IRS Tax Relief for Hurricane Irma Victims

The IRS is providing help to the victims of Hurricane Irma. Special tax relief and assistance is available to taxpayers in the Presidential Disaster Areas. Hurricane Irma victims in parts of Florida and elsewhere will now have until January 31, 2018, to file certain individual and business tax returns and make certain tax payments, according to the Internal Revenue Service announcements.

The IRS’s recent relief notice, issued September 12, parallels that granted last month to victims of Hurricane Harvey. This includes an additional filing extension for taxpayers with valid extensions that expire on October 16 and businesses with extensions that expire on September 15.

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for assistance. Parts of Florida, Puerto Rico, and the Virgin Islands are currently eligible. As localities are added later to the disaster areas, including those in other states, those taxpayers will automatically receive the same filing and payment relief. (The current list of eligible localities is always available on the disaster relief page on IRS.gov).

So far, the IRS filing and payment relief applies to the following localities identified by FEMA due to Hurricane Irma:

• In U.S. Virgin Islands: The islands of St. John and St. Thomas.
• In Puerto Rico: The municipalities of Culebra and Vieques.
• In Florida: Broward, Charlotte, Clay, Collier, Duval, Flagler, Hillsborough, Lee, Manatee, Miami-Dade, Monroe, Palm Beach, Pinellas, Putnam, Sarasota and St. Johns Counties.

In addition, the IRS will work with taxpayers living outside the disaster area but whose records are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227.

Practitioners located in the covered disaster area who maintain records necessary to meet a filing or payment deadline for taxpayers located outside the disaster area may elect to contact the IRS to identify such clients.

These relief provisions also include workers assisting the relief activities who are affiliated with recognized government or philanthropic organizations.

In addition to the additional filing extensions noted above, the filing and payment relief offered by the IRS will also include:

• September 15, 2017, and January 16, 2018, deadlines for making quarterly estimated tax payments.
• October 31, 2017, deadline for quarterly payroll and excise tax returns.
• September 15, 2017, deadline for filing calendar year partnership and S Corporation returns.
• October 2, 2017, deadline for filing estate and trust returns.
• October 16, 2017, deadline for filing individual, C Corporation and FinCen returns.
• Calendar year tax-exempt organizations tax filings originally extended to November 15, 2017.
• Waiver of late-deposit penalties for federal payroll and excise tax deposits normally due within the first 15 days of the disaster period.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS, the taxpayer should call the number on the notice to have the penalty abated.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim the losses on either the return for the year of the loss (2017) or the return for the prior year (2016). See Publication 547 for details.

401(k)s and Similar Employer-Sponsored Retirement Plans

In a separate release, the Internal Revenue Service also announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Irma and members of their families. (This is similar to relief provided last month to victims of Hurricane Harvey).

Participants in 401(k) plans, employees of public schools, and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans, may be eligible to take advantage of these streamlined loan procedures and liberalized hardship distribution rules. (IRA participants may also be eligible to receive distributions under liberalized procedures).

Retirement plans can provide this relief to employees who live or work in disaster areas affected by Hurricane Irma and designated by FEMA. In its latest announcement, the IRS is also relaxing procedural rules that apply to retirement plan loans and hardship distributions by allowing plan participants to access funds more quickly with a minimum of administration formalities.

This current relief will allow retirement plan participants to take hardship distributions or borrow up to the specified limits. The relief also allows a person who lives outside the disaster area to take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent, or other dependent who lived or worked in the Irma disaster area.

It should be noted here that the IRS has emphasized that the tax treatment of loans and distributions remains unchanged. Retirement plan loan proceeds are tax-free if they are repaid over a period of five years or less, and hardship distributions are generally taxable and subject to a 10 percent early-withdrawal tax.

ADDITIONAL RESOURCES

How to reconstruct records (IRS website)
Disaster relief assistance (IRS website)
Hurricane Irma tax relief (IRS website)
Help for victims of Hurricane Irma (IRS website)

QUESTIONS?

Should you have any questions about how the relief provisions may affect you or your business, contact your Marcum Tax professional or reach out directly to one of the following Marcum partners: