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Tax Hardship Relief in Sight for Victims of Hurricanes

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Caitlin Carragee

As many in impacted areas across Florida, Georgia, Puerto Rico, the U.S. Virgin Islands, and parts of Texas focus on rebuilding after widespread damage from Hurricanes Harvey, Irma, and Maria, the prospect of their 2016 tax-filing extension running out on October 16, 2017 is an added cause of stress.

tax hardship relief - United States map

 Luckily, the Internal Revenue Service (IRS) has announced that it will be giving tax filing relief to impacted taxpayers residing or owning businesses in those zones designated as disaster areas by the Federal Emergency Management Agency (FEMA). FEMA designated disaster areas following a series of three major hurricanes that hit the United States and its territories:

  • Hurricane Harvey, which struck the Houston area, Louisiana, and neighboring Gulf Coast regions Aug. 23-Sept. 2, 2017.
  • Hurricane Irma, which lasted from Aug. 31 until Sept, 11 of 2017, making landfall in the U.S. Virgin Islands and nine states.
  • Hurricane Maria, which decimated Puerto Rico on Sept. 20, 2017.

For impacted taxpayers whose tax-filing extension is set to run out on October 16, 2017, the IRS is offering tax hardship relief in the form of an additional extension deadline of January 31, 2018 to file their 2016 tax returns. The relief additionally includes the annual retirement plan filing of Form 5500, which will have an automatic extended filing deadline of January 31, 2018. The IRS will automatically apply filing and any associated penalty relief to affected taxpayers located within the designated disaster areas.

Note: For those residents and small business owners impacted by the storms but not in FEMA-designated disaster areas, relief requests will need to be made by contacting the IRS.

Beyond tax-filing extension, the relief includes provision for employers sponsoring retirement plans to allow expedited loans and hardship distributions for employee hurricane victims and members of their families. Under this allowance, a worker living outside a disaster area may take a retirement plan loan or hardship distribution and use the money for the assistance of children, parents, grandparents, or other dependents who lived or worked in a FEMA-designated disaster area. This relaxed loan and hardship withdrawal relief will be available until January 31, 2018.

Who Is Eligible?

To qualify for tax relief, an individual must reside or have a business in one of the covered disaster areas, which include:

  • Texas: The counties of Aransas, Austin, Bastrop, Bee, Bexar, Brazoria, Burleson, Calhoun, Chambers, Colorado, Dallas, De Witt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Grimes, Hardin, Harris, Jackson, Jasper, Jefferson, Karnes, Kleberg, Lavaca, Lee, Liberty, Madison, Matagorda, Montgomery, Newton, Nueces, Orange, Polk, Refugio, Sabine, San Jacinto, San Patricio, Tarrant, Travis, Tyler, Victoria, Walker, Waller, Washington, and Wharton.
  • U.S. Virgin Islands: The islands of St. Croix, St. John and St. Thomas.
  • Puerto Rico: All 78 municipalities.
  • Florida: All 67 counties.
  • Georgia: All 159 counties.

In addition, eligibility for post-hurricane tax filing relief is contingent upon at least one of the following conditions applying:

  • The taxpayer's place of business is in a covered disaster area.
  • Records necessary to file taxes are in the covered disaster area.
  • The taxpayer is a relief worker of a recognized government or philanthropic organization assisting in the covered disaster area.
  • The taxpayer was visiting the covered disaster area and was killed or injured as a result.

What Do Eligible Taxpayers Need to Do?

The IRS automatically provides filing and penalty relief to any taxpayer whose IRS address of record is located in a designated disaster area. Therefore, affected taxpayers do not need to contact the IRS to get this relief.

Please note: If an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment, or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

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