Your clients are counting on you to be up-to-date on the latest in tax. This means keeping them informed on how major storms, floods, and wildfires could affect their returns.
We saw the hurricane headlines, and they were shocking. Three major storms stood out for their ferocity and damage. Hurricanes Harvey and Irma killed more than 100 in the United States and caused more than $150 billion in property damage. Puerto Rico was hit hard by Hurricane Maria. The island lost all power and nearly all cell service. In some places, these services have yet to be restored.
And it wasn’t just hurricane season that was unusually active. Wildfire season has been one of the worst on record. Almost 9 million acres have burned in wildfires across the western states.
And the year isn’t over just yet.
In November, TEC Chair Annette Nellen, CPA, CGMA, spoke on this topic and offered advice at the National Tax Conference in Washington, D.C. Here are some of the key considerations she shared to get you and your clients ready for busy season.
Leave-based donations. Employees and employers can help victims of disaster through leave-based donation programs. In these programs, employees pass on the cash value of their sick, vacation, or personal time. In exchange for their time, their employers make a charitable contribution to eligible Sec. 170(c) organizations. These donations must be made before Jan. 1, 2019. Employees may not use their leave-based donation as a charitable deduction on their income tax return, but employers may deduct it as a business expense. Right now, this type of donation is available for Hurricanes Maria, Harvey and Irma and the California wildfires. Check with your human resources department to see if your company participates.
Disaster relief for affected taxpayers. Those affected by the California wildfires and the three major hurricanes may be eligible for special tax relief and assistance from the IRS. Also, disaster victims can claim some disaster-related losses on either their 2016 or 2017 returns. The IRS offers a recap of key tax relief provisions available to storm victims.
Some states are also extending deadlines for individuals who reside in disaster areas. The Council on State Taxation (COST) provides a document outlining available relief.
Legislation. The Disaster Tax Relief and Airport and Airway Extension Act of 2017 became law at the end of September. This provides tax relief for those people and businesses that reside in areas affected by the three major hurricanes. Filers must have experienced a financial loss to be eligible for relief. Under this Act, filers may receive:
- relief of penalty for early withdrawal of retirement fund for qualified hurricane distributions;
- an increase of loan limit from a qualified employer plan;
- an employment retention credit to employers equal to 40% of qualified wages up to $6,000, and;
- a more favorable tax treatment of the casualty loss.
A full list of provisions is available here.
Beware of fake charities. People want to help victims of disaster, and scammers are taking advantage of their goodwill. They often do this by using dummy websites that pose as real charities. Before you donate to any charity, search Select Check to make sure your money is going to the right people. Scammers may also claim to be from well-respected organizations. They reach out via phone, email, or social media to get Social Security numbers and other pieces of personal and financial data.
Disaster victims are also at risk. Con artists may pretend to be IRS representatives who are helping victims file casualty loss claims and get tax refunds. Disaster victims should call 866-562-5227 if they need IRS assistance.
This blog post is published in the AICPA Insights blog and can be found here.