With an estimated 60 million Americans who were in the path of Hurricane Sandy, that means 1 in 5 Americans could be facing some sort of recovery from this storm. For some, it could be things like catching up on missed days of work and school while others start the tremendous task of recovery from loss of life of those they love, as are many in the Caribbean. Somewhere between is the task of recovering from property loss.
If you sustained material loss or damage from the storm in a place determined to be federally declared disaster area (note: President Obama has already declared disaster areas in New York and New Jersey), you could be eligible for tax relief from the IRS for your casualty losses and financial assistance from FEMA. The IRS defines a casualty loss as the “result from the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake…”
Following are steps you can take to begin financial recovery if you have sustained property loss as a result of Hurricane Sandy.
Filing insurance claims is the first step to financial recovery
The earlier insurance claims are filed, the sooner the reimbursement process can begin and homes can be restored to their pre-storm condition. But, it is important to know that property losses not covered by insurance are often tax-deductible, but insurance reimbursement information is needed to accurately calculate a casualty loss claimed on a tax return.
Claiming casualty losses can mean more money for your recovery
Claiming disaster-related casualty losses for damaged or lost property is a way you can find the money you need to replace what you lost. Among the expenses that can be deducted are homeowner’s and renter’s deductibles on any claims made that were disaster-related. You may be able to defer taxes on any gain from insurance proceeds by replacing damaged property with similar property, such as replacing a principal residence with another one of similar value.
Casualty losses incurred in federal disaster areas can be claimed as itemized tax deductions on the current year’s tax return or on an original or amended tax return for the previous year. So, you can either file an amended return for tax year 2011 to claim the losses or include the losses on the 2012 return that will be due April 15, 2013.
Generally, the following taxpayers are eligible to claim a casualty loss resulting from a federally declared disaster:
- Individuals who live in the covered disaster area
- Relief workers assisting government agencies in recovery efforts
- Those who have a main place of business in the covered disaster area
- Those who have books and records in the disaster area that are needed to complete tax returns.
The IRS identifies affected taxpayers located in the disaster area and automatically applies filing and payment relief. Affected taxpayers outside the disaster area can request tax relief from the IRS by calling 866-562-5227.
Getting IRS records is an important part of reconstructing finances – plus, it is expedited for you
As part of the recovery, you may need to reconstruct tax records lost in the disaster to apply for a disaster loan or grant. It isn’t easy for many people to quickly get copies of past years’ tax returns and it is especially difficult for those recovering from losing many of their possessions.
For affected taxpayers, the IRS will waive the usual fees and expedite requests for a copy of a tax return or for a transcript of a tax return by contacting the IRS at 800-829-1040 or www.irs.gov. H&R Block clients can visit any retail tax office nationwide to get copies of their tax returns, even if they prepared their taxes on their own using H&R Block tax software.
Helping those in need can make a difference
If you are in a position to help others, your financial contributions to organizations like the American Red Cross are tax-deductible when claimed as itemized deductions. For charitable donations to be tax-deductible, they must be made to qualified, tax-exempt organizations (IRS-approved nonprofit religious, educational or charitable groups). Make sure you have receipts for contributions. For example, if you make a donation from your smart phone, be sure to save your phone bill as proof of your donation.
H&R Block is proud to be an American Red Cross Disaster Responder. Our donations ensure the Red Cross can respond immediately to threats like Hurricane Sandy so victims receive the help they need during and after crisis strikes.
The American Red Cross continues to mobilize resources and workers across the country to respond to Hurricane Sandy. At present more than 112 shelters across 9 states are being managed by the Disaster Responder team H&R Block supports. In addition, more than 1,000 Red Cross workers have been deployed to support relief efforts across DE, MD, NC, NJ, PA, PR, VA and WV and nearly 170 Red Cross Emergency Response Vehicles are ready to respond once it is safe in affected communities, bringing meals, water, information, emotional support and damage assessment.
For more information on the American Red Cross disaster response or to help in your community, visit the Red Cross here.
[Image: Fred Dunn via Flickr]