Publication 4492-B - Main Content


Definitions

The following definitions are used throughout this publication.

Midwestern Disaster Areas

A Midwestern disaster area is an area for which a major disaster was declared by the President during the period beginning on May 20, 2008, and ending on July 31, 2008, in the state of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, or Wisconsin, as a result of severe storms, tornadoes, or flooding that occurred on the applicable disaster date. See Tables 1 and 2 for a list of the counties included in the Midwestern disaster areas.

Applicable Disaster Date

The term “applicable disaster date” as used in this publication, refers to the date on which the severe storms, tornadoes, or flooding occurred in the Midwestern disaster areas. You will need to know this date when using this publication for the various tax provisions.

Table 1

The counties listed in Table 1 below are eligible for all tax provisions shown in this publication.

Applicable
Disaster Dates*
State Affected Counties—Midwestern Disaster Areas
05/02/2008
through
05/12/2008
Arkansas Arkansas, Benton, Cleburne, Conway, Crittenden, Grant, Lonoke, Mississippi, Phillips, Pulaski, Saline, and Van Buren.
06/01/2008
through
07/22/2008
Illinois Adams, Calhoun, Clark, Coles, Crawford, Cumberland, Douglas, Edgar, Hancock, Henderson, Jasper, Jersey, Lake, Lawrence, Mercer, Rock Island, Whiteside, and Winnebago.
05/30/2008
through
06/27/2008
Indiana Adams, Bartholomew, Brown, Clay, Daviess, Dearborn, Decatur, Gibson, Grant, Greene, Hamilton, Hancock, Hendricks, Henry, Huntington, Jackson, Jefferson, Jennings, Johnson, Knox, Lawrence, Madison, Marion, Monroe, Morgan, Owen, Parke, Pike, Posey, Putnam, Randolph, Ripley, Rush, Shelby, Sullivan, Tippecanoe, Vermillion, Vigo, Washington, and Wayne.
05/25/2008
through
08/13/2008
Iowa Adair, Adams, Allamakee, Appanoose, Audubon, Benton, Black Hawk, Boone, Bremer, Buchanan, Butler, Cass, Cedar, Cerro Gordo, Chickasaw, Clarke, Clayton, Clinton, Crawford, Dallas, Davis, Decatur, Delaware, Des Moines, Dubuque, Fayette, Floyd, Franklin, Fremont, Greene, Grundy, Guthrie, Hamilton, Hancock, Hardin, Harrison, Henry, Howard, Humboldt, Iowa, Jackson, Jasper, Johnson, Jones, Keokuk, Kossuth, Lee, Linn, Louisa, Lucas, Madison, Mahaska, Marion, Marshall, Mills, Mitchell, Monona, Monroe, Montgomery, Muscatine, Page, Polk, Pottawattamie, Poweshiek, Ringgold, Scott, Story, Tama, Union, Van Buren, Wapello, Warren, Washington, Webster, Winnebago, Winneshiek, Worth, and Wright.
05/10/2008
through
05/11/2008
Missouri Barry, Jasper, and Newton.
06/01/2008
through
08/13/2008
Missouri Adair, Andrew, Callaway, Cass, Chariton, Clark, Gentry, Greene, Harrison, Holt, Johnson, Lewis, Lincoln, Linn, Livingston, Macon, Marion, Monroe, Nodaway, Pike, Putnam, Ralls, St. Charles, Stone, Taney, Vernon, and Webster.
05/22/2008
through
06/24/2008
Nebraska Buffalo, Butler, Colfax, Custer, Dawson, Douglas, Gage, Hamilton, Holt, Jefferson, Kearney, Lancaster, Platte, Richardson, Sarpy, and Saunders.
06/05/2008
through
07/25/2008
Wisconsin Adams, Calumet, Crawford, Columbia, Dane, Dodge, Fond du Lac, Grant, Green, Green Lake, Iowa, Jefferson, Juneau, Kenosha, La Crosse, Manitowoc, Marquette, Milwaukee, Monroe, Ozaukee, Racine, Richland, Rock, Sauk, Sheboygan, Vernon, Walworth, Washington, Waukesha, and Winnebago.
*For more details, go to www.fema.gov

Table 2

The counties listed in Table 2 below are eligible for all of the special tax provisions shown in this publication except the following.

  • Charitable Giving Incentives.

  • Net Operating Losses.

  • Education Credits.

  • Recapture of Federal Mortgage Subsidy.

  • Tax Relief for Temporary Relocation.

  • Employee Retention Credit.

  • Employer Housing Credit and Exclusion.

  • Demolition and Clean-up Costs.

  • Increase in Rehabilitation Credit.


Applicable
Disaster Dates*
State Affected Counties—Midwestern Disaster Areas
06/01/2008
through
07/22/2008
Illinois Greene, Madison, Monroe, Pike, Randolph, St. Clair, and Scott.
05/30/2008
through
06/27/2008
Indiana Benton, Boone, Fountain, Franklin, Jay, Montgomery, Ohio, Switzerland, Union, and Wabash.
05/25/2008
through
08/13/2008
Iowa Carroll, Cherokee, Lyon, Palo Alto, Pocahontas, Taylor, and Wayne.
05/22/2008
through
06/16/2008
Kansas Barber, Barton, Bourbon, Brown, Butler, Chautauqua, Cherokee, Clark, Clay, Comanche, Cowley, Crawford, Decatur, Dickinson, Edwards, Elk, Ellis, Ellsworth, Franklin, Gove, Graham, Harper, Haskell, Hodgeman, Jackson, Jewell, Kingman, Kiowa, Lane, Linn, Logan, Mitchell, Montgomery, Ness, Norton, Osborne, Pawnee, Phillips, Pratt, Reno, Republic, Riley, Rooks, Rush, Saline, Seward, Sheridan, Smith, Stafford, Sumner, Thomas, Trego, Wallace, and Wilson.
06/06/2008
through
06/13/2008
Michigan Allegan, Barry, Eaton, Ingham, Lake, Manistee, Mason, Missaukee, Osceola, Ottawa, Saginaw, and Wexford.
06/06/2008
through
06/12/2008
Minnesota Cook, Fillmore, Freeborn, Houston, Mower, and Nobles.
06/01/2008
through
08/13/2008
Missouri Atchison, Audrain, Bates, Buchanan, Cape Girardeau, Carroll, Christian, Daviess, Grundy, Howard, Jefferson, Knox, Mercer, Miller, Mississippi, Morgan, New Madrid, Pemiscot, Perry, Pettis, Platte, Polk, Randolph, Ray, Saline, Schuyler, Scotland, Shelby, St. Genevieve, St. Louis, the Independent City of St. Louis, Scott, Sullivan, and Worth.
04/23/2008
through
04/26/2008
Nebraska Gage, Johnson, Morrill, Nemaha, and Pawnee.
05/22/2008
through
06/24/2008
Nebraska Adams, Blaine, Boone, Boyd, Brown, Burt, Cass, Chase, Cherry, Cuming, Dundy, Fillmore, Frontier, Furnas, Garfield, Gosper, Greeley, Hall, Hayes, Howard, Johnson, Keya Paha, Lincoln, Logan, Loup, Merrick, McPherson, Morrill, Nance, Nemaha, Otoe, Phelps, Polk, Red Willow, Rock, Saline, Seward, Sherman, Stanton, Thayer, Thomas, Thurston, Valley, Webster, Wheeler, and York.
06/27/2008 Nebraska Dodge, Douglas, Sarpy, and Saunders.
06/05/2008
through
07/25/2008
Wisconsin Lafayette.
* For more details, go to www.fema.gov

Charitable Giving Incentives

Temporary Suspension of Limits on Charitable Contributions

This benefit applies only to the counties in Table 1.

Individuals.   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% of adjusted gross income (AGI) limit. A qualified contribution is a charitable contribution paid in cash or by check to a 50% limit organization if you make an election to have the 50% limit not apply to these contributions.

  A qualified contribution must also meet all of the following requirements.
  • Be paid after May 1, 2008, and before January 1, 2009.

  • The contribution must be for relief efforts in one or more Midwestern disaster areas.

  • Documentation must be provided by the donee organization that the contribution was used (or will be used) for relief efforts in one or more Midwestern disaster areas.

  Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. You can carry over any contributions you are not able to deduct for 2008 because of this limit. In 2009, the carryover of your unused qualified contributions is subject to the 50% of AGI limit.

Exception.   Qualified contributions do not include contributions to certain private foundations described in section 509(a)(3) or contributions for the establishment of a new, or maintenance of an existing, donor advised fund.

Corporations.   A corporation can elect to deduct qualified cash contributions without regard to the 10% of taxable income limit if the contributions were paid after May 1, 2008, and before January 1, 2009, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3) or contributions for the establishment of a new, or maintenance of an existing, donor advised fund), for relief efforts in one or more Midwestern disaster areas. Documentation must be provided by the donee organization that the contribution was used (or will be used) for relief efforts in one or more Midwestern disaster areas. The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% of taxable income limit.

Partners and shareholders.   Each partner in a partnership and each shareholder in an S corporation must make a separate election to have the appropriate limit not apply.

More information.   For more information, see Publication 526 or Publication 542, Corporations. Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions.

Standard Mileage Rate for Charitable Use of Vehicles

This benefit applies only to the counties in Table 1.

The following are special standard mileage rates in effect for 2008 for the cost of operating your vehicle for providing charitable services related only to the severe storms, tornadoes, or flooding.

  • 36 cents per mile for the period beginning on the applicable disaster date through June 30, 2008.

  • 41 cents per mile for the period July 1 through December 31, 2008.

Mileage Reimbursements to Charitable Volunteers

This benefit applies only to the counties in Table 1.

You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger vehicle for the benefit of a qualified charitable organization in providing relief related to the severe storms, tornadoes, or flooding during the period beginning on the applicable disaster date, and ending on December 31, 2008. You cannot claim a deduction or credit for amounts you exclude. You must keep records of miles driven, time, place (or use), and purpose of the mileage. The amount you can exclude cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods.

  • 50.5 cents per mile for the period beginning on the applicable disaster date through June 30, 2008.

  • 58.5 cents per mile for the period July 1 through December 31, 2008.

Casualty and Theft Losses

This benefit applies to the counties in both Tables 1 and 2.

The following paragraphs explain changes to casualty and theft losses that were caused by the severe storms, tornadoes, or flooding in the Midwestern disaster areas. For more information, see Publication 547.

Limits on personal casualty or theft losses.   Losses of personal use property that arose in a Midwestern disaster area on or after the applicable disaster date are not subject to the $100 or 10% of AGI limits. Qualifying losses include losses from casualties and thefts that arose in a Midwestern disaster area that were attributable to the severe storms, tornadoes, or flooding.

When completing Form 4684, do not include on line 17 any losses that arose in a Midwestern disaster area. A loss arising in a Midwestern disaster area is not considered a loss attributable to a federally declared disaster for purposes of that line and cannot be added to your standard deduction.

When to deduct the loss.   Casualty and theft losses are generally deductible only in the year the casualty occurred or the theft was discovered. However, you can elect to deduct losses caused by the severe storms, tornadoes, or flooding on your return for the prior year.

Special instructions for individuals who elect to claim a Midwestern disaster area casualty or theft loss for 2007.   Individuals filing or amending their 2007 tax return for casualty or theft losses that were attributable to the severe storms, tornadoes, or flooding should:
  • Enter “Midwestern Disaster Area” at the top of Form 1040 or Form 1040X, and

  • Complete the 2008 version of Form 4684. Cross out “2008” and enter “2007” at the top of Form 4684.

Time limit for making election.   You must make this election to claim your casualty or theft loss in 2007 by the later of the following dates.
  • The due date (without extensions) for filing your 2008 income tax return.

  • The due date (with extensions) for filing your 2007 income tax return.

Example.

If you are a calendar year individual taxpayer, you have until April 15, 2009, to amend your 2007 tax return to claim a casualty or theft loss that occurred during 2008.

Replacement Period for Nonrecognition of Gain

This benefit applies to the counties in both Tables 1 and 2.

Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a federally declared disaster area). However, for property that was involuntarily converted on or after the applicable disaster date, as a result of the severe storms, tornadoes, or flooding, a 5-year replacement period applies if substantially all of the use of the replacement property is in a Midwestern disaster area. For more information, see the Instructions for Form 4684.

Net Operating Losses

This benefit applies only to the counties in Table 1.

Qualified disaster recovery assistance loss.   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. However, the portion of an NOL that is a qualified disaster recovery assistance loss can be carried back to the 5 tax years before the NOL year. In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD.

  A qualified disaster recovery assistance loss is the smaller of:
  1. The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or

  2. The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year):

    1. Qualified disaster recovery assistance casualty loss (as defined below),

    2. Moving expenses paid or incurred on or after the applicable disaster date, and before January 1, 2011, for the employment of an individual whose main home was in a Midwestern disaster area before the applicable disaster date, who was unable to remain in that home because of the severe storms, tornadoes, or flooding, and whose main job location (after the move) is in a Midwestern disaster area,

    3. Temporary housing expenses paid or incurred on or after the applicable disaster date, and before January 1, 2011, to house employees of the taxpayer whose main job location is in a Midwestern disaster area,

    4. Depreciation or amortization allowable for any qualified disaster recovery assistance property (even if you elected not to claim the special disaster recovery assistance depreciation allowance for such property) for the year placed in service, and

    5. Repair expenses (including expenses for the removal of debris) paid or incurred on or after the applicable disaster date, and before January 1, 2011, for any damage from the severe storms, tornadoes, or flooding to property located in a Midwestern disaster area.

Qualified disaster recovery assistance casualty loss.   A qualified disaster recovery assistance casualty loss is any deductible section 1231 loss of property located in a Midwestern disaster area if the loss was caused by the severe storms, tornadoes, or flooding. For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by the severe storms, tornadoes, or flooding of property located in a Midwestern disaster area. Any such loss taken into account in figuring your qualified disaster recovery assistance loss is not eligible for the election to be treated as having occurred in the previous tax year.

More information.   For more information on NOLs, see Publication 536 or Publication 542, Corporations.

IRAs and Other Retirement Plans

New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of the severe storms, tornadoes, or flooding.

Definitions

Qualified disaster recovery assistance distribution.   A qualified disaster recovery assistance distribution is any distribution you received from an eligible retirement plan if all of the following apply.
  1. The distribution was made on or after the applicable disaster date and before January 1, 2010.

  2. Your main home was located in a Midwestern disaster area on the applicable disaster date.

  3. You sustained an economic loss because of the severe storms, tornadoes, or flooding and your main home was in a Midwestern disaster area on the applicable disaster date. Examples of an economic loss include, but are not limited to:

    1. Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause;

    2. Loss related to displacement from your home; or

    3. Loss of livelihood due to temporary or permanent layoffs.

  If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified disaster recovery assistance distribution, regardless of whether the distribution was made on account of the severe storms, tornadoes, or flooding. Qualified disaster recovery assistance distributions are permitted without regard to your need or the actual amount of your economic loss.

  The total of your qualified disaster recovery assistance distributions from all plans is limited to $100,000. If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you can allocate the $100,000 limit among the plans any way you choose.

  A reduction or offset (on or after the applicable disaster date) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified disaster recovery assistance distribution.

Eligible retirement plan.   An eligible retirement plan can be any of the following.
  • A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan).

  • A qualified annuity plan.

  • A tax-sheltered annuity contract.

  • A governmental section 457 deferred compensation plan.

  • A traditional, SEP, SIMPLE, or Roth IRA.

Main home.   Generally, your main home is the home where you live most of the time. A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home.

Taxation of Qualified Disaster Recovery Assistance Distributions

This benefit applies to the counties in both Tables 1 and 2.


Qualified disaster recovery assistance distributions are included in income in equal amounts over three years. However, if you elect, you can include the entire distribution in your income in the year it was received.

Qualified disaster recovery assistance distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). However, any distributions you receive in excess of the $100,000 qualified disaster recovery assistance distribution limit may be subject to the additional tax on early distributions.

For more information, see Form 8930.

Repayment of Qualified Disaster Recovery Assistance Distributions

This benefit applies to the counties in both Tables 1 and 2.


If you choose, you generally can repay any portion of a qualified disaster recovery assistance distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. Also, you can repay a qualified disaster recovery assistance distribution made on account of a hardship from a retirement plan. However, see Exceptions later for qualified disaster recovery assistance distributions you cannot repay.

You have three years from the day after the date you received the distribution to make a repayment. Amounts that are repaid are treated as a qualified rollover and are not included in income. Also, a repayment of a qualified disaster recovery assistance distribution to an IRA is not counted when figuring the one-rollover-per-year limitation. See Form 8930 for more information on how to report repayments.

Exceptions.   You cannot repay the following types of distributions.
  1. Qualified disaster recovery assistance distributions received as a beneficiary (other than a surviving spouse).

  2. Required minimum distributions.

  3. Periodic payments (other than from an IRA) that are for:

    1. A period of 10 years or more,

    2. Your life or life expectancy, or

    3. The joint lives or joint life expectancies of you and your beneficiary.

Repayment of Qualified Distributions for the Purchase or Construction of a Main Home

This benefit applies to the counties in both Tables 1 and 2.


If you received a qualified distribution to purchase or construct a main home in a Midwestern disaster area, you can repay part or all of that distribution on or after the applicable disaster date, but no later than March 3, 2009, to an eligible retirement plan. For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made.

To be a qualified distribution, the distribution must meet all of the following requirements.

  1. The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA.

  2. The distribution was received after the date that was 6 months before the day after the applicable disaster date.

  3. The distribution was to be used to purchase or construct a main home in a Midwestern disaster area that was not purchased or constructed because of the severe storms, tornadoes, or flooding.

Amounts that are repaid before March 4, 2009, are treated as a qualified rollover and are not included in income. Also, a repayment of a qualified distribution to an IRA is not counted when figuring the one-rollover-per-year limitation.

A qualified distribution not repaid before March 4, 2009, may be taxable for 2007 or 2008 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions.

You must file Form 8930 if you received a qualified distribution that you repaid, in whole or in part, before March 4, 2009.

Loans From Qualified Plans

This benefit applies to the counties in both Tables 1 and 2.


The following benefits are available to qualified individuals.

  • Increases to the limits for distributions treated as loans from employer plans.

  • A 1-year suspension for payments due on plan loans.

Qualified individual.   You are a qualified individual if your main home was located in a Midwestern disaster area on the applicable disaster date and you had an economic loss because of the severe storms, tornadoes, or flooding. Examples of an economic loss include, but are not limited to:
  • Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause;

  • Loss related to displacement from your home; or

  • Loss of livelihood due to temporary or permanent layoffs.

Limits on plan loans.   The $50,000 limit for distributions treated as plan loans is increased to $100,000. In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. If your main home was located in a Midwestern disaster area, the higher limits apply only to loans received during the period beginning on October 3, 2008, and ending on December 31, 2009.

One-year suspension of loan payments.   Payments on plan loans outstanding on or after the applicable disaster date, may be suspended for 1 year by the plan administrator. To qualify for the suspension, the due date for any loan payment must occur during the period beginning on the applicable disaster date and ending on December 31, 2009.

Additional Tax Relief for Individuals

Earned Income Credit and Child Tax Credit

This benefit applies to the counties in both Tables 1 and 2.

You can elect to use your 2007 earned income to figure your earned income credit (EIC) and additional child tax credit for 2008 if:

  1. Your 2008 earned income is less than your 2007 earned income, and

  2. At least one of the following statements is true.

    1. Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 1.

    2. Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 2, and you were displaced from that home because of the severe storms, tornadoes, or flooding.

Earned income.    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit.

Joint returns.   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. If you make the election, your 2007 earned income is the sum of your 2007 earned income and your spouse's 2007 earned income.

Making the election.   If you make the election to use your 2007 earned income, the election applies for figuring both the EIC and the additional child tax credit. However, you can make the election for the additional child tax credit even if you do not take the EIC.

  Electing to use your 2007 earned income can increase or decrease your EIC. Take the following steps to decide whether to make the election.
  1. Figure your 2008 EIC using your 2007 earned income.

  2. Figure your 2008 additional child tax credit using your 2007 earned income for EIC purposes.

  3. Add the results of (1) and (2).

  4. Figure your 2008 EIC using your 2008 earned income.

  5. Figure your 2008 additional child tax credit using your 2008 earned income for additional child tax credit purposes.

  6. Add the results of (4) and (5).

  7. Compare the results of (3) and (6). If (3) is larger than (6), it is to your benefit to make the election. If (3) is equal to or smaller than (6), making the election will not help you.

  If you elect to use your 2007 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2007 earned income on the dotted line next to line 64a of Form 1040, on the line next to line 40a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ.

  If you elect to use your 2007 earned income and you are claiming the additional child tax credit, enter your 2007 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line.

Getting your 2007 tax return information.   If you do not have your 2007 tax records, you can get the amount of earned income used to figure your 2007 EIC by calling 1-866-562-5227. You can also get this information by visiting the IRS website at www.irs.gov.

  If you prefer to figure your 2007 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. See Request for Copy or Transcript of Tax Return on page 11.

Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding

This benefit applies to the counties in both Tables 1 and 2.

You can claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by the severe storms, tornadoes, or flooding. The additional exemption amount is claimed on Form 8914. You can claim an additional exemption amount only one time for a specific individual. If you claimed an additional exemption amount for an individual in 2008, you cannot claim that amount again for the same individual in 2009.

The maximum additional exemption amount you can claim for all displaced individuals is $2,000. Any additional exemption amount you claimed for displaced individuals in 2008 will reduce the $2,000 maximum for 2009. The $2,000 limit applies to a husband and wife, whether the husband and wife file joint returns or separate returns. If married filing separately, the $2,000 can be divided in $500 increments between the spouses. For example, if one spouse claims an additional exemption amount for one displaced individual, the other spouse, if otherwise eligible, can claim additional exemption amounts for three different displaced individuals.

If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home).

To qualify as a displaced individual, the individual:

  1. Must have had his or her main home in a Midwestern disaster area on the applicable disaster date, and he or she must have been displaced from that home. If the individual's main home was located in a Midwestern disaster area as shown in Table 2, that home must have been damaged by the severe storms, tornadoes, or flooding or the individual must have been evacuated from that home because of the severe storms, tornadoes, or flooding,

  2. Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and

  3. Cannot be your spouse or dependent.

You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following.

  • Food, clothing, or personal items consumed or used by the displaced individual.

  • Reimbursement for the cost of any long distance telephone calls made by the displaced individual.

  • Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle.

However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual.

Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount.

For more information, see Form 8914.

Education Credits

This benefit applies only to the counties in Table 1.

The education credits have been expanded for students attending an eligible educational institution located in a Midwestern disaster area (Midwestern disaster area students) for any tax year beginning in 2008 or 2009. The Hope credit for a Midwestern disaster area student is increased to 100% of the first $2,400 in qualified education expenses and 50% of the next $2,400 of qualified education expenses for a maximum credit of $3,600 per student. The lifetime learning credit rate for a Midwestern disaster area student is increased from 20% to 40%.

The definition of qualified education expenses for a Midwestern disaster area student also has been expanded. This expanded definition also applies to the tuition and fees deduction claimed on Form 8917. In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a Midwestern disaster area student include the following.

  1. Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution.

  2. For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution.

  3. For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts.

    1. The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.

    2. The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.

You will need to contact the eligible educational institution for qualified room and board costs.

For more information, see Form 8863. See Form 8917 for the tuition and fees deduction.

Recapture of Federal Mortgage Subsidy

This benefit applies only to the counties in Table 1.

Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. This amount is increased to $150,000 if the loan was provided before 2011 and was used to alter, repair, or improve an existing owner-occupied residence in a Midwestern disaster area as shown in Table 1.

Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding

This benefit applies to the counties in both Tables 1 and 2.

Generally, discharges of nonbusiness debts (such as mortgages) made on or after the applicable disaster date and before January 1, 2010, are excluded from income for individuals whose main home was in a Midwestern disaster area on the applicable disaster date. If the individual's main home was located in a Midwestern disaster area as shown in Table 2, the individual also must have had an economic loss because of the severe storms, tornadoes, or flooding. Examples of an economic loss include, but are not limited to:

  1. Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause;

  2. Loss related to displacement from your home; or

  3. Loss of livelihood due to temporary or permanent layoffs.

This relief does not apply to any debt secured by real property located outside a Midwestern disaster area.

You may also have to reduce certain tax attributes by the amount excluded. For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).

Tax Relief for Temporary Relocation

This benefit applies only to the counties in Table 1.

The IRS can adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2008 or 2009 as a result of a temporary relocation caused by the severe storms, tornadoes, or flooding. However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. The IRS has exercised this authority as follows.

  • In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of the severe storms, tornadoes, or flooding.

  • In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of the severe storms, tornadoes, or flooding.

  • You can treat as a student an individual who enrolled in school before the applicable disaster date, and who is unable to attend classes because of the severe storms, tornadoes, or flooding, for each month of the enrollment period that individual is prevented by the severe storms, tornadoes, or flooding from attending school as planned.

Additional Tax Relief for Businesses

Employee Retention Credit

This benefit applies only to the counties in Table 1.

An eligible employer who conducted an active trade or business in a Midwestern disaster area can claim the employee retention credit. The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Use Form 5884-A to claim the credit.

Employers affected by the severe storms, tornadoes, or flooding.   The following definitions apply to employers affected by the severe storms, tornadoes, or flooding.

Eligible employer.   For this purpose, an eligible employer is any employer who meets all of the following.
  • Employed an average of not more than 200 employees on business days during the tax year before the applicable disaster date.

  • Conducted an active trade or business on the applicable disaster date in a Midwestern disaster area.

  • Whose trade or business was inoperable on any day after the applicable disaster date and before January 1, 2009, because of the damage caused by the severe storms, tornadoes, or flooding.

Eligible employee.   For this purpose, an eligible employee is an employee whose principal place of employment on the applicable disaster date with such eligible employer was in a Midwestern disaster area. An employee is not an eligible employee for purposes of the severe storms, tornadoes, or flooding if the employee is treated as an eligible employee for the work opportunity credit.

Qualified wages.   Qualified wages are wages (up to $6,000 per employee) you paid or incurred before January 1, 2009, for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable disaster, and ending on the date your trade or business resumed significant operations at that place. In addition, the wages must have been paid or incurred after the applicable disaster date.

   This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed.

   Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act.

  For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. For a special rule that applies to railroad employees, see section 51(h)(1)(B).

  Qualified wages do not include the following.
  • Wages paid to your dependent or a related individual. See section 51(i)(1).

  • Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program.

  • Wages for services of replacement workers during a strike or lockout.

  For more information, see Form 5884-A.

Employer Housing Credit and Exclusion

This benefit applies only to the counties in Table 1.

An employer who conducted an active trade or business in a Midwestern disaster area can claim the employer housing credit. The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from November 1, 2008, through May 1, 2009. The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). The employer must use Form 5884-A to claim the credit.

A qualified employee is an individual who had a main home in a Midwestern disaster area on the applicable disaster date, and who performs substantially all employment services in a Midwestern disaster area for the employer furnishing the lodging. The employee cannot be your dependent or a related individual. See section 51(i)(1).

For more information, see Form 5884-A.

Demolition and Clean-up Costs

This benefit applies only to the counties in Table 1.

You can elect to deduct 50% of any qualified disaster recovery assistance clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. Qualified disaster recovery assistance clean-up costs are any amounts paid or incurred on or after the applicable disaster date, and before January 1, 2011, for the removal of debris from, or the demolition of structures on, real property located in a Midwestern disaster area that is:

  • Held by you for use in a trade or business or for the production of income, or

  • Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business.

Qualified disaster recovery assistance clean-up costs are limited to amounts necessary due to damage attributable to the severe storms, tornadoes, or flooding in the Midwestern disaster areas.

Increase in Rehabilitation Tax Credit

This benefit applies only to the counties in Table 1.

The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred on or after the applicable disaster date, and before January 1, 2012, on buildings located in a Midwestern disaster area as follows.

  • For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%.

  • For certified historic structures, the credit percentage is increased from 20% to 26%.

For more information, see Form 3468, Investment Credit.

Request for Copy or Transcript of Tax Return

Request for copy of tax return.   You can use Form 4506 to order a copy of your tax return. Generally, there is a $57 fee for requesting each copy of a tax return. If your main home, principal place of business, or tax records are located in a Midwestern disaster area, the fee will be waived if “Midwestern Disaster Area” is written in red across the top of the form when filed.

Request for transcript of tax return.   You can use Form 4506-T to order a free transcript of your tax return. A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. You can also call 1-800-829-1040 to order a transcript.

How To Get Tax Help

Special IRS assistance.   The IRS is providing special help for those affected by the severe storms, tornadoes, or flooding, as well as survivors and personal representatives of the victims. We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by recent federally declared disasters, or who have other tax issues related to the severe storms, tornadoes, or flooding.


Call 1-866-562-5227
Monday through Friday
In English–7 a.m. to 10 p.m. local time
In Spanish–8 a.m. to 9:30 p.m. local time

  The IRS website at www.irs.gov has notices and other tax relief information. Check it periodically for any new guidance.

You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

Contacting your Taxpayer Advocate.   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. Here are seven things every taxpayer should know about TAS:
  • TAS is your voice at the IRS.

  • Our service is free, confidential, and tailored to meet your needs.

  • You may be eligible for TAS help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should.

  • TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.

  • TAS employees know the IRS and how to navigate it. We will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.

  • TAS has at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. You can call your local advocate, whose number is in your phone book, in Pub. 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www.irs.gov/advocate. You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059.

  • You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www.taxtoolkit.irs.gov.

Low Income Taxpayer Clinics (LITCs).   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. LITCs are independent from the IRS. Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. For more information, see Publication 4134, Low Income Taxpayer Clinic List. This publication is available at www.irs.gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office.

Free tax services.   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. It contains lists of free tax information sources, including publications, services, and free tax education and assistance programs. It also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on your telephone.

  Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities.

Free help with your return.   Free help in preparing your return is available nationwide from IRS-trained volunteers. The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Many VITA sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. To find the nearest VITA or TCE site, call 1-800-829-1040.

  As part of the TCE program, AARP offers the Tax-Aide counseling program. To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website at
www.aarp.org/money/taxaide.

  For more information on these programs, go to
www.irs.gov and enter keyword “VITA” in the upper right-hand corner.

Internet. You can access the IRS website at www.irs.gov 24 hours a day, 7 days a week to:

  • E-file your return. Find out about commercial tax preparation and e-file services available free to eligible taxpayers.

  • Check the status of your 2009 refund. Go to
    www.irs.gov and click on Where's My Refund. Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund.

  • Download forms, instructions, and publications.

  • Order IRS products online.

  • Research your tax questions online.

  • Search publications online by topic or keyword.

  • Use the online Internal Revenue Code, Regulations, or other official guidance.

  • View Internal Revenue Bulletins (IRBs) published in the last few years.

  • Figure your withholding allowances using the withholding calculator online at www.irs.gov/individuals.

  • Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant.

  • Sign up to receive local and national tax news by email.

  • Get information on starting and operating a small business.

Phone. Many services are available by phone.

  • Ordering forms, instructions, and publications. Call 1-800-TAX FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. You should receive your order within 10 days.

  • Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.

  • Solving problems. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.

  • TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications.

  • TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.

  • Refund information. To check the status of your 2009 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Refunds are sent out weekly on Fridays. If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back.

  • Other refund information. To check the status of a prior year refund or amended return refund, call 1-800-829-1954.

Evaluating the quality of our telephone services. To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to listen in on or record random telephone calls. Another is to ask some callers to complete a short survey at the end of the call.

Walk-in. Many products and services are available on a walk-in basis.

  • Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.

  • Services. You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. No appointment is necessary—just walk in. If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. All other issues will be handled without an appointment. To find the number of your local office, go to
    www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.

Mail. You can send your order for forms, instructions, and publications to the address below. You should receive a response within 10 days after your request is received.


Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613

DVD for tax products. You can order Publication 1796, IRS Tax Products DVD, and obtain:

  • Current-year forms, instructions, and publications.

  • Prior-year forms, instructions, and publications.

  • Tax Map: an electronic research tool and finding aid.

  • Tax law frequently asked questions.

  • Tax Topics from the IRS telephone response system.

  • Internal Revenue Code—Title 26 of the U.S. Code.

  • Fill-in, print, and save features for most tax forms.

  • Internal Revenue Bulletins.

  • Toll-free and email technical support.

  • Two releases during the year.
    – The first release will ship the beginning of January 2010.
    – The final release will ship the beginning of March 2010.

Purchase the DVD from National Technical Information Service (NTIS) at www.irs.gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee).


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