Taxes are likely the last thing on the minds of residents in Hurricane Michael’s path, but the storm could carry some consequences for affected taxpayers.
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The storm is expected to make landfall in the Florida panhandle on Wednesday afternoon, according to the National Weather Service.
Amid natural disasters, the IRS often grants tax relief to affected residents, based on the Federal Emergency Management Agency’s declarations, said Eric Smith, an IRS spokesman.
The hurricane’s landfall takes place at a critical time on the tax calendar: Affected filers who received an Oct. 15 extension to submit their 2017 tax returns have a deadline around the corner.
“What we do is grant relief based on FEMA’s assessments,” said Smith. “The key thing to be aware of is whether it’s going to affect the filing deadline.”
Here’s what you need to know.
In the event of a federal disaster, the IRS may grant affected filers more time to submit the necessary documents.
Filers who were supposed to turn in their 2017 income tax returns by Oct. 15 may get more time, depending on how FEMA proceeds, Smith said.
These taxpayers’ 2017 levies were originally due on April 18 — even if they had received an extension to submit their returns — and any payments that haven’t been made yet are accruing interest.
In September, the IRS granted relief to taxpayers affected by Hurricane Florence.
Residents with quarterly income tax payments due on Sept. 17 and Jan. 15, 2019, among others, have until Jan. 31, 2019 to file the applicable returns and pay taxes that were originally due during that period.
In this case, filers with the Oct. 15 extension were also given more time.
There are other tax planning implications to keep in mind, too.
Be aware that the Tax Cuts and Jobs Act, the tax overhaul that went into effect this year, has changed the way you can claim personal casualty and theft losses.
Prior to the change, you were able to claim an itemized deduction for property losses that aren’t reimbursed by insurance and that stem from natural disasters, fires, thefts and other events. The total of these losses needed to exceed 10 percent of your adjusted gross income.
In 2016, the most recent year available, 154,274 tax returns claimed a casualty or theft loss deduction, according to data from the IRS.
Now, you may claim casualty losses on your taxes only in the event of a federally declared disaster.
You can either claim them during year they occurred — 2018 — or in an amended return for the prior year.
Your loss deduction is still subject to the 10 percent threshold.
This change is in effect from 2018 through the end of 2025.
Under both the old and new tax law, how much you can claim as a loss will be reduced based on the insurance payout you receive for your damages.
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