Many thousands of individuals and businesses felt the wrath of Hurricane Ian and Hurricane Fiona in September, including many tax professionals and their tax clients, making it impossible to meet the Oct. 17 and other impending tax deadlines.
The Internal Revenue Service has granted relief by extending the time certain individuals and businesses have to file their returns and pay any taxes due. In addition, there are special rules affecting the recognition of gains and losses from casualty losses incurred in these presidentially declared disaster areas.
Who receives relief?
The IRS has issued a number of pronouncements granting relief to taxpayers impacted by Hurricanes Fiona and Ian. As of the publication date of this article, the relief applies to individuals and households that reside or have a business anywhere in Puerto Rico, Florida, North Carolina and South Carolina.
Affected individuals and businesses will now have until Feb. 15, 2023, to file returns and pay any taxes originally due during this period. This relief includes taxpayers with valid extensions to file their 2021 returns, previously due to be filed on Oct. 17, 2022.
Keep in mind that the relief does not apply to payments for 2021 returns; those payments were due to be paid on April 18, 2022.
The IRS is making this relief available to any area designated by the Federal Emergency Management Agency. The FEMA declarations permit the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in disaster areas.
The IRS also indicates it will work with taxpayers living outside the disaster area but whose records necessary to meet a deadline during the postponement period are located in the affected area. This also includes workers assisting the relief activities when said relief activities are affiliated with a recognized government or philanthropic organization.
Taxpayers qualifying for relief who live outside the disaster area should call the IRS at (866) 562-5227.
Other returns or payments affected
The Feb. 15, 2023, due date doesn’t just apply to individual and business tax returns. The new due date also applies to:
- Quarterly estimated income tax payments that, under other circumstances, would have been due on Jan. 17, 2023;
- Quarterly payroll and excise tax returns usually due on Oct. 31, 2022, and Jan. 31, 2023;
- Penalties on payroll and excise tax deposits after the September dates listed below and before Oct. 10, 2022, will be abated as long as the deposits were made by Oct. 11, 2022. The shift from Oct. 10 to Oct. 11 is due to Oct. 10, 2022, being a federal holiday.
- Businesses with an original or extended due date within the postponement period can also take advantage of the extended due date. The new due date includes calendar-year corporations whose 2021 extensions must be filed by Oct. 17, 2022, and tax-exempt organizations, including 2021 calendar-year returns whose 2021 extensions end on Nov. 15, 2022.
- Form 5500 series returns due on or after Sept. 15, 2022, and before Feb. 15, 2023.
- Transferors who are not affected but are involved in a section 1031 like-kind exchange under Section 17.02(2) of Rev. Proc. 2018-58.
In addition to extensions of time to file tax returns and make payments, presidential disaster declarations offer taxpayers special options for gain or loss recognition. Those who have casualty losses in a presidentially-declared disaster area may qualify to recognize losses in the year prior to the year the casualty actually occurred under Section 165(i).
Taxpayers who realize gains by receiving insurance proceeds in excess of basis may be able to defer gain recognition by reinvesting in qualified property under Section 1033. Some of these actions are time-sensitive, so taxpayers are encouraged to contact their tax advisor to take advantage of the full range of relief options
Actions to take if an affected taxpayer receives a penalty notice
The IRS automatically will provide filing and penalty relief to an affected taxpayer with an IRS address of record located in a disaster area.
However, if a taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.
Relief dates by jurisdiction
The start dates for relief are different for each state affected by Hurricane Ian and for Puerto Rico affected by Hurricane Fiona.
- Puerto Rico: Filing and payment deadlines starting on or after Sept. 17, 2022, and before Feb. 15, 2023, will be postponed until Feb. 15, 2023.
- Florida: Filing and payment deadlines starting on or after Sept. 23, 2022, and before Feb. 15, 2023, will be postponed until Feb. 15, 2023.
- South Carolina: Filing and payment deadlines starting on or after Sept. 25, 2022, and before Feb.15, 2023, will be postponed until Feb. 15, 2023.
- North Carolina: Filing and payment deadlines starting on or after Sept. 28, 2022, and before Feb.15, 2023, will be postponed to Feb. 15, 2023.
Additional resources for those impacted by recent disasters
Tax professionals and taxpayers can follow additional IRS announcements and get further guidance by accessing the resources below:
IRS updates can be tracked by following the IRS disaster relief page. Federal Emergency Management Agency assistance specific to Hurricane Ian can be found at FEMA.gov/Disaster/Hurricane-Ian. Other federal agency responses for Hurricane Ian and other recent disasters can be found on USA.gov.