Find out how you can get tax assistance from the IRS during natural disasters.
In this article:
- Natural Disasters Tax Relief and Assistance
- What Constitutes a Natural Disaster in the United States?
- Are You an “Affected Taxpayer”?
- What Kind of Assistance Will the IRS Provide to Affected Taxpayers?
- When Must You Make a Disaster Loss Election?
- Preparing for Natural Disasters
Natural Disasters and Taxes: A Few Things You Need to Know
Natural Disaster Definition: It is any catastrophic event resulting from the natural processes of the earth causing great damage to mankind.
Natural Disasters Tax Relief and Assistance
Natural disasters can create numerous hardships for Americans. One of these hardships involves how affected taxpayers make up for losses caused by the disaster, as well as file and pay their taxes on time.
Fortunately, there is government assistance for such difficult situations. It’s important for all Americans to know the government provides disaster tax relief for those affected by natural disasters. Most importantly, damage to personal property or homes may be deducted as losses on federal income tax returns.
What Constitutes a Natural Disaster in the United States?
There are many different types of natural disasters that the IRS will provide assistance for. For the most part, the biggest natural disasters that affect Americans on a broad basis are hurricanes and wildfires, but the full list includes the following:
- Severe storms and straight-line winds
- Severe storms and flooding
- Landslides and mudslides
- Latent effects of wildfires, including flooding, mudflows, and debris flows
- Tropical storms
Are You an “Affected Taxpayer”?
In order to be qualified as someone who is eligible to receive natural disaster assistance from the Internal Revenue Service (IRS) of the United States, you must be considered what is called an “affected taxpayer.”
In order to be an affected taxpayer, you must live or have your primary address in a covered disaster area. This area is designated by the government, and if your address falls within it, you will be an affected taxpayer or a de facto victim of whatever natural disaster occurred there.
With this in mind, however, it is important to remember that not everyone in a covered disaster area will be getting assistance from the government. If your home and personal property did not incur any major damage from the natural disaster event, you cannot claim any losses (more on this topic below).
What Kind of Assistance Will the IRS Provide to Affected Taxpayers?
There are several different ways in which the IRS assists the victims of natural disasters.
Late penalties waived: If you file or pay your taxes late and are an affected taxpayer, these penalties will be waived. Remember, however, that in some cases, the penalties will go through and you’ll receive a notice that you’ll have to pay them.
In these situations, if you are indeed a natural disaster victim (“affected taxpayer”), call the number on the notice and the penalties should be waived.
Automatic penalty relief: If you are an affected taxpayer entitled to relief after a natural disaster, there is no need to contact the IRS concerning the matter; they will file on your behalf. The IRS looks over the covered disaster area and automatically offers penalty relief (and filing) for all affected taxpayers in this area.
The casualty loss deduction: This deduction cannot be claimed in more than one tax year, but affected taxpayers may decide to claim these casualty losses either in the year in which the event took place or the year prior to the event year.
Remember that the IRS will only allow natural disaster tax deduction elections if the damage is major and directly caused by the natural disaster. Normal wear and tear on personal property or progressive deterioration from causes such as termites or natural deterioration will not be considered losses from the natural disaster.
In addition, any losses incurred that are otherwise covered by insurance or other forms of reimbursement will not be covered by IRS natural disaster assistance either. Affected taxpayers who have damage that is otherwise covered by insurance need to make timely claims for reimbursements with their insurance company.
If they do not make the claim available on time and in full, they cannot turn to the IRS to deduct their losses as theft or casualty.
Lastly, keep in mind that the IRS strictly states, “Food, medical supplies, and other forms of assistance you receive don’t reduce your casualty loss unless they are replacements for lost or destroyed property.”
When Must You Make a Disaster Loss Election?
Effective October 13, 2016, the IRS has extended the deadline for making a disaster loss election to six months after the tax filing due date of the year the disaster took place.
Preparing for Natural Disasters
The IRS is dedicated to encouraging taxpayers to prepare well for possible storms, tornadoes, hurricanes, wildfires, and other natural disasters.
The major recommendation they have is to organize a disaster plan and share it with your entire family. Naturally, those in the middle of the country won’t need a hurricane disaster plan, so it is advised that locals prepare for the most common types of disasters that occur in their communities.
You should also remember to update your natural disaster plan every year. Make sure you know how to protect yourselves; what important documents, medications, and other things you need to take if leaving your home; and how to practically hold down your home and property in order to endure the least amount of damage.
It is also recommended that — whether for insurance or tax benefits — all taxpayers videotape and photograph the contents of their home at least once every few years. This makes making claims much easier.
The IRS even provides their own Casualty, Disaster, and Theft Loss Workbook, which guides taxpayers step-by-step through documenting personal property and, if necessary, figuring out the losses endured from natural disasters.
We understand that going through a natural disaster is difficult enough. Enduring these frightening situations can be emotionally and physically challenging, and the challenges may last long after the event ends.
Still, everyone must file and pay their due taxes every year. When this is a particular challenge for those affected by natural disasters — whether it’s because you can’t pay, you’ve lost all your tax documents in the event, or another reason — it’s good to know that the government is willing to help.
Take advantage of the assistance offered by the IRS and the U.S. government outlined here to give yourself more time, waive expensive penalties, and make up for the event-associated losses you’ve endured.
Have you ever been hit by a natural disaster? Were you able to take advantage of the government’s assistance? Tell us about your experiences in the comments section.