Don't Mess With Taxes

Mother Nature is really flexing her muscles right now. She's put her extremes of fire and ice on simultaneous display.

While residents in much of the lower 48 are coping with early and record-breaking winter weather, folks in our 50th state are watching flames consume part of their island home.

Lava flowing again: The Puʻu ʻŌʻō vent of the Kilauea volcano in Hawaii began erupting in 1983. Its latest lava flow, moving anywhere from five to 30 yards an hour, began back in June.

This week, in addition to consuming roadways and open land, the lava ignited a fire in a vacant house, burning it to the ground.

Other residents in the lava's path have evacuated or are ready to leave if necessary. As the lava flow progresses, it threatens to put more people at risk, U.S. Geological Survey geologist Frank Trusdell told Hawaii News Now.

In a surreal twist to this disaster, emergency management officials are allowing folks who have been forced from their homes by this slow-movinxg threat to watch from a safe distance as their homes are consumed by the flow.

Afterwards, then what?

Tax help for damage repair: Thanks to a presidential order, the Hawaiian eruption has been declared a major disaster. That means the area is eligible for federal aid to supplement state and local disaster programs.

It also means that individuals who sustain damage from the lava have the option to amend their 2014 tax returns and receive sooner possible tax refund money that they use in their recovery efforts.

While the special tax treatment afforded victimsot at the of major disasters is welcome, Uncle Sam also provides assistance in less extreme loss situations.

As I noted last this week at my other tax blog, individuals have tax options after a storm or other loss situation occurs. In these more routine, for lack of a better word, circumstances, the losses are claimed at regular tax filing time.

And in both major disasters and other casualty loss circumstances, you still must follow the rules to claim the damages. This includes subtracting any insurance payments you receive, as well as $100 from each loss incident. Finally, the amount loss amount you can claim must exceed 10 percent of your adjusted gross income.

Details on the process are found in Internal Revenue Service Form 4684, Casualties and Thefts, and its accompanying instruction booklet.

Extended incidents: The Hawaiian situation also brings up one other special casualty loss situation: property that is undamaged by the disaster, but is unsafe because of it.

The IRS says that if your home was located in a disaster area and your state or local government ordered you to tear it down or move it because the structure was no longer safe for use because of the disaster, the resulting loss in value is treated as a disaster loss.

To claim the loss of your property due to the governmental order, the command to tear down or move the structure must be issued within 120 days after the area is officially declared a disaster area.

Again, Form 4684 has more on how to claim a loss in such tear down etc. situations.

This convergence of fire and ice is unusual, but it underscores reality that disasters can happen any time, any place.

You can check the Federal Emergency Management Agency's running list of major disasters. The IRS also has a special Web page with information on tax relief offered in certain disasters, such as the special consideration it is giving folks in Napa and Solano counties following August's 6.0 earthquake in Northern California.

And don't forget about the ol' blog's special Natural Disasters Resources page. It has lots of posts on preparation, recovery and ways to help others who sustain disaster damages.

Atlantic City unnatural disaster: The gambling mecca of the Eastern Seaboard is suffering through its own disaster, but it's not at the hands of Mother Nature.

Rather, the economy has taken its toll on Atlantic City. But the town that inspired the Monopoly board game is hoping that it soon will get some much-need cash from property tax lien sales, including two against Trump casinos.

You can find details on the financial troubles of AC and the tax liens against Trump Taj Mahal and Trump Plaza over at Bankrate.com.

I typically post my additional tax thoughts at Bankrate Taxes Blog on Tuesdays and Thursdays. If you miss them there, you usually can find highlights and links here the following weekend -- or sooner if I'm having a work disaster free Friday!

You also might find these items of interest:

• Simultaneous Atlantic, Pacific Ocean hurricanes
• Preparation is key as severe weather seasons overlap
• Moore, Oklahoma, still recovering from horrific 2013 tornado