Tax News


When Disasters Strike

August 30, 2011 : Jackie Perlman - The Tax Institute

When Disasters Strike

Taxes are probably not on your mind in the event you and your loved ones are affected by a natural disaster. But, you should know three types of tax relief and assistance are available to help taxpayers in federal disaster areas recover and rebuild.

  • Casualty losses. Taxpayers in a federal disaster area who incur disaster-related casualty losses (e.g., damaged or lost property) have a choice about how to claim their losses. A disaster-related casualty loss may either be claimed on a tax return for the year the disaster occurred or on the prior year’s return.

o        For example, a loss occurring in 2011 may be claimed on the taxpayer’s 2011 tax return filed in 2012 or on an original or amended 2010 return filed in 2011. While claiming the loss on the 2010 return results in a faster tax refund, waiting to claim the loss may or may not result in greater tax savings.

If a major disaster area has been declared and you have sustained a disaster-related loss, this casualty loss option is available to you even if the IRS has not postponed filing and other deadlines for taxpayers in the area.

  • Postponed deadlines. When there is significant damage to taxpayers’ property following a major disaster, the IRS usually extends deadlines to file returns and pay taxes, and posts that information online.
  • Expedited customer service requests. Affected taxpayers may need to reconstruct tax records lost in the disaster in order to apply for a disaster loan or grant. The IRS will waive the usual fees and expedite requests for a copy of your tax return (Form 4506) or for a transcript of your tax return (Form 4506-T).

While tax relief is just a small part of the recovery process, don’t forget that you may benefit from tax relief provisions and assistance from the IRS.

Jackie Perlman - The Tax Institute

Jackie Perlman - The Tax Institute

H&R Block

Jackie Perlman, CPA, is a principal tax research analyst at The Tax Institute. Jackie specializes in individual taxpayer issues, family tax situations, and tax law complications for families.

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