Missouri taxpayers affected by this spring’s severe weather and flooding may qualify for tax relief, according to a recent Internal Revenue Service (IRS) press release. “The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area,” says the June 6 release. Affected taxpayers with certain federal tax deadlines that fall between April 28, 2017 and August 31, 2017 are granted additional time to file through August 31, 2017, including second-quarter estimated tax payments ordinarily payable on June 15 and second quarter payroll returns due July 31. A complete listing of the types of relief granted and Missouri counties covered by the declaration can be found at IRS.gov.
Taxpayers who take advantage of the additional time to file will not be subject to failure-to-pay penalties and, if assessed for the applicable period, should only need to call the IRS at the telephone number on any delinquency notice to have the penalties abated. The Missouri Department of Revenue has remained silent on the issue and, as such, all Missouri taxpayers must still abide by regular state filing and payment deadlines.
To be considered for automatic relief, individual taxpayers must reside in one of the primary Missouri counties covered by the President’s June 2nd disaster declaration, which includes the counties of Franklin, Jefferson, and St. Louis. Businesses who primarily do business in one of the affected counties are also eligible for relief. Affected taxpayers who reside outside of the defined relief area but who wish to request relief are directed to call the IRS disaster hotline at 866-562-5227 to make their request. It is important to note that the City of St. Louis is not included in the defined relief area.
Taxpayers who have suffered losses as a result of the storm should also consider whether or not they are eligible to deduct the loss as a part of itemized deductions on their income tax return. For taxpayers in the defined relief area, allowable casualty losses may be deducted on either their current-year income tax return, due in 2018, or on the previous year’s return, even if the loss was suffered in 2017.
Deductible disaster losses generally include those derived from fire, storm (including flooding and tornadoes), shipwreck, or other casualty. To be considered deductible, the loss from each separate casualty must exceed $100 and the total amount of all losses, when reduced by the amount of any insurance proceeds or other reimbursement, must exceed 10% of the taxpayer’s adjusted gross income.
Adjusted gross income $200,000
Amount of disaster loss $50,000
Less: Insurance reimbursement $25,000
Adjusted loss $25,000
Less: $100 $100
Less: 10% of adjusted gross income $20,000
Allowable loss $4,900
Deductible losses are reported on Form 4684, Casualties and Thefts, and also on Schedule A (Form 1040), Itemized Deductions. Taxpayers who ordinarily take the standard deduction on their income tax returns should still consider the deductibility of any incurred losses as allowable losses may increase itemized deductions to a level greater than the standard deduction, thus providing the taxpayer a greater tax benefit.
Determining the amount of any allowable casualty loss can be a complex and time-consuming process. Taxpayers must consider not only the amount of their loss, but also the amount of insurance proceeds, their basis in the property, and its fair market value both prior-to and following the loss. Taxpayers who wish to explore the option of deducting storm-related or other casualty or theft losses on their income tax returns or who wish to take advantage of the other types of relief granted by the IRS, especially those who wish to postpone filings or payments, should consult a tax professional prior to taking any action.
For more information please feel free to read the following pieces: Tax Relief for Victims of Severe Storms, Tornadoes, Straight-line Winds, and Flooding in Missouri and 2016 Instructions for Form 4684. You can also always reach out to Tax Strategies or your Moneta Group advisory team.