Hands up if the thought of natural disasters make you queasy? If your hand is up, you're not alone. No one likes to think about the potential of a hurricane or wildfire in their area. The reality is that natural disasters can strike when you least expect it. For this reason, it's critical that you do your homework, so that you can be as prepared as possible.
The good news is that the IRS isn't unreasonable. They understand that things happen. Here's what you need to know about tax relief in disaster situations.
What Is IRS Disaster Relief?
In Disaster Designation IRS - Internal Revenue Service - provides tax relief for those affected by a natural disaster. In the unfortunate event that a natural disaster hits your region or community, you'll need to be prepared for what's next. Understanding the process of disaster designation IRS is essential in a stressful situation like this.
The last thing you want is to be caught off-guard. It's therefore critical to understand your responsibilities and the responsibilities of the IRS in a disaster relief situation. It's possible that your area will be declared a major disaster area by the President of the United States. If this happens, a range of funding and various federal programs are made available.
Individuals, business owners, local and state governments, and some nonprofit organizations will be assisted financially during the aftermath of the natural disaster. The Federal Emergency Management Agency (FEMA) guides the process of providing these resources in an effort to assist in the recovery.
What Are FEMA Declarations?
FEMA declarations refer to the procedure used to obtain assistance via the U.S Federal Emergency Management Agency. This procedure begins with the government asking the president for a disaster declaration after a natural disaster. If this happens, the state or region benefits from a range of relief efforts provided by the federal government.
Research shows that thousands of Americans are negatively impacted by natural disasters every year. Forest fires, storms, droughts, and earthquakes are some examples of natural disasters that have been acknowledged by the Internal Revenue Service. The IRS is there for you. They understand certain parts of America are especially vulnerable to natural disasters.
And that these can be devastating for those who live or own business in the area. Through the years, the IRS has done this with tax relief and extended deadlines, rather than issuing new tax credits. The IRS offers significant assistance in the form of the casualty loss deduction.
This provides an accelerated tax refund for those who declared as a "federally declared disaster area" by the president of the United States.
Who Qualifies For Tax Relief In Disaster Situations?
If you're wondering who qualifies for tax relief according to the FEMA declarations, you've come to the right place. The good news is that you're already here, reading this article. That's the first step as It's helpful to do your research well in advance. This ensures that you're prepared if a disaster strikes unexpectedly. The reality is that this is usually the case.
As hurricane victims and those who've suffered property loss (called a casualty loss), you'll have to wait for the case to be deemed a 'declared disaster'. After this, you're able to deduct the loss on a federal income tax return. This should happen within the year in which the loss occurred.
Alternatively, you can deduct the loss on the tax return for the preceding year. It's up to you to select which of the two tax years provides a better tax advantage for you. Remember that any reimbursement received from insurance can't be deducted from your taxes. The IRS reminds you that this doesn't include progressive deterioration or normal wear and tear.
The IRS Is Here For You
Disaster relief applies to tax preparers who are unable to file returns or make payments on behalf of the client because of the disaster. Taxpayers outside of the disaster area may qualify for relief if:
- their preparer is in the disaster area, and
- the preparer is unable to file or pay on their behalf.
Sometimes, in a post-disaster period, people require access to a quick source of cash. In this case, it's very useful to be aware that, in addition to providing disaster relief, the IRS can also accelerate tax refunds to people in a declared disaster zone. This refund is a fast, direct injection of cash that doesn't need an Individual Assistance declaration, Best of all, it doesn't need to be repaid.
Along with this, another way the IRS assists taxpayers after a natural disaster is that they're able to postpone certain tax filing deadlines. For those who live in or have a business in a declared disaster area, this allows them much needed extra time to organize their finances.
The Next Steps
The last thing you need in an already stressful situation after a natural disaster is worrying about finances and tax. You and your family's wellbeing should be your first priority. After reading this article, it's clear that being prepared is the best option. The reality is that anything can happen at any time. So, it's better to have the knowledge ahead of time.
Now that you know more about tax relief in disaster situations, what are the next steps? Natural disasters often mean that many payroll and practitioner businesses and their clients suffer significant losses. If you need accurate calculations for your tax deductions and/or an easy tool for proof of payment check out our service and create a paystub.