Late on Friday, the IRS announced various tax relief measures for individuals and businesses affected by Hurricane Sandy in Connecticut, New Jersey, and New York (e-News for Tax Professionals No. 2012-44). The relief applies to taxpayers in areas in those states declared a disaster area by the Federal Emergency Management Agency (FEMA). The IRS said other locations may be added in coming days based on additional damage assessments by FEMA.
The IRS is postponing various tax filing and payment deadlines starting in late October, giving affected taxpayers until Feb. 1, 2013, to file these returns and pay any taxes due. The postponed deadlines include those for fourth quarter individual estimated tax payments, normally due Jan. 15, 2013. Also postponed are the deadlines for payroll and excise tax returns and accompanying payments for the third and fourth quarters, normally due on Oct. 31, 2012, and Jan. 31, 2013, respectively. The postponement also applies to tax-exempt organizations required to file Form 990 series returns with an original or extended deadline falling during this period.
So far, IRS filing and payment relief applies to the following localities:
- Connecticut: Fairfield, Middlesex, New Haven, and New London counties and the Mashantucket Pequot Tribal Nation and Mohegan Tribal Nation located within New London County;
- New Jersey: Atlantic, Bergen, Cape May, Essex, Hudson, Middlesex, Monmouth, Ocean, Somerset, and Union counties;
- New York: Bronx, Kings, Nassau, New York, Queens, Richmond, Rockland, Suffolk, and Westchester counties.
The IRS announced that it will also abate any interest and any late-payment or late-filing penalties that would otherwise apply. The IRS is also waiving failure-to-deposit penalties for federal payroll and excise tax deposits normally due on or after the disaster area start date and before Nov. 26, if the deposits are made by Nov. 26, 2012.
The relief applies automatically to any taxpayer located in the disaster area and taxpayers do not need to contact the IRS to get the relief.
On Wednesday, the IRS announced it was granting taxpayers and tax preparers affected by Hurricane Sandy until Nov. 7 to file returns and accompanying payments normally due on Oct. 31 (see “IRS delays Oct. 31 deadlines for taxpayers and preparers affected by Hurricane Sandy”).
The IRS also announced it is willing to work with any taxpayer who resides outside the disaster area but whose books, records, or tax professional are located in areas affected by Hurricane Sandy. Also, all workers assisting the relief activities in the covered disaster areas who are affiliated with a recognized government or philanthropic organization are eligible for relief.
The IRS has told taxpayers who live outside of the affected area and think they may qualify for relief that they must contact the IRS at 866-562-5227.
Qualified disaster treatment of payments to victims
The IRS on Friday also alerted taxpayers that Hurricane Sandy is designated as a qualified disaster for purposes of Sec. 139, and qualified disaster relief payments made to individuals by their employer or any person can be excluded from those individuals’ taxable income.
Qualified disaster relief payments are defined by Sec. 139 as amounts paid:
(1) To or for the benefit of an individual to reimburse or pay reasonable and necessary personal, family, living or funeral expenses (not otherwise compensated for by insurance or otherwise) incurred as a result of a qualified disaster, or
(2) To reimburse or pay reasonable and necessary expenses (not otherwise compensated for by insurance or otherwise) incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation or replacement is attributable to a qualified disaster.
The IRS also announced that the designation of Hurricane Sandy as a qualified disaster means that employer-sponsored private foundations may provide disaster relief to employee-victims in areas affected by the hurricane without affecting their tax-exempt status.
Additional federal disaster relief information is available at disasterassistance.gov.
AICPA requests quick relief
On Thursday, the AICPA sent a comment letter to the IRS, requesting that the agency act quickly to provide relief for victims of the hurricane and not wait for FEMA to make a disaster declaration. “This situation merits an extraordinary response from the IRS—FEMA declaration or not,” Jeffrey Porter, chair of the AICPA’s Tax Executive Committee, wrote in the letter.
Porter noted that many exempt organizations have Nov. 15 filing deadlines and have been affected by the hurricane—or are helping provide relief. Many other taxpayers also upcoming deadlines, and given the widespread impact of the hurricane, Porter wrote that there is “a desperate need for a very quick response from the IRS for further relief due to Hurricane Sandy.”
—Alistair M. Nevius (email@example.com) is the JofA’s editor-in-chief, tax.