SD-2008-03, Oct. 29, 2007
SAN DIEGO — The Internal Revenue Service today announced tax relief for California taxpayers in the Presidential Disaster Area struck by severe wildfires beginning on Oct. 21, 2007. The disaster area consists of the following counties: Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and Ventura.
Deadlines for affected taxpayers to file returns, pay taxes and perform other time-sensitive acts falling on or after Oct. 21, 2007, and on or before Jan. 31, 2008, have been postponed to Jan. 31, 2008.
In addition, the IRS will waive the failure to deposit penalty for employment and excise deposits due on or after Oct. 21, 2007, and on or before Nov. 5, 2007, as long as the deposits are made by Nov. 5, 2007.
If any affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply during the period from Oct. 21, 2007, to Jan. 31, 2008 –– Oct. 21, 2007, to Nov. 5, 2007, for failure to deposit penalties. No penalty or interest will be abated for taxpayers that do not have a filing, payment or deposit due date, including an extended filing or payment due date, during this period.
IRS computer systems automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief. Taxpayers within the covered disaster area do not need to self-identify by writing on their returns or using the disaster designation in their tax software.
Affected taxpayers who reside or have a business located outside the covered disaster area are required to call the IRS disaster hotline at 866-562-5227 to self-identify for disaster relief.
Covered Disaster Area
The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.
Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose books, records, or tax professionals’ offices are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area are eligible for relief.
Grant of Relief
The IRS gives affected taxpayers until Jan. 31, 2008, to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date falling on or after Oct. 21, 2007, and on or before Jan. 31, 2008. For original filing due dates falling during this period, the relief is provided under section 6081 and if additional time to file is needed beyond Jan. 31, 2008, an affected taxpayer may file the appropriate extension request to obtain the remainder of the 6-month period provided by section 6081. For extended filing due dates falling during this period where the full six-month extension period has been used, relief is provided under section 7508A. In such a case, no additional time to file is available after Jan. 31, 2008.
The IRS also gives affected taxpayers until Jan. 31, 2008, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (August 20, 2007), that are due to be performed on or after Oct. 21, 2007, and on or before Jan. 31, 2008. This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.
The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 or 5498 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise deposits, due on or after Oct. 21, 2007, and on or before Nov. 5, 2007, provided the taxpayer made these deposits by Nov. 5, 2007.
Affected taxpayers in a presidentially declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.
Individuals may deduct personal property losses that are not covered by insurance or other reimbursements, but they must first subtract $100 for each casualty event and then subtract ten percent of their adjusted gross income from their total casualty losses for the year. For details, see IRS Publication 547 (PDF), “Casualties, Disasters and Thefts.”
Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “California Wildfires” at the top of the form so that the IRS can expedite the processing of the refund.
The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers who need them to apply for benefits or to file amended returns claiming casualty losses. Such taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506 (PDF), “Request for Copy of Tax Return,” or Form 4506-T (PDF), “Request for Transcript of Tax Return,” as appropriate, and submit it to the IRS.
Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.
For further information, see Tax Relief in Disaster Situations.