This year already, there have been numerous extreme weather events that have impacted many Americans. The most recent weather disaster, Hurricane Ida, made landfall as a category 4 storm, slamming directly into southeast Louisiana. Currently, over one million people are without power in the state and there is extensive property damage, some places may be unrepairable.
A few days later, Ida continued her destruction in the northeast, killing nearly 50 people, and causing unprecedented flooding and damage in New York, New Jersey, Pennsylvania, and Maryland. If you or your loved ones have been impacted by the storm there are steps you can take to get relief.
First, Check Disaster Areas
Many relief provisions are dependent on where you live and whether that area has officially been declared a disaster area by the president. To see if your area is designated, go to diasterassisstance.gov and enter your state and zip code. If you are impacted but do not see your city listed, then check the site again in a few days.
Second, Reach Out To FEMA
While the Federal Emergency Management Agency (FEMA) is not the only organization that provides relief, most victims of natural disasters focus on FEMA since it provides financial and direct services. This might include money for temporary housing, funds to help with repairs, or coverage for medical/funeral expenses.
⦁ Call FEMA at 1-800-621-3362
⦁ For Louisiana, call FEMA- 4611
⦁ or visit, diasterassitance.gov
Third, Keep Detailed Record of All Damage
Keeping an excellent record of the damage including; photos, videos, detailed descriptions. Also, keep any estimates, receipts of repairs, and replacement values. In some cases, getting an appraisal if necessary.
To protect yourself from future disasters, we recommend storing all original documents, including bank statements, tax returns, deeds, and insurance policies in a safe and dry location that is easily accessible. You should also make copies and scan any important documents that you have.
Fourth, Research Tax Relief Options.
You may be able to claim a tax deduction for unreimbursed damaged or lost property. To do so – you must itemize and file Schedule A with their tax return. If you claim the standard deduction, however, you may still be able to deduct the losses if they claim them as business losses on Schedule C.
- If the property is personal-use property or is not completely destroyed, the amount of the loss is the smaller of the adjusted basis or the decrease in the fair market value of your property due to damage.
- If the property is business or income-producing (e.g., rental) property, and is completely destroyed, then the amount of the loss is an adjusted basis. In this context, basis means what you paid for the item plus any long-term improvements less any depreciation that you previously claimed.
- To the extent that the property can be saved or reimbursed by insurance, you must report those adjustments. Therefore, if you expect to be paid by the insurance company, then you must factor that in, even if you have not received the money yet.
Available Tax Extensions
The IRS has granted victims of Ida and those working directly in assisting the disaster relief activities more time to file individual and business tax returns and make federal tax payments. The extension is for all areas designated by FEMA as qualifying for individual or public assistance; this includes the entire state of Louisiana.
Ida victims will also be given more time to submit;
- The quarterly estimated tax payments, normally due on September 15, 2021.
- Quarterly payroll excise tax returns, normally due on November 1, 2021.
- Extensions on penalties on payroll and excise tax deposits.
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of designated disaster relief area. This includes workers assisting the relief activities that are affiliated with a recognized government or charitable organization.
Victims and workers of hurricane Ida will also be waived the fee for obtaining copies of previously filed tax returns. To obtain a free copy of a tax return or a tax return transcript, write “Hurricane Ida -Location” in bold letters at the top of Form 4506 or Form 4505-T and send it to the IRS.
Deductions for Damaged Property
Causality losses are generally deductible in the year that the loss occurred. However, if you have a casualty loss from a federally declared area, like Louisiana, you have the option to treat it as having happened the previous year. This means that the deductions can either be claimed on your 2021 or 2022 tax return. A few tips:
- Write the FEMA declaration number on the return claiming for the deduction.
- Write “Hurricane Ida -Location” in bold letters at the top of the form, if you’re claiming it for 2021.
If you’re not affected by Ida, but want to help, you may be entitled to a tax deduction for your charitable gift, assuming you itemize your deductions. It’s a good idea to first check to be sure which charitable organizations are doing what and what they need. Keep all receipts of donations. Remember that for tax purposes, you can deduct contributions to a qualified tax-exempt charitable organization. Finally, donations to individuals are never deductible for tax purposes.
If you are a victim of Ida or other natural disasters this year, you may be entitled to earn substantial tax relief. To learn more, reach out to Herman & Company – Accounting & Consulting with any questions. We are trained tax professionals who can help you navigate state and federal tax laws regarding disaster relief.