IRS and Texas Provide Special Tax Relief to Hurricane Harvey Victims

Synopsis 
 
The IRS recently announced that taxpayers impacted by Hurricane Harvey will now have until January 31, 2018, to file various tax returns, including payroll tax returns, and make certain tax payments. This special tax relief applies to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance and currently covers eighteen (18) counties in Texas. The State of Texas also announced tax relief for impacted taxpayers.

Counties Eligible for Relief

The IRS is offering tax relief, more fully discussed below, to any area the Federal Emergency Management Agency (FEMA) has designated as qualifying for individual assistance.Taxpayers in localities that become part of the disaster-affected communities list at a later date will automatically receive the same filing and payment relief. Locations in other states are expected to be added to the list in the coming days based on FEMA damage assessments. We will update the list of affected counties as more information becomes available. Currently, the following Texas counties automatically qualify for tax relief:

The IRS has also stated that it will work with any taxpayer living outside of a designated disaster area, whose records, which are located in a disaster area, are necessary to meet a deadline occurring during the postponement period. These taxpayers should contact the IRS at 1-866-562-5227. Additionally, workers assisting in the relief activities who are affiliated with a recognized government or charitable organization and any individual visiting the recognized disaster area that was injured or killed due to the disaster are eligible for relief.

Summary of Relief

The IRS will automatically provide tax filing and penalty relief to any taxpayer with an IRS address of record located within a designated disaster area.Therefore, taxpayers do not need to contact the IRS to receive the special tax relief. If a taxpayer receives a late filing or late payment penalty notice from the IRS and the taxpayer is entitled to relief, the taxpayer should call the number on the notice to have the penalty abated. 

Special Tax Relief

The tax relief postpones various tax filing and payment deadlines occurring on or after August 23, 2017. Taxpayers will have until January 31, 2018, to file most returns and pay taxes for: 

Individual, corporate, and estate and trust income tax returns
Partnership returns, S corporation returns, trust returns
Estate, gift, and generation-skipping transfer tax returns
Employment and excise tax returns 

These taxes must have either an original or extended due date occurring on or after August 23, 2017, and before January 31, 2018. The extension is also granted for quarterly estimated payments originally due September 15, 2017, and January 16, 2018. The deadline for making these quarterly estimated payments is now January 31, 2018. For individual taxpayers, this includes 2016 income tax returns on valid extension, i.e., October 16, 2017. However, the IRS noted that because the 2016 individual income tax payments related to these returns were originally due on April 18, 2017, payments for such taxes are not eligible for relief.

Several business tax deadlines are affected, including the October 31, 2017, deadline for quarterly payroll and excise tax returns. Additionally, the IRS will waive penalties for federal payroll and excise tax deposits normally due on or after August 23 and before September 7, provided such taxes are paid by September 7, 2017. Specific details on the special tax relief can be found on the disaster relief page on IRS.gov.

Casualty Losses

Affected taxpayers in designated disaster areas suffering uninsured or unreimbursed disaster-related losses have the option of claiming disaster-related casualty losses on their federal income tax return for either the year in which the event occurred, or the prior year.  See Publication 547 for details.  

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers.Taxpayers should write the assigned Disaster Designation, “Texas, Hurricane Harvey,” in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, when submitting such forms to the IRS. The Texas Comptroller also announced tax relief for impacted taxpayers, including an extension of time to file certain returns and pay certain taxes due, as well as hotel tax and sales tax relief for both evacuees and relief workers. For more information, visit the Texas Comptroller’s website.
 
What Does CohnReznick Think?

Any natural disaster – especially those involving loss of life and displacement of families – presents challenges to the survivors.  Affording taxpayers affected by such an event flexibility in filing tax returns and paying taxes due is simply the right thing to do. In addition to the federal tax relief noted above, many states, as Texas has already done, often provide similar relief to impacted taxpayers. Taxpayers who believe they qualify for relief from Hurricane Harvey should consult with their tax advisor and/or the IRS to ensure they understand how the relief provisions outlined above impact their specific situation. 
 
Contact

For more information, please contact Mike Celkis, Partner, at [email protected] or at 512-499-1422.