FAQs for Disaster Victims
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Taxpayers Affected by Disasters
Tax Returns
Payments
Property and Casualty Loss
Expenses
Taxpayers Affected by Disasters
Affected Taxpayers and Records
Definition of an Affected Taxpayer
An affected taxpayer includes:
- An individual
- Any business entity or sole proprietor
- Any shareholder in an S Corporation
A taxpayer does not have to be located in a federally declared disaster area to be an “affected taxpayer.” Taxpayers are considered “affected” if records necessary to meet a filing or payment deadline postponed during the relief period are located in a covered disaster area. See 26 CFR § 301.7508A-1(d)(1) for more information.
Tax Returns
Change of Address
Q1: What address should be used on a taxpayer’s return considering the number of times they may move and may not remain at a current address for a long period of time?
Amended Returns
Q1: 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?
Q2: 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?
Q3: 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?
Q4: 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?
Copies of Tax Returns
Q1: How does a taxpayer or return preparer obtain an expedited copy of a tax return or tax return transcript?
Q2: What is the effect of filing an extension of time to file under section 6081, if, prior to the March 15, 202X, due date for filing a U.S. Return of Partnership Income (Form 1065), an event in the state and county in which the partnership was formed, results in the area being declared a federally declared disaster area and, pursuant to section 7508A of the Internal Revenue Code, the IRS postpones filing and payment obligations for the period March 1, 202X, through June 30, 202X?
Q3: A corporate taxpayer whose U.S. Corporation Income Tax Return (Form 1120) is due to be filed on or before April 15, 202X, files an extension of time to file under section 6081 prior to the due date for filing the return thereby extending the due date to October 15, 202X. If, as a result of a disaster, the county in which the corporate taxpayer’s principal place of business is located is declared a federally declared disaster and pursuant to section 7508A of the Internal Revenue Code, the IRS postpones filing and payment obligations for the period May 1, 202X, through August 31, 202X, when must the corporate taxpayer file its Form 1120?
Filing of Extensions/Extensions of Time to File
Q: A taxpayer whose individual income tax return (Form 1040 or 1040-SR) is due to be filed on or before April 15, 202X, timely files an extension of time to file the return under section 6081 thereby extending the due date to October 15, 202X. If the county in which the taxpayer resides is declared a federally declared disaster area and, pursuant to section 7508A of the Internal Revenue Code, the IRS postpones filing and payment obligations for the period September 1, 202X through December 31, 202X, when must the taxpayer file their Form 1040 or 1040-SR?
Q: What is the effect of filing an extension of time to file under section 6081, if, prior to the March 15, 202X, due date for filing a U.S. Return of Partnership Income (Form 1065), an event in the state and county in which the partnership was formed, results in the area being declared a federally declared disaster area and, pursuant to section 7508A of the Internal Revenue Code, the IRS postpones filing and payment obligations for the period March 1, 202X, through June 30, 202X?
Q: A corporate taxpayer whose U.S. Corporation Income Tax Return (Form 1120) is due to be filed on or before April 15 ,202X, files an extension of time to file under section 6081 prior to the due date for filing the return thereby extending the due date to October 15, 202X. If, as a result of a disaster, the county in which the corporate taxpayer's principal place of business is located is declared a federally declared disaster and pursuant to section 7508A of the Internal Revenue Code, the IRS postpones filing and payment obligations for the period May 1, 202X, through August 31, 202X, when must the corporate taxpayer file its Form 1120?
Payments
Penalty and Interest
Q1: Is there any interest relief for taxpayers who have balances due that arise during the disaster relief period for prior year returns?
Q2: What, if any, relief is accorded to Installment agreement payments that become due during the disaster relief period?
Mitigation Payments
Q1: Are mitigation payments under Code section 139 tax-free?
Q2: Do you have to subtract FEMA payments in arriving at the calculation for your net casualty loss?
Taxable State Recovery Payments
Q1: How do reimbursements from state funds to compensate for property damage that are received in a subsequent year affect a homeowner’s casualty loss and basis computations?
Q2: What if a net operating loss (NOL) was generated on the original return, would a taxpayer amend all amended returns and Form 1045?
Property and Casualty Loss
Casualty Loss (Valuations and Sections 165 (i))
Q1: A number of concerns have been raised by taxpayers and tax professionals about casualty loss valuations. Will the IRS continue to research and develop specific answers to these issues?
Q2: What is the best method of reporting casualty losses on Form 4684 when using the repairs as evidence of the loss?
Q3: The decrease in fair market value of the property for which I am taking a casualty loss is the difference between the property’s value immediately before and immediately after the casualty. What constitutes “immediately after”?
Q4: If a taxpayer owns several parcels of real estate that are damaged by a federally declared disaster, may the taxpayer choose to claim a casualty loss on one property in the preceding year and a casualty loss on other property in the disaster year?
Q5: A homeowners/condo association sustained a loss from a disaster and made a special assessment on owners to replace uninsured property. May the homeowners claim the special assessment as a casualty loss?
Q6: How does a taxpayer determine a casualty loss from damaged trees and other landscaping on personal-use residential property when that loss is attributable to a disaster?
Q7: A taxpayer’s residence is damaged by a disaster. Prior to the disaster the taxpayer’s basis in the property was $100,000. The taxpayer receives insurance proceeds of $10,000 for the damage (not for living expenses), but only spends $7,500 for repairs necessary to restore the residence to its condition before the disaster. The taxpayer receives no other form of compensation for the damage. Does the taxpayer have a casualty loss deduction? Is the difference of $2,500 between the insurance recovery and the repair cost taxable? What is the adjusted basis of the residence after the repairs?
Q8: How will the IRS handle water damage and "mold issues" because of insufficient repairs or other events. Will there be special reporting on the loss related to mold?
Q9: A business building has an adjusted basis of $40,000 ($30,000 building and $10,000 land) and the building is 50% destroyed by a federally declared disaster. Insurance proceeds of $10,000 for the damage (not for living expenses). Cost to repair is $85,000. What is the amount of the taxpayer’s casualty loss deduction?
Q10: Is there an audit technique guide to assist in the preparation of casualty losses?
Q11: The cost of making repairs to restore property to its original condition can be used as a measure of the decrease in the fair market value of the property. If the repairs have not yet been made but the taxpayer received an estimated cost of the repairs, can the taxpayer report the estimated cost on the taxpayer’s return?
Q12: Previously, taxpayers affected by a federally declared disaster were instructed to write, in red ink, at the top of the Form 1040 or 1040-SR, information that identifies the particular disaster. Because many taxpayers file their returns electronically, how will they receive the designated disaster tax relief?
Q13: During a recent disaster many taxpayers lost food stored in refrigerators and freezers due to long periods without electricity. Multiple insurance companies reimbursed policyholders a flat amount for food losses, without requiring the policyholders to itemize the food losses or file claims. If the amount the taxpayer received from the insurance company exceeded the original cost of the food, does the taxpayer have a reportable gain?
Q14: May taxpayers use the value of their property, as stated in their most recent property tax statement, to establish the FMV of the property before the casualty?
SBA Loan
Q1: If a taxpayer secures a low-interest disaster loan from the Small Business Administration, what effect will it have on calculating a casualty loss?
Sale of Home
Q1: If a taxpayer’s main home was destroyed by a federally declared disaster and the taxpayer later sells the vacant land used only in conjunction with the main home, will gain from the sale of the vacant land qualify for exclusion under § 121 of the Code?
Realized Gain on Main Home
Q1: What are the rules for taxpayers who realize gain from receipt of insurance proceeds or other reimbursements for damage or destruction of a main home that is in a federally declared disaster area?
Expenses
Travel Expenses
Q1: If your employer relocates to another location because of a federally declared disaster, how do you determine if you will be able to deduct your travel expenses?
Q2: May a taxpayer claim a travel expense deduction if the taxpayer is displaced by a federally declared disaster and must live and work in another locality?
Page Last Reviewed or Updated: 24-Aug-2021
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