 10 counties in New Jersey, and 9 counties in New York.  The IRS is also demonstrating compassion for people who were indirectly affected by Sandy.  So, if your tax records or your CPA were located in any of the listed counties during the storm, or if you were helping with rescue and relief efforts, you may also qualify for tax relief, but you will need to call the IRS and request it.

IRS Gives Payroll Tax Extension for Business in Sandy’s Path

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Filing and paying your taxes is a serious obligation that cannot easily be avoided or postponed.  If you fail to file and/or pay on time, you will be responsible for penalties and interest that can make your tax debt add up quickly.  Penalties and interest can sometimes be avoided by showing you had reasonable cause for filing and/or paying late.  For example, if you were incapacitated by serious injury or illness, or if there was some act of God occuring in your locality that prevented you from filing or paying on time, the IRS would likely abate the penalties and interest that would have accrued during that time.

Sometimes the IRS automatically grants penalty relief when there are major storms and disasters.  Reasonable cause is presumed in these situations and the taxpayer need not provide any individual proof.  FEMA has designated certain areas affected by Hurricane Sandy and related storms as official disaster areas and the IRS followed suit by granting limited tax relief.  The IRS is giving businesses an extra seven days to make their quarterly tax deposits — 3rd Quarter deposits that are normally due on October 31st, will not be late as long as they are made by November 7th.

Isaac-related Tax Relief

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Hurricane Isaac has caused an estimated $2 billion worth of damage with at least 13,000 homes and countless other structures damaged in Louisiana alone.  The devastation was enough for the IRS to announce special tax relief for the following affected counties:

  • In Louisiana: Ascension, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. John the Baptist and St. Tammany parishes.
  • In Mississippi: Hancock, Harrison, Jackson and Pearl counties.

What kind of tax relief, you ask?  The IRS basically gives taxpayers and businesses in the affected areas extensions on filing and paying certain taxes that were due on or after August 26, 2012.  For example, somebody living in Jefferson Co., Louisiana who requested a filing extension for their 2011 taxes will no longer have to file by October 15th.  Instead, the new deadline will be January 11, 2013.  And this is regardless of individual circumstances; everyone in the affected counties will be allowed to postpone filing and/or payment.  The other benefit is that the IRS will abate both penalties and interest that would otherwise accrue during the period leading up to January 11th.

It’s actually FEMA that goes out and assesses the damage, and IRS designates disaster areas based on FEMA reports.  There are 14 disaster areas now, but will that list continue to grow?  It may be too early to kiss Isaac goodbye.  A remnant of Isaac is lurking in the Gulf of Mexico that experts say could regenerate into another hurricane if conditions are just right.  Apparently this is what happened with Katrina in 2005.