IRS: Many payments to individuals affected by East Palestine train disaster are tax-free; new guidance could help those in Ohio, Pennsylvania, West Virginia

 

IR-2024-156, June 5, 2024

WASHINGTON — The Internal Revenue Service announced today that in many cases payments received by individuals affected by last year’s train derailment in East Palestine, Ohio, are not taxable.

In Notice 2024-46PDF, posted today on IRS.gov, the IRS determined that the Feb. 3, 2023, derailment qualifies as “an event of a catastrophic nature.” As a result, various payments made to affected individuals by the common carrier that operated the derailed train are “qualified disaster relief payments,” which, by law, are excluded from gross income. Individual taxpayers qualify for the exclusion only if the expenses covered by the qualified disaster relief payments made by the common carrier are not otherwise paid for by insurance or other reimbursement.

According to the IRS notice, the common carrier issued Forms 1099-MISC to recipients of various payments, some of which are taxable and some of which are not because they are qualified disaster relief payments.

Tax-free qualified disaster relief payments made by the common carrier are:

  • One-time $1,000 “inconvenience” payments to affected individuals;
  • Relocation expenses and expenses for replacing clothing and personal items;
  • Cost of repairing or rehabilitating homes and the surrounding environment;
  • Compensation to homeowners who sold their homes after the derailment; and
  • Medical expenses.

Taxable payments include:

  • Lost wages;
  • Access payments to property owners to allow the common carrier access to the train track for remediation and to clean nearby creeks and streams; and
  • Payments to businesses.

How to report: Returns should state “East Palestine Derailment Relief”

Any taxpayer who has not yet filed their 2023 return does not need to report qualified disaster relief payments on their tax return, even if reported to them on Form 1099-MISC. However, taxable payments must be reported.

If filing Form 1040 electronically, attach to the Form 1040 a .pdf attachment with filename “EPTDR-East Palestine Train Derailment Relief.” The attachment should state “East Palestine Train Derailment Relief.”

If filing Form 1040 on paper, state “East Palestine Train Derailment Relief” at the top of Form 1040. Mail the Form 1040 to the address in the Form instructions.

Any taxpayer who has already filed their 2023 tax return and reported their qualified disaster relief payments as taxable can amend their return, report the exclusion and claim any refund of taxes paid, by filing Form 1040-X. The IRS urges anyone who e-filed their 2023 return to e-file their amended return to speed processing. Visit File an amended return for details.

If filing Form 1040-X electronically, attach a .pdf attachment with filename “EPTDR-East Palestine Train Derailment Relief.” The attachment should state “East Palestine Train Derailment Relief.” Individuals may also state, “East Palestine Train Derailment Relief,” at the beginning of Part III, Explanation of Changes.

If filing Form 1040-X on paper, state, “East Palestine Train Derailment Relief,” at the top of Form 1040-X, as well as at the beginning of Part II, Explanation of Changes. Mail the completed form to the address in the Form instructions.

For more information see East Palestine train derailment frequently asked questions.

Reminder about tax return preparation options