Tax Relief for California Wildfire Victims

  • Real estate
  • 1/14/2025
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New tax provisions for taxpayers affected by federally declared disasters in Los Angeles County may bring additional relief opportunities.

The IRS and the California Franchise Tax Board (FTB) have announced tax relief for individuals and businesses affected by the wildfires and straight-line winds that began on January 7, 2025, in parts of southern California.

Impacted taxpayers now have until October 15, 2025, to file various federal and state tax returns and make tax payments typically due between January 7 and October 15, 2025.

The relief also applies to taxpayers who reside or operate a business outside of Los Angeles County but whose tax preparers are located inside Los Angeles County.

Key details of the new federal disaster tax relief

Postponed/extended deadlines

The new October 15, 2025, deadline applies to individual income tax returns and payments normally due on April 15, 2025. It also includes the 2024 estimated tax payments due on January 15, 2025, and the 2025 estimated tax payments due on April 15, June 16, and September 15, 2025.

Business tax returns

The extension applies to quarterly payroll and excise tax returns, calendar-year partnership, limited liability company and S corporation returns, corporation and fiduciary/trust returns, and tax-exempt organization returns.

The relief from deadlines also applies to pass-through entity elective tax payments and business entity corporate or pass-through entity tax returns.

Payroll and excise tax deposits

Penalties on payroll and excise tax deposits due between January 7, 2025, and January 22, 2025, will be abated if the deposits are made by January 22, 2025.

Additional tax relief opportunities

Casualty losses

Affected taxpayers can claim disaster-related casualty losses on their income tax return for either the year the event occurred or the prior year.

Section 1031 exchanges

Revenue Procedure 2018-58 provides two different sections that can be relied on in these situations.

Section 6

This section applies to affected taxpayers only. Any 45- or 180-day deadline that falls on or after the disaster date above is postponed.

Section 17

This section is applicable to both affected taxpayers and other taxpayers who have difficulty meeting the 45-day identification period or 180-day exchange period deadline due to a federally declared disaster.

Examples of potential difficulties include whether the relinquished or replacement property is located in a covered disaster area; a party of the transaction is killed, injured, or missing as a result of the disaster; or the disaster causes third parties like lenders or insurance companies to back out of the deal due to the disaster.

Taxpayers who qualify for relief under this section postpone the 45-day identification period or the 180-day exchange period to the later of the last day of the general disaster extension period or 120 days from the original deadline. It is important to note that with Section 17, the relinquished property must have been transferred on or before the date of the federal declared disaster and the postponement period may never extend beyond the due date, including extensions, of the return year of the transfer or one year.

Retirement plan relief

Special disaster distributions from retirement plans may be available, potentially exempting taxpayers from the 10% early distribution tax and allowing the taxpayer to spread the income over three years.

Automatic relief

The IRS and FTB will automatically identify and apply relief to taxpayers in the covered disaster area. Those outside the area but affected should call the IRS disaster hotline at 866-562-5227.

How we can help

CLA tax professionals can provide comprehensive guidance on federal, state, and local tax relief to help you understand the specific provisions that apply to your situation.

We can also help with filing claims and extensions, calculating losses, and identifying eligible deductions, credits, and other forms of relief offered by the IRS following a federally declared disaster.

This blog contains general information and does not constitute the rendering of legal, accounting, investment, tax, or other professional services. Consult with your advisors regarding the applicability of this content to your specific circumstances.

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