Originally published on Forbes.com Oct 29th, 2012
If you are anywhere near the East Coast, I hope by now you are in a safe place and have a good stock of drinking water and flashlights and batteries and whatever else people who know about such things advise you to have. I’m just a tax blogger. There are already Disaster Area Declarations from Maryland to Massachusetts in place.
Disaster area declarations have a lot of tax implications. Since you may have a lot of time on your hands for the next couple of days, you might want to print this out so you can spend some of that time doing disaster tax planning, after the power goes out. You need a break from the board games. I remember stories about birth spikes nine months after events like this. That is the sort of thing I don’t like to fact check. I would just as soon believe it. Even that type of activity can only take up so much time, though.
The IRS has some pretty good material on this subject so I will not try to give you a comprehensive checklist. I will just point out a couple of things that over the years, people have been surprised by when I told them.
Casualty Loss
If you have a deductible casualty loss in a disaster area you can claim the loss on the return for the year in which the casualty occurs or the previous year. This would mean that you can amend your 2011 return for a refund or congratulate yourself on procrastinating past the extended due date. I have never represented somebody on the audit of a casualty loss, so I can only give you advice based on general principles.
The amount of the loss is the lesser of the decrease in fair market value of property or its adjusted basis less any insurance proceeds. The more documentation you have the better. Scan whatever receipts you might have for material items that might be destroyed into the cloud along with as many before pictures as you can. Don’t forget all that ornamental shrubbery in the yard and all those immensely valuable trees out there. I am superstitious enough to believe that if you have really good documentation on an item that might be destroyed, then it is less likely to be destroyed.
Due Dates
Disaster declarations extend the due dates for returns and payments. That is fairly common knowledge. What many people do not realize is that the extension will also apply to a broad range of “time sensitive” acts. The list was updated in Revenue Procedure 2007-56. It is a very long list and most of the items will seem rather obscure. What I found surprising when the procedure came out were acts relating to like-kind exchanges, the 45 day notification period and the 180 day period to close on the exchange. There are also many time sensitive acts related to qualified plans. The IRS should be coming out with a news release indicating what the extended due date from the disaster will be. The Hurricane Isaac extension was until January 11, 2013. I am really paranoid about blowing due dates, but there may be some planning opportunities presented here, since the postponement will likely cross over a year-end.
You can follow me on twitter @peterreillycpa.
After note:
As of today, November 2, the IRS has only extended payment dates to November 7. There may be further extensions coming though. Stay tuned.