FAQs for Disaster Victims - Amended Returns

 

Q: If I sustain a loss that is attributable to a federally declared disaster, may I elect to deduct that disaster loss in the preceding tax year?

A: Generally, you may elect to deduct a disaster loss in the year you sustain the loss. This is known as the disaster year.

The disaster year is generally the year in which the disaster occurred but may be a year after the disaster occurred. If, for example, you have a claim for reimbursement with a reasonable prospect of recovery, then you have not sustained a loss until you know with reasonable certainty whether you will receive reimbursement.

If you have a loss attributable to a federally declared disaster occurring in an area identified by FEMA as qualifying for public or individual assistance (or both), you may elect to deduct that loss on your return or amended return for the tax year immediately preceding the disaster year. If you make this election, the loss is treated as having occurred in the preceding year.

This election may be made on Form 4684 Casualties and Thefts, section D. This election should be attached to a return or amended return for the preceding year. With respect to the due date for the election, you must make the election to claim your disaster loss in the preceding year on or before the date that is 6 months after the regular due date for filing your original return (without extensions) for the disaster year. See Publication 547 for more information.

A list of areas warranting public or individual assistance (or both) is available at the FEMA website at FEMA.gov/Disasters.

For tax years 2018 through 2025, if you are an individual, casualty or theft losses of personal-use property, are deductible only if the loss is attributable to a federally declared disaster.

Q: How long does it take for the IRS to process amended returns filed by disaster victims who elect to deduct their disaster related loss in the preceding taxable year?

A: The IRS expedites processing of amended returns notated with the appropriate disaster information, on the top of page one of Form 1040X, i.e. “Midwestern Disaster Area." The timeframe is generally 60 days.

Q: A taxpayer affected by a disaster timely filed a federal income tax return for the taxable year the disaster occurred and did not claim a casualty loss deduction on the return. May the taxpayer wait until a later year and amend the original return to claim a casualty loss deduction reduced by insurance and other reimbursements received in subsequent years?

A: A taxpayer may claim a casualty loss deduction for the first time on an amended original return.  A casualty loss must be reduced by the amount of insurance proceeds and other reimbursements received.

If the taxpayer has a casualty loss from a federally declared disaster occurring in an area qualifying for FEMA’s public or individual assistance (or both), the taxpayer may elect to claim the loss in the immediately preceding year. The election to claim your casualty loss for the disaster in the preceding year must be made on or before the date, 6 months after the regular due date for filing your original return (without extensions) for the disaster year.  See Publication 547 for more information.

Q: A taxpayer affected by a disaster timely filed a federal income tax return for the taxable year the disaster occurred and claimed a casualty loss deduction. Taxpayer received reimbursements for the loss in a subsequent year. May a taxpayer file an amended return for the year in which the taxpayer claimed a casualty loss deduction to reduce the loss by the amount of the reimbursement the taxpayer received?

A: If a taxpayer properly claimed a casualty loss deduction on an original return and in a later year receives reimbursement for the loss, the taxpayer does not amend the original return. Instead the taxpayer should report the amount of the reimbursement in gross income in the tax year in which the reimbursements were received, to the extent the casualty loss deduction reduced their income tax in the tax year that the taxpayer reported the casualty loss deduction. See section entitled “Insurance and Other Reimbursements” of Publication 547, Casualties, Disasters, and Thefts.

In computing the "tax benefit," you are advised to review Publication 525, Taxable and Nontaxable Income.