Article written by:
Ashley Neel, CPA
Over the past couple months, we have seen two extremely powerful hurricanes, Harvey and Irma, cause catastrophic destruction in Texas, Florida and various parts of the southern United States. Due to the recent effects of these hurricanes, the IRS has announced it is providing various types of tax relief for those impacted by the events.
Taxpayers qualified to receive the tax relief include individuals, business entities and sole proprietors located in a covered disaster area. Taxpayers that are not located in a disaster area, but have documents or information located in a disaster area that is needed to timely file a tax return, are also entitled to tax relief. In addition, the IRS is granting this relief to certain workers assisting in relief efforts as well as any individual who was killed or injured as a result of the events while visiting the disaster area. A disaster area is any county specified by the Federal Emergency Management Agency as a designated covered disaster area.
The tax relief issued is providing an expanded time to file business entity returns and individual returns that have an original or extended filing due date that falls within the postponement period. Individual returns and business entity returns with an original extended due date of September 15, 2017 and October 16, 2017, respectively, are now due January 31, 2018. The expanded due date also applies to tax-exempt entities with an original extended due date of November 15, 2017. Quarterly 2017 estimated tax payments due September 15, 2017 and January 16, 2018 are now due January 31, 2018 as well. However, the tax relief does not extend any 2016 individual tax payments as these were due April 18, 2017.
Also, the IRS has announced that hardship distributions and loans can be made from 401(k), 403(b) and 457(b) plans and has relaxed many rules and regulations normally in place for a hardship distribution to be made. This allows for a streamlined process for plan participants affected by Hurricane Harvey and Hurricane Irma to be able to receive their money more quickly. Ordinarily, a plan must have language in place in order to make a loan or hardship distribution; however, the IRS has stated that if the plan does not have language in place to allow for this, a loan or distribution can still be made before a formal amendment of the plan takes place. The loan or hardship distribution can be made for certain plan participant’s family members even if the plan member is not located within a covered disaster area. In addition, the regulation not allowing contributions to 401(k) and 403(b) plans for six months following the loan or hardship distribution does not apply to eligible plan participants receiving the tax relief. The IRS notes that if a loan or hardship distribution is taken, early distribution rules still apply as well as any applicable tax or penalties.
Tax advisors at GBQ are happy to discuss your specific situation and any tax relief you may be eligible for, should you be an affected victim of these devastating storms that took place recently.