38 min.
The hard-hit victims of Superstorm Sandy have received donations of blankets, cleaning supplies and diapers. Now there may be more aid flowing their way: tax help.
Taking some lessons from the hardship faced by the thousands of people displaced by Hurricane Katrina in 2005, the U.S. Internal Revenue Service and the Treasury Department have come up with ways to ease the upcoming tax burden.
Some businesses and certain other taxpayers in hard-hit areas have extra time to file returns and pay taxes. Some can deduct certain losses not covered by insurance. Even good Samaritans who donate cash and goods can get some relief.
"Anything to get cash to (taxpayers) sooner rather than later is a godsend," said Paul Gevertzman, partner at accounting firm Anchin, Block & Anchin. "This is a difficult time and cash flow will be a problem."
The IRS is continuing to announce initiatives and posting updates on its website.
"We are monitoring the situation closely to resolve potential tax administration issues as they are identified," the agency says on that site. Other locations eligible for tax aid may be added in coming days based on additional damage assessments by the Federal Emergency Management Agency (FEMA).
In the aftermath of Hurricane Katrina, Congress provided additional tax breaks that went beyond what the IRS can do on its own. It's uncertain whether legislators will fold similar provisions into a larger year-end tax bill.
"Keep your eyes open," said Mariana Moghadam, a tax director at accounting firm EisnerAmper. Moghadam certainly will be looking. Her Montville, New Jersey, home was hit by a tree and lost power.
If you've been hurt by Sandy or helped those who were, here are ways the tax system may be able to help you.
Time is money
For starters, you have some breathing room.
Individuals and businesses in Connecticut, New Jersey and New York rushing to meet tax filing or payment deadlines that fall between late October and January 15 have until February 1, 2013. The IRS automatically provides this relief to any taxpayer in states where there are declared disaster areas, and you do not need to contact them. Penalties are waived.
Taxpayers outside disaster areas also get the extension if their books, records or tax professionals are in the areas affected by Hurricane Sandy.
Does your home or business have damage not covered by insurance? You might be able file an amendment to your 2011 taxes, claiming a loss. This disaster declaration enables you to treat the losses as if they happened last year. This can help reduce last year's income and may give you quicker access to tax refunds. It will benefit some people in certain tax brackets. Check with an accountant.
The IRS's disaster resource guide will walk you through the process.
Take note, though. Accountants said you aren't allowed to deduct out-of-pocket expenses for things like replacement diapers and emergency hotel rooms.
Even better than a deduction for most taxpayers is tax-free income. Disaster relief payments for rebuilding homes and businesses are typically not subject to income taxes.
Good Samaritans
People giving aid and shelter to Sandy victims will get some tax help, too.
The IRS and Treasury are allowing tax credits for owners of qualified low-income housing who opened their doors to victims of Sandy, even if the victims are not in a low-income bracket.
Workers anywhere can donate vacation or sick time or personal leave in exchange for employer cash payments to qualified, tax-exempt organizations helping victims, if their company has such a program. This donated leave will not be included in employee wages and employers can deduct the amount of the cash payment.
Volunteers affiliated with an IRS-recognized government or philanthropic organization who helped distribute supplies in disaster areas are eligible for the February 1 extension to file taxes and make payments, the IRS has said. Volunteers for so-called 501(c)3 charities also will be able to deduct their transportation costs, including 14 cents per mile for distances they drove in their cars.
If you want to make a cash donation and receive a tax benefit, be sure you only give to a qualified 501(c)3 organization and get a receipt.
How about donations of clothing, blankets and cleaning supplies? There's a chance you can deduct the fair market value of things dropped off at qualified organizations, such as most religious and fraternal groups and nonprofit volunteer fire companies.
"Many of these measures are designed to speed up cash flow," said Gevertzman. The IRS "is trying to be a little more sensitive."?
Source: http://www.nbcnews.com/business/tax-relief-planned-sandy-victims-volunteers-1C6979491
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