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HURRICANE TAX RELIEF SUMMARY

September 04, 2005

The IRS has invoked its disaster relief powers to waive tax rules for the areas affected by the Katrina disaster.

RETURN DEADLINE RELIEF

All tax returns and payments due from August 29 through October are extended automatically to October 31 for taxpayers in the "affected area" of Hurricane Katrina; the counties in the affected area are listed below. This includes 3rd quarter individual and corporate estimated tax payments otherwise due September 15, as well as double-extended 1040s. (IR-2005-84; IR-2005-91.)UPDATE:The IRS has now extended the due dates for all returns and payments due until January 3, 2006, amounts due before that date. (IR 2005-96) UPDATE, SEPTEMBER 22, 2005: Congress has passed legislation extending the deadlines to February 28, 2005. More on the congressional action here.

EMPLOYMENT AND EXCISE TAX PAYMENT RELIEF

Taxpayers in the affected area with employment tax and excise tax deposits otherwise due August 29 through September 23 have until October 31 to make the deposits.

COLLECTION AND ENFORCEMENT SUSPENDED

The IRS has suspended "many" of its compliance and enforcement activities in the affected area for 60 days.

FURTHER EXTENSIONS LIKELY

The IRS says it expects to extend these extensions and enforcement moratoriums for the hardest-hit areas.

DISASTER FAQS: The IRS has set up a "frequently answered questions" page regarding disaster-related tax issues.

COUNTIES AFFECTED (updated 9/22/05 per Notice 2005-73)

(Taxpayers should mark the top of any late filings eligible for relief with the words "Hurricane Katrina" in red).

Louisiana

Taxpayers will receive automatic relief in 31 Louisiana parishes designated for individual assistance: Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Pointe Coupee, Plaquemines, St. Bernard, St. Charles, St. Helena, St. James, St. John, St. Mary, St. Martin, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge and West Feliciana

Taxpayers will receive tax relief if they identify themselves as being impacted by Hurricane Katrina and they live in these 33 Louisiana parishes designated for public assistance: Allen, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Caldwell, Catahoula, Claiborne, Concordia, Desoto, East Carroll, Evangeline, Franklin, Grant, Jackson, LaSalle, Lincoln, Madison, Morehouse, Natchitoches, Ouachita, Rapides, Red River, Richland, Sabine, St. Landry, Tensas, Union, Vernon, Webster, West Carroll and Winn.

Mississippi

Taxpayers will receive automatic relief in 47 Mississippi counties designated for individual assistance: Adams, Amite, Attala, Claiborne, Choctow, Clarke, Copiah, Covington, Franklin, Forrest, George, Greene, Hancock, Harrison, Hinds, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston and Yazoo.

Taxpayers will receive tax relief if they identify themselves as being impacted by Hurricane Katrina and they live in these 35 Mississippi counties designated for public assistance: Alcorn, Benton, Bolivar, Calhoun, Carroll, Chickasaw, Clay, Coahoma, DeSoto, Grenada, Holmes, Humphreys, Issaquena, Itawamba, Lafayette, Leflore, Lee, Marshall, Monroe, Montgomery, Panola, Pontotoc, Prentiss, Quitman, Sharkey, Sunflower, Tallahatchie, Tate, Tippah, Tishomingo, Tunica, Union, Washington, Webster and Yalobusha.

Alabama

Taxpayers will receive automatic relief in 10 Alabama counties designated for individual assistance: Baldwin, Choctaw, Clarke, Greene, Hale, Mobile, Pickens, Sumter, Tuscaloosa and Washington.

Taxpayers will receive tax relief if they identify themselves as being impacted by Hurricane Katrina and they live in these 12 counties eligible for public assistance: Bibb, Colbert, Cullman, Jefferson, Lamar, Lauderdale, Marengo, Marion, Monroe, Perry, Wilcox and Winston.

Florida

Taxpayers will receive tax relief if they identify themselves as being impacted by Hurricane Katrina and they live in these 11 Florida counties designated for public assistance: Monroe, Broward, Miami- Dade, Bay, Collier, Escambia, Franklin, Gulf, Okaloosa, Santa Rosa and Walton.

OTHER RELIEF

Several other relief provisions have been announced in response to the disaster. These include:

DISASTER HOT LINE: The IRS has set up a toll-free number (1-866-562-5227) to address disaster-related questions.

DIESEL FUEL EXCISE TAXES: A waiver of penalties for using dyed dieself fuel for highway use. This runs from August 25 in Florida; August 30 in Alabama, Louisiana and Mississippi; and August 31 in the rest of the country. The waiver period runs through September 15 (IR 2005-89)

RETIREMENT PLAN CONTRIBUTIONS: Employers in the affected area have until October 31 to make minimum funding contributions otherwise due from August 29 through October 30 (Notice 2005-60)

LOW-INCOME HOUSING: Landlords who qualify for low-income housing credits normally have to document the low-income status of their tenants to receive the credits. These rules have been waived to those providing housing for Katrina refugees (IR-2005-92)

IRS DISASTER WEB PAGE: The IRS has set up a web page for all of it's Katrina-related news.

CHARITY SEARCH PAGE: The IRS has a searchable web page of charities eligible to receive deductible contributions. If you don't know the charity well, this can help you avoid disaster scammers.

REFUNDS FOR DISASTER LOSSES: Taxpayers who suffer a deductible loss in the Katrina disaster area will be able to file amended returns to claim the loss in 2004. This will enable taxpayers to get the tax benefit of the losses right away, rather than having to wait until they file their 2005 returns. In general, these deductions are available for casualty losses not reimbursed by insurance. The deductible loss is the lesser of:

- The amount the disaster reduced the value of the property, or
- The excess of the property's basis (generally basis = cost) over its value after the disaster.

UPDATE: CHARITABLE EXEMPTION RELIEF: The IRS has announced that it is speeding up the process for approving applications for charitable entity status as a result of the Katrina disaster. They still encourage gifts to established charities.

LEAVE-SHARING.The IRS has also announced that "leave-donation" programs will be tax-preferred. This covers arrangements where employees give up accrued vacation in exchange for the employer making a cash payment of accrued vacation pay to charity (IR 2005-97; Notice 2005-68). The payments will be deductible to the employer without being subject to employment taxes; the employee will not pick up the payments in income. This only covers payments for Katrina relief, and only if the payments are remitted to charity before January 1, 2007

RELIEF FOR AID WORKERS (ADDED 9/15/05): The IRS will give Katrina aid workers the same automatic extension of return payment and filing deadlines already available for residents of the disaster area. This means aid workers - relief workers assisting in the disaster area - have until January 3 to pay amounts otherwise due since August 29. This includes third quarter payments due today and extended 1040s due October 15. (IR 2005-103)

RETIREMENT PLAN LOANS AND HARSHIP DISTRIBUTIONS: The IRS has granted qualified plans blanket permission to make hardship distributions or loans to disaster-area residents (Announcement 2005-70).

Taxation of disaster relief payments is covered in this comprehensive summary of Katrina and taxes provided by CCH (via TaxGuru.net).

UPDATE, 9/21/05:IRS WEB SITE CONSOLIDATES KATRINA GUIDANCE

The IRS has linked all of its releases and announcements related to the hurricane at thier new Katrina News Releases & Legal Guidance page.

GIVE GENEROUSLY: There is an enormous need for help. It behooves those of us fortunate enough to be high and dry to give generously to the Salvation Army, the Red Cross, or other worthy charities. If your employer matches contributions, be sure to have them kick in to the effort with you.

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