The physical destruction caused by Hurricane Sandy has left many victims struggling to recover financially. In an effort to ease some of the burden, the IRS is offering tax relief to those who were impacted by the storm.
Filing deadlines extended
The IRS is extending certain filing deadlines for both individuals and businesses affected by Hurricane Sandy. The extension covers taxes due from late October through January and pushes the deadline up to February 1, 2013. The deadline covers payroll and excise tax returns that would normally be due on October 31 or January 31 and fourth quarter installment payments for estimated taxes due by January 15, 2013. Qualifying individuals will also be eligible for an abatement of any penalties and interest.
Business owners whose business is not physically located in the federally designated disaster areas can still file using the extended deadlines as long as their books, physical records or accounting personnel was located in the area affected by the storm. The IRS is also allowing tax-exempt organizations to use the extended deadline for filing Form 990 series returns that would normally be due during the October to January filing period.
Retirement loan penalties
Ordinarily, non-qualified withdrawals from 401(k) or other employer-sponsored retirement plan would be subject to a ten percent penalty. From now until February 1, 2013, the IRS will waive the penalty for Hurricane Sandy victims who make early withdrawals under the hardship distribution guidelines. Taxpayers who participate in a 401(k), 403(b) or 457 plan may be eligible, as long as the money is intended to be used for a financial emergency or hardship directly resulting from Hurricane Sandy.
Under the regular hardship rules, plan participants would be required to stop their elective deferrals for six months after taking a withdrawal. The IRS is allowing Hurricane Sandy victims to continue making contributions immediately following a distribution. If you don’t have an employer-sponsored plan, you may be able to make early withdrawals from an IRA under the more lenient hardship rules.
Claiming casualty losses
Taxpayers impacted by the storm have the option of claiming disaster-related casualty losses on their federal tax return for the 2012 or 2013 tax year. The IRS has advised that claiming the loss on this year’s return could mean a bigger tax break but you could get your refund sooner by claiming it for 2012. You can deduct personal property losses that weren’t covered by insurance or other reimbursements using Form 4684 and using the Disaster Designation.
The IRS is also waiving fees for affected taxpayers who request a copy of a previously filed return. To qualify, you’ll need to complete Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, with the Disaster Designation.
Qualifying for tax relief
To take advantage of these tax measures, you must live or do business in one of the affected areas. According to the IRS, qualifying counties include the following:
- Connecticut: Fairfield, Middlesex, New Haven, and New London Counties and the Mashantucket Pequot Tribal Nation and Mohegan Tribal Nation located within New London County
- Maryland: Somerset County
- New Jersey: Atlantic, Bergen, Burlington, Camden, Cape May, Cumberland, Essex, Gloucester, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Salem, Somerset, Sussex, Union and Warren
- New York: Bronx, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Sullivan, Suffolk, Ulster and Westchester
- Rhode Island: Newport and Washington counties
If you’re not sure if you’re eligible for tax relief, you can call 866-562-5227 or visit www.disasterassistance.gov for additional help.