Author: Leon Clinton

In the aftermath of Hurricane Sandy, the Internal Revenue Service has announced several types of relief aimed at helping affected individuals and businesses. Here are two of them.

Qualified Disaster Treatment of Payments to Victims of Hurricane Sandy

In light of the designation of Hurricane Sandy as a qualified disaster for tax purposes, the IRS is notifying taxpayers and employers that 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 include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.

In addition, employer-sponsored private foundations may provide disaster relief to employee-victims in areas affected by the hurricane without affecting their tax-exempt status.

Return Filing and Tax Payment Deadline Extended to February 1, 2013

Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Connecticut, New Jersey and New York will receive tax relief. Other locations may be added in coming days based on additional damage assessments by FEMA.

The tax relief postpones various tax filing and payment deadlines that occurred starting in late October. As a result, affected individuals and businesses will have until February 1, 2013 to file these returns and pay any taxes due. This includes the fourth quarter individual estimated tax payment, normally due January 15, 2013. It also includes payroll and excise tax returns and accompanying payments for the third and fourth quarters, normally due on October 31, 2012 and January 31, 2013 respectively. It also applies to tax-exempt organizations required to file Form 990 series returns with an original or extended deadline falling during this period.

The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. The IRS automatically provides this relief to any taxpayer located in the disaster area.

Taxpayers need not contact the IRS to get this relief.

Beyond the relief provided by law to taxpayers in the FEMA-designated counties, the IRS will work with any taxpayer who resides outside the disaster area but whose books, records or tax professional are located in the areas affected by Hurricane Sandy. 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. Please contact us if you are a taxpayer who lives outside of the impacted area, but think you may qualify for this relief. We can help you sort it out.

In addition, the IRS is waiving failure-to-deposit penalties for federal payroll and excise tax deposits normally due on or after the disaster area start date and before November 26, if the deposits are made by November 26, 2012.

So far, IRS filing and payment relief applies to the following localities:

In Connecticut (starting October 27): Fairfield, Middlesex, New Haven, and New London Counties and the Mashantucket Pequot Tribal Nation and Mohegan Tribal Nation located within New London County;

In New Jersey (starting October 26): Atlantic, Bergen, Cape May, Essex, Hudson, Middlesex, Monmouth, Ocean, Somerset and Union;

In New York (starting October 27): Bronx, Kings, Nassau, New York, Queens, Richmond, Rockland, Suffolk and Westchester.

Questions? Don’t hesitate to give us a call. We have answers!

• By Leon Clinton
• December 17, 2012