Tax Relief for Victims of Greensburg Tornado, Related Storms; Many Can Claim Refunds under New Tax Law
KS-MO 2008-33, July 9, 2008
WASHINGTON — Recently-enacted legislation is making retroactive tax relief available to many taxpayers affected by last year’s Greensburg, Kan., tornado and related storms. A new IRS publication, 4492-A, explains how eligible individuals and businesses can take advantage of this special relief.
The Food, Conservation, and Energy Act of 2008, commonly referred to as the Farm Bill, includes several tax relief provisions for the 24 disaster-area counties in Kansas struck by storms and tornadoes from May 4 to June 1, 2007. Included are Barton, Clay, Cloud, Comanche, Dickinson, Edwards, Ellsworth, Kiowa, Leavenworth, Lyon, McPherson, Osage, Osborne, Ottawa, Phillips, Pottawatomie, Pratt, Reno, Rice, Riley, Saline, Shawnee, Smith and Stafford counties. These relief provisions are described in Publication 4492-A, Information for Taxpayers Affected by the May 4, 2007, Kansas Storms and Tornadoes.
For example, one of these provisions lifts the limitations that normally require individuals who suffer a casualty or theft loss of personal-use property to reduce the deductible loss by $100 and to reduce their total deductible casualty or theft losses for the year by 10 percent of their adjusted gross income. As a result, many individuals and couples who originally showed disaster losses on either their 2006 or 2007 returns may now be eligible to report a larger deduction and thus claim an additional refund by filing an amended return with the IRS. In addition, those barred from claiming a loss because of the regular $100 and 10-percent limits can now claim a deduction on either an original or amended return for tax year 2007.
The new law also
Provides relief for those who take money out of their IRAs and other retirement plans;
Liberalizes depreciation, expensing and net operating loss rules for business taxpayers; and
Provides an employee retention credit to employers.
As with the disaster-loss provision, eligible taxpayers affected by the Kansas disaster may need to amend previously filed returns in order to properly claim these deductions and credits. Publication 4492-A provides details, including instructions on how to modify various existing IRS forms to claim these deductions and credits.
The Treasury Department and the IRS are preparing additional guidance to address how business taxpayers who have already filed their returns may claim the special 50 percent depreciation allowance or may elect not to claim this deduction.