The Internal Revenue Service has started issuing announcements which provide that victims of hurricane Irene qualify for tax relief.

Areas Covered:

The taxpayers must live or reside in a county that has been declared a Federal disaster area. Currently, all of New Jersey and many New York counties, excluding NYC, qualify for relief. The Internal Revenue Service is continuing to add additional counties once FEMA reviews their applications for relief.

Affected Taxpayers:

Affected taxpayers include individuals who live and businesses whose principal place of business is located in a covered disaster area.  In addition, taxpayers not in a covered disaster area but whose records are maintained in a covered disaster area are also entitled to relief.

Scope of Relief:

The Internal Revenue Service has granted affected taxpayers until October 31 to file most tax returns and pay any required tax (payment must be received, not mailed, by October 31). They include Individual Returns, Corporate Returns, Estate and Trust Income Tax Returns, Partnership Returns, S-Corporation Returns, Estate, Gift and Generation Skipping Transfer Returns, as well as some Employment Tax Returns.  In addition, estimated tax payments are also included.  These returns must either have an original or extended due date occurring on or after the date of Hurricane Irene and before October 31.

Other Items:

In the past, the Internal Revenue Service has extended relief to those taxpayers whose tax preparers are located in the disaster area.  This has not been the case in the initial IRS announcements.  Rather, the Internal Revenue Service has announced that if the taxpayer's preparer is located in an area that was under an evacuation order or a severe weather warning because of Hurricane Irene, even if the tax preparer is located outside of a Federal declared disaster area, relief is given to file until September 22.  This is filing relief and not payment relief. 

As of this time, it is not clear whether the Internal Revenue Service will be able to accept e-filed returns subsequent to the normal due dates of September 15 or October 15, however, the Service is currently working on this issue.

State Tax Issues:

Various states, including New Jersey and New York, have started to announce that they will be conforming to the Federal relief provisions.

Casualty Losses:

Along with the tax filling and/or tax payment relief discussed above, affected taxpayers in a Federal declared disaster area can deduct casualty losses on their income tax returns for either 2010 or 2011.  By claiming a casualty loss deduction on an original or an amended income tax return for calendar year 2010 affected taxpayers could receive earlier tax refunds. 

We will continue to keep you informed on developments in this area through other communications including tax blogs on our website: www.smf-cpa.com.

Please feel free to call your tax adviser for additional information.