The damage inflicted by natural disasters can be far reaching and last for weeks or months. While you scramble to rebuild your normal life, you still must worry about handling routine tasks like filing your taxes.
To ease your burden, the IRS now offers various relief options to people affected by such unforeseen circumstances. These tax breaks may give you extra time to file and the opportunity to reclaim tax expenses that you incurred because of a natural disaster that impacted your home or business.
Accelerated Processing of Your Tax Return
Natural disasters leave behind damages that can bend or break your budget. You may have to use most or all of your savings to clean up flood waters, replace broken fixtures, or rebuild structures leveled by a storm or fire.
Regardless of whether or not you have the funds to contend with such costs, the IRS contends that you should not have to suffer the financial burden alone. As such, it allows you to claim some or all of the expenses on your tax return.
You can claim these costs on the return that you will prepare and submit next year if your home or business has been destroyed or damaged by disasters like a fire. However, if you live or operate a business in a federal declared disaster area, you can claim those expenses on the previous year's return. That return will then be expedited through processing to allow you to recoup those losses faster.
The president must declare a city, county, or some or all of a state as a federal declared disaster area. This declaration typically comes after an area has been impacted by a:
- mud slide
- mud slide
Establishment of LossesWhile the IRS allows you to request compensation for a variety of losses incurred because of a natural disaster, it also expects you to do your part to determine the fair value of your possible reimbursement. Before you submit your return with these deductions, the IRS asks that you:
- identify and list damaged or destroyed property
- determine the original cost of the property
- determine the property's pre-disaster fair market value
- determine the property's post-disaster fair market value
- indicate how much your insurer will compensate you for the loss
You should utilize IRS publication 584-B to make these calculations before listing and submitting them on your tax return.
Tax Filing Extensions
Finally, as the victim of a natural disaster, you may have the opportunity to request a tax filing extension. Extensions are granted on a case-by-case basis by the tax comptroller in your state.
If approved for the extension, you could have anywhere from 30 to 180 days to file your return. You are asked to use IRS form 4864 or Schedule A to claim losses on your return by the extension date. You also can make this request and file your returns by that extension date by retaining a tax professional to handle these tasks for you.
As the victim of a natural disaster, you have dozens of tasks to worry about at any given time. You can cross filing taxes off your to-do list as you rebuild your life by taking advantage of the various relief options available just for home and business owners impacted by disasters like fires, floods, tornadoes, mud slides, and other occurrences.