Please see Circular 230 Disclosure at bottom of page
Relief Available for those Affected by the Tornado
On March 3, 2020, a major storm system affected the lives of many of our friends and neighbors. Many have been impacted from the storms whether it be damaged property, injury, or worse. We keep you all in our prayers, praying for strength and healing in this difficult time. It is encouraging to see our neighbors and communities take action to help those in need.
On March 6, the President declared that a major disaster occurred in the State of Tennessee, which allows affected taxpayers to receive tax relief. The disaster areas identified for tax relief are Davidson, Putnam, and Wilson counties. Individuals and households that reside or have a business in these counties may qualify for tax relief.
If you or your business have been personally impacted by the disaster, the following tax relief measures are available to you.
Postponed filing and payment deadlines
Certain deadlines falling on or after March 3, 2020 and before July 15, 2020 are granted additional time to file through July 15, 2020. Any business entity tax returns due March 15, 2020 or individual tax returns due April 15, 2020 are automatically extended to July 15, 2020. The extension of time is for both filing tax returns and making any payments that would have been due on the original due dates.
Additional time for IRA contributions
With the extension of the due date for individual income tax returns, affected taxpayers have until July 15, 2020 to fund IRA or other retirement accounts.
Election of early deduction of disaster losses
For personal casualty losses caused by an event in a federally declared disaster area, and for casualty and other losses incurred in a trade or business that are due to a disaster occurring in a federally declared disaster area, a special rule allows taxpayers to claim a personal casualty loss deduction in the year when the casualty occurred, or in the year before the casualty occurred. This provision allows taxpayers to claim losses incurred in 2020 on their 2019 income tax returns.
Insurance proceeds for damaged or destroyed property
Gains can result if insurance proceeds received on damaged or destroyed property exceeds the property’s adjusted basis. If the proceeds are used to repair the property or to purchase qualified replacement property with two years, taxpayers can elect to defer the gain.
Insurance proceeds for principal residence
If a taxpayer’s principal residence, or any of its contents, are partially or completely destroyed due to a federally declared disaster, any gain from the receipt of insurance proceeds for personal property that was part of the residence contents (with the exception of scheduled property, which is property specifically insured and listed in the insurer’s schedule) is not taxable income regardless of the use to which the taxpayer puts those proceeds. Additionally, insurance proceeds received for the home or its separately scheduled contents are treated as received for a single item of property, which makes it easier for homeowners to replace a residence without recognizing gain.
Plan loans and hardship distributions
The IRS may make it easier for taxpayers affected by a disaster, or taxpayers whose family members are affected by a disaster, to access funds in a qualified retirement plan. The guidance generally makes it easier for individuals to obtain a plan loan or hardship distribution by relaxing some of the verification procedures for qualified plans and IRA’s.
Obtaining copies of tax returns
The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns. This relief can be especially helpful to anyone whose copies of these documents were lost or destroyed due to the disaster.
Many of the above relief provisions should be carefully examined to determine the best year in which to include gain or losses in order to maximize the tax relief provisions. We would be glad to review these provisions with you. If you or someone you know has suffered a loss from this recent disaster, please call and we can review your specific situation.
CIRCULAR 230 DISCLOSURE: DO NOT TAKE ACTION WITHOUT DISCUSSING YOUR SITUATION WITH YOUR CPA.
The information contained herein is general in nature and based on authorities that are subject to change. Blankenship CPA Group, PLLC guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Blankenship CPA Group, PLLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. Circular 230 Disclosure: This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
FOR EMPLOYMENT AND BENEFITS RELATED ACTIONS PLEASE ALSO DO NOT TAKE ACTION WITHOUT DISCUSSING WITH YOUR HR ATTORNEY