TAX RELIEF FOR VICTIMS OF HURRICANE IRMA

Victims of Hurricane Irma that took place beginning on September 4, 2017 in parts of Florida may qualify for tax relief from the Internal Revenue Service.

As of September 15, 2017 the IRS is now offering relief to victims of Hurricane Irma. The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. Deadlines falling on or after September 4, 2017 and before January 31, 2018, are granted additional time to file through January 31, 2018. This includes individual, partnership, corporate and estate and trust taxpayers who had a valid extension to file their 2016 return.

On September 29, 2017, President Trump signed into law the Disaster Tax Relief and Airport and Airway Extension Act of 2017. This act provided further relief for taxpayers that suffered casualty losses in connection with Hurricane Irma.

Tax relief would include:

ELIMINATION OF THE 10 PERCENT ADJUSTEDGROSS INCOME REDUCTION

Currently, the base subtracted from unreimbursed personal casualty losses is generally $100 plus 10 percent of AGI. The base under the Disaster Act for a qualified disaster-related personal casualty loss is changed to $500 for qualified disasters. The “10 percent of AGI” portion of the base does not apply to these qualified disasters. Normally, a personal casualty is an itemized deduction. The Act permits these qualified losses to be deductible in addition to the standard deduction. This “additional standard deduction” is only allowed for the “net disaster loss.” This means the disaster-related personal casualty losses would have to be netted against any personal casualty gains to arrive at the “net disaster loss” that becomes the additional standard deduction.

QUALIFIED HURRICANE DISTRIBUTION

The 10 percent early withdrawal penalty does not apply to any qualified hurricane distribution. A “qualified hurricane distribution” is any distribution received by an individual whose principal place of abode is located in the applicable hurricane area and who has sustained an economic loss. The maximum amount of distributions exempt from the penalty under this provision is $100,000. Distributions have to be made on or after September 4, 2017, and before January 1, 2019. The income from these qualified withdrawals is spread ratable over the three-taxable-year period beginning with the year of the distribution.

Taxpayers can elect not to have this spread apply. If the taxpayer dies before the end of the spread years, any amounts not already reported as income are required to be reported as income in the year of the death. The taxpayer can do a rollover of any portion of these distributed amounts at any time before the end of the three-taxable-year period. For purposes of the one-in-a-year rollover limitations, these rollovers will not be considered to be a rollover.

EARNED INCOME TAX CREDIT

If a qualified individual has less earned income in the taxable year which includes the applicable date than the amount of the earned income in the preceding taxable year, the credits allowed for the Additional Child Tax Credit and the Earned Income Tax Credit will be computed, at the election of the taxpayers, by using the preceding taxable year’s earned income. Any election to use the provision for either the Additional Child Tax Credit or the Earned Income Tax Credit will be an election to use this provision for both. A taxpayer cannot make this election for one credit purpose and not for the other.

It is important to remember there may be other tax relief provisions that you may be able to utilize. Please feel free to call my office or email me.

If you should have a topic that you would like me to discuss or if you should have a question, please feel free to call 239.403.4410 or e-mail me at michael@mwtaxandaccounting.com. 4280 East Tamiami Trail Executive Suite 302-M | Naples, FL 34112

An enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics