Navigating IRS Disaster Relief

This article was originally published on October 4, 2022. It has been updated to include California storm guidance.

If you, your business, or your employees have been affected by a natural disaster, the relief options below may be of help.

IRS extends deadlines for counties affected by California storms, flooding, landslides, and mudslides

On January 11, 2023, the IRS issued a news release announcing that most payments and tax returns with deadlines between January 8, 2023 and May 15, 2023 have been extended to May 15, 2023. The California Franchise Tax Board conformed on January 13.

You do not need to contact the IRS to obtain this relief. The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in a designated disaster area.

Designated disaster areas currently include the following counties: Alameda, Colusa, Contra Costa, El Dorado, Fresno, Glenn, Humboldt, Kings, Lake, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Benito, San Bernadino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama, Tulare, Ventura, Yolo and Yuba.

Find additional information, including specific forms or payments, in the IRS release or the office of the governor notice.

In a follow-up news release dated January 24, 2023, the IRS announced that victims of severe winter storms, flooding, landslides, and mudslides beginning December 27, 2022 now have until May 15, 2023 to file various individual and business tax returns and make tax payments. Designated disaster areas subject to the January 24 relief announcement currently include the following counties: Calaveras, Merced, Monterey, Sacramento, San Joaquin, San Luis Obispo, Santa Barbara, and Santa Cruz.

Extended deadlines for Hurricane Ian victims

On September 29, 2022, the IRS issued a news release announcing that various tax return and filing payment deadlines beginning September 23, 2022, have been postponed until February 15, 2023, for certain victims of Hurricane Ian.

The tax relief is automatically provided to any taxpayer with an IRS address of record located in the federally declared disaster area, which includes the entire state of Florida. You do not need to contact the agency to get this relief.

Deadlines postponed until February 15, 2023, include:

• 2021 individual returns with an extension to October 17, 2022
• Quarterly estimated income tax payments due on January 17, 2023, and the quarterly payroll and excise tax returns normally due on October 31, 2022, and January 31, 2023
• Business and exempt organization returns with an original or extended due date starting September 23, 2022, including, among others, calendar-year C corporations with extensions to October 17, 2022, and exempt organizations with extensions to November 15, 2022

Additionally, penalties on payroll and excise tax deposits due on or after September 23, 2022, and before October 10, 2022, will be abated as long as the deposits are made by October 10, 2022.

The IRS will also work with any taxpayer who lives outside the federally declared disaster area but whose records necessary to meet a deadline are located in the affected area. This relief is obtained by calling the IRS at 866-562-5227.

Disaster relief in Alaska and Puerto Rico

Similar relief was provided last week to individuals and households that reside or have a business in the Regional Education Attendance Areas of Bering Strait, Kashunamiut, Lower Kuskokwim, and Lower Yukon, in Alaska and were affected by Typhoon Merbok’s severe storm, flooding, and landslides. For that disaster, tax filings and payments falling on or after September 15, 2022, and before February 15, 2023, are postponed through February 15, 2023.

Those affected by Hurricane Fiona in Puerto Rico were extended comparable relief as well.

Deduction for damaged or lost property

If you sustained damage to your business, home, or property, consider whether a casualty loss deduction could help you.

Disaster losses, not covered by insurance or other reimbursements, are generally deductible in the year incurred (i.e., 2023). However, under Section 165(i), taxpayers may elect to deduct any loss occurring in a disaster area and attributable to a federally declared disaster in the tax year immediately preceding the tax year in which the disaster occurred on an original or amended return for such preceding tax year (i.e., 2022).

Work with a tax professional to help you determine if you qualify and how to proceed.

Disaster relief to employees may be tax-free

If you have employees affected by natural disaster, Section 139 allows business owners to help employees during a federally declared disaster through tax-free qualified disaster relief payments. Typically, any gift from an employer is taxed; however, Section 139 qualified disaster relief payments are tax-free to the employee and are fully deductible by the employer.

Qualified disaster relief payments can be used to help employees offset the cost of certain expenses such as reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a disaster, and necessary repair or rehabilitation of a personal residence or repair not otherwise compensated for by insurance.

How we can help

If you have questions regarding disaster relief or postponed tax deadlines, please contact us. CLA’s state and local tax professionals can help guide you through these changes.