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Disaster Declarations and Disaster Relief

September 15, 2017

When there is a hurricane, flood, tornado, etc. I usually check the IRS disaster tax relief page. Why does it seem to take so long for the IRS to announce tax relief?

The IRS can only provide tax relief when the disaster declaration process is completed with FEMA.

What is the disaster declaration process?

Following a natural disaster, when it is apparent that an effective response is beyond the capabilities of a state government, the state contacts FEMA to request an assessment of the damage and determine the types of federal assistance that are needed.

Here, “state” can refer to the 50 states, D.C., U.S. territory or possession, or Indian tribal government.

If warranted, the President will make a disaster declaration. The disaster declaration process may take weeks or even months but, for disasters such as the recent hurricanes, the process and declarations are usually done within a week.

I saw an “emergency declaration” for Louisiana on FEMA’s site. Is an emergency declaration the same thing as a major disaster declaration?

No, there are different types of disaster declarations – and the difference determines what type of federal assistance is available and ultimately whether tax relief will be granted.

There are two types of declarations under the Robert T. Stafford Disaster Relief and Emergency Assistance Act:

  1. Emergency declaration. This type of declaration allows the federal government to provide supplementary federal assistance to protect lives and property and other services as needed. In critical situations, the state government may request a “pre-disaster” emergency declaration. An emergency declaration may or may not be followed by a major disaster declaration.
  2. Major disaster declaration. This type of declaration allows for a wide range of federal assistance including individual assistance, public assistance, and hazard mitigation.
  • Note that in “FEMA-vocabulary” some terms may have different meanings from their everyday usage:

Individual assistance means assistance to individuals and households, such as housing, unemployment, and nutrition assistance. FEMA also partners with other agencies such as the Small Business Administration to offer SBA loans to affected businesses.

Public assistance means federal assistance to state governments and some non-profits for clean-up, repair, and replacement of damaged facilities.

  • Not all FEMA programs are activated for every major disaster declaration or every county in a covered disaster area.

Federal assistance may also be provided when a fire management assistance declaration occurs. This type of declaration is not a major disaster declaration.

When does the IRS step in to provide tax relief?

In general, the IRS provides tax relief soon after a major disaster has been declared and individual assistance has been approved. However, the IRS may expand relief to include affected taxpayers in all counties in a covered disaster area, regardless of the scope of assistance offered. The IRS did so following Hurricane Matthew last October and has the discretion to expand relief should “mixed assistance” be provided in the Irma and Harvey disaster areas.

There is so much information on FEMA’s site. How do I check for major disasters with individual assistance available?

Go to www.FEMA.gov and select Navigation\Disaster Declarations. Select “major disaster declarations” and click “apply.” Click on “financial assistance.” If and when individual assistance is approved it will be displayed on this page.

What types of relief is the IRS authorized to grant?

The IRS is authorized to grant the following types of relief:

  • The IRS has authority to postpone various deadlines and time-sensitive acts that occur on or after the date of a federally declared disaster. The Postponements can vary depending on the time of year of the disaster. Each disaster release spells out the specific postponements. For instance, taxpayers affected by Hurricane Harvey in Texas and Hurricane Irma in Florida, Puerto Rico and the USVI may postpone the third and fourth quarterly estimated tax payments for tax year 2017 to Jan. 31, 2018.
  • The IRS does not have the authority to postpone payroll and excise tax deposits. However, the IRS may waive penalties for late payment of these deposits provided they are made within a short time after the due date. Each disaster release spells out payroll and excise tax deposit penalty relief.
  • Federal law allows taxpayers to claim a disaster-related casualty loss either for the tax year in which the disaster occurred or for the previous tax year. This relief is allowed for any emergency declaration or major disaster declaration, regardless of whether the IRS provides tax relief. However, it may be more difficult for a taxpayer who is not in an individual-assistance county to establish that property damage was disaster-related.
  • Other types of relief may be available following a major disaster. For instance, retirement plans may be able to make hardship distributions to affected taxpayers and their families. The IRS announces any additional relief on its newsroom page.

I see that for Hurricane Harvey and Hurricane Irma the IRS has postponed the tax filing date only. Why didn’t the IRS postpone the tax payment date?

The IRS cannot postpone a due date that occurred before a disaster occurs. An affected taxpayer in the Hurricane Harvey disaster area who filed a valid extension last April was still required to pay all federal taxes due by April 18. The taxpayer has until Jan. 31, 2018, to file the federal tax return but late payment penalties and interest continue to apply starting April 19 until the taxes are paid.

The filing postponement for Hurricane Harvey does not apply to a taxpayer who did not file an extension to begin with.

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