IRS Grants Relief for Texas Taxpayers Impacted by Storms, Wind, and Flooding

29 May 2024 IRS Grants Relief for Texas Taxpayers Impacted by Storms, Wind, and Flooding

Authored by RSM US LLP, May 29, 2024

Executive summary

IRS postpones various tax filing and tax payment deadlines for taxpayers impacted by severe storms, straight-line winds, tornadoes, and flooding in Texas. Affected taxpayers in certain counties will have until Nov. 1, 2024, to file returns and pay any taxes that were originally due during this period.

Filing and payment relief for affected taxpayers in Texas

The IRS issued guidance granting relief to taxpayers affected by severe storms, straight-line winds, tornadoes, and flooding in Texas that began April 26, 2024.  Taxpayers in affected counties now have until Nov. 1, 2024, to file various individual and business tax returns and make tax payments. The IRS is offering relief to any area designated by the Federal Emergency Management Agency, currently including Taxpayers residing in Calhoun, Collin, Cooke, Denton, Eastland, Guadalupe, Hardin, Harris, Jasper, Jones, Lamar, Liberty, Montague, Montgomery, Polk, San Jacinto, Trinity, Walker and Waller counties.

The relief postpones various tax filing and payment deadlines that were originally due on or after April 26, 2024, and before Nov. 1, 2024. As a result, affected individuals and businesses will have until Nov. 1, 2024, to file returns and pay any taxes that were originally due during this period. This includes 2024 quarterly estimated tax payments due on June 17, 2024 and Sep. 16, 2024; quarterly payroll and exercise tax returns normally due on April 30, 2024, July 31, 2024, and Oct. 31, 2024.  In addition, penalties on payroll and excise tax deposits due on or after April 26, 2024, and before May 13, 2024, will be abated as long as the tax deposits were made by May 13, 2024.

Under section 7508A, the IRS gives affected taxpayers until Nov. 1, 2024, to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift and generation-skipping transfer tax returns; annual information returns of tax-exempt organizations; and employment and certain excise tax returns), that have either an original or extended due date occurring on or after April 26, 2024, and before Nov. 1, 2024, are granted additional time to file through Nov. 1, 2024.

The IRS relief includes other time-sensitive actions described in Reg. section 301.7508A-1(c)(1) and Rev. Proc.  2018-58; filing Form 5500 series returns due on or after the respective disaster due on or after April 26, 2024, and before Nov. 1, 2024; and transferors who are not affected taxpayers but who are involved in a section 1031 like-kind exchange pursuant to section 17.02(2) of Rev. Proc. 2018-58.

Unless an act is specifically listed in Rev. Proc. 2018-58, the postponement of time to file and pay does not apply to information returns in the W-2, 1094, 1095, 1097, 1098 or 1099 series; to Forms 1042-S, 3921, 3922 or 8027; or to employment and excise tax deposits. However, penalties on payroll and excise tax deposits due on or after April 26, 2024, and before May 13, 2024, will be abated as long as the tax deposits were made by May 13, 2024.

Disaster-related casualty losses

In addition to extensions of time to file tax returns and complete certain actions, presidential disaster declarations offer taxpayers special options with respect to gain/loss recognition. Taxpayers who experience a casualty loss in a presidentially-declared disaster area may qualify to recognize losses in the year prior to the year the casualty actually occurred under section 165(i). Taxpayers who realize gains by receiving insurance proceeds in excess of basis may be able to defer gain recognition by reinvesting in qualified property under section 1033. Some of these actions are time sensitive, so taxpayers are encouraged to contact their tax advisor to take advantage of the full range of relief options. Taxpayers that will claim a disaster loss should note in bold letters at the top of their return the FEMA disaster declaration number. For the April 26, 2024, severe storms, straight-line winds, tornadoes and flooding in Texas, the designation is 4781-DR.

Please see the applicable news release and refer to Publication 547 and Instructions to Form 4684 Casualties and Thefts for instructions.

Automatic penalty relief

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extending filing, payment or deposit due date falling within the postponement period, the taxpayer or their representative should contact the IRS to have the penalty abated.

Relief for those impacted outside the disaster area

The IRS will also work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Other relief

Qualified disaster relief payments are generally excluded from gross income. This means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525 for details.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

This article was written by Alina Solodchikova, Evan Stone and originally appeared on 2024-05-29. Reprinted with permission from RSM US LLP.
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