IRS announces federal tax relief for taxpayers in several jurisdictions

In February, the IRS announced relief for victims of natural disasters in several locations, including: Spokane, Washington (wildfires); San Diego, California (severe storms and flooding); and several counties in Michigan (severe storms, tornadoes and flooding), West Virginia (severe storms, flooding, landslides and mudslides) and Maine (severe storms and flooding). Affected taxpayers have until June 17, 2024, to file various federal returns and make tax payments.

The federal tax relief applies to:

• Individuals who live in the covered disaster areas;
• Businesses (including tax-exempt organizations) whose principal place of business is located in the covered disaster areas;
• Certain relief workers in the covered disaster areas and any individual visiting the covered disaster areas who was killed or injured because of the disasters; and
• Taxpayers not in the covered disaster areas but whose records necessary to meet a deadline are located in the covered disaster areas.

Relief provided

Affected individuals and businesses will have until June 17, 2024, to file most tax returns (individual, corporate, estate and trust income tax returns; partnership, S corporation and trust tax returns; estate, gift and generation-skipping transfer tax returns; annual information returns of tax-exempt organizations; and employments and certain excise tax returns) and pay any taxes that were originally due. Taxpayers covered by the San Diego disaster relief additionally have until June 17, 2024, to make 2023 contributions to IRA and health savings accounts. Please see the links to the “IRS Tax Relief in Disaster Situations” pages above for additional details.

Casualty losses

Affected taxpayers with casualty losses attributable to the federally declared disaster may elect to take losses into account either in the tax year the loss occurred, or the prior tax year.

Other relief

Subject to plan rules, certain taxpayers may be eligible to take a special disaster distribution from their retirement plan without incurring the additional 10% early distribution tax and may be able to spread income recognition from the distribution over three tax years.

In addition, affected taxpayers may exclude certain payments received from a government agency from gross income. Payments received would have to be for reasonable and necessary personal, family, living or funeral expenses, or the repair or rehabilitation of their personal residence and its contents.

Please reach out to your Baker Tilly advisor with any questions about how the above impacts your tax situation.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments. Baker Tilly US, LLP does not practice law, nor does it give legal advice, and makes no representations regarding questions of legal interpretation.