Don't Mess With Taxes

One of the severe storms that hit Michigan on June 26. In the wake of a major disaster declaration, the IRS is giving some of the state's taxpayers until Nov. 1 to take care of tax tasks. (Photo by Ben Kessler via the National Weather Service)

The 2021 Atlantic hurricane season got off to an early start. Since then, though, it's been a slow tropical season. Thank you, Saharan dust (and Deb Fox)!

However, other major natural disasters have made up for it.

So far in 21, there have been 14 instances of tax relief provided by the Internal Revenue Service due to federal disaster declarations. That's a bit ahead of last year, which by the end of July 2020 had recorded 10 such devastating circumstances.

The latest IRS decision to provide taxpayer relief because of a major Mother Nature snit affects some Michigan taxpayers.

The IRS has announced that Great Lakes State individual and business taxpayers who suffered through severe storms, flooding, and tornadoes that began on June 25 now have until Nov. 1 to file various returns and make payments.

The affected counties, per the Federal Emergency Management Agency (FEMA), are Washtenaw and Wayne Counties in the southeastern part of the state.

Here's a quick look at this storm-related relief for these Michigan filers.

Returns, payments and estimated taxes: The extension means that Michigan individuals who had a valid extension until Oct. 15 to file their 2020 tax returns now have until Nov. 1 to finish that document.

However, since any tax payments associated with the extended 2020 returns were due on May 17, the COVID-delayed 2021 deadline, any additional tax due with the final, extended filing will have penalty and interest charges tacked on.

The new Nov. 1 deadline also applies to the quarterly estimated tax payment due on Sept. 15.

As for businesses, the delay applies to quarterly payroll and excise tax returns normally due on Aug. 2. The IRS says that penalties on deposits due on or after June 25, 2021, and before July 12, 2021, will be abated as long as the tax deposits were made by July 12.

And for businesses that face the Aug. 31 deadline to file their Tax Year 2021 Form 2290, Heavy Highway Vehicle Use Tax Return, for vehicles also now have until Nov. 1 to do that.

Contact IRS about penalty notices: Because, well, IRS and taxes, it's possible that taxpayers who live or own a company in Washtenaw or Wayne Counties could get a late filing or late payment penalty notice from the IRS even though they now have added time to take care of tax tasks.

In these cases, if the notice is for a tax obligation that has an original or extended filing, payment or deposit due date that falls within the postponement period, then call the telephone number on the notice to have the IRS abate the penalty.

You can get additional information on services currently available at the IRS operations and services page at IRS.gov/coronavirus.

IRS automatically applies new deadline: Also, Michiganders who live or have a business in the storm-relief counties don't need to do anything to get the November deadline. The IRS automatically identifies taxpayers located in the covered disaster area and applies filing and payment relief.

However, if you reside or have a business outside the covered disaster area and believe you, too, should get more tax time, call the IRS' toll-free disaster hotline at (866) 562-5227 to discuss your circumstances and request the same relief.

Claiming losses this tax year or next: Finally, the disaster relief also includes the option to decide when to claim any uninsured losses on your taxes.

You can do so for the prior year. In this case, that would be the 2020 returns from filers who got extensions and now don't have to get the paperwork to the IRS until Nov. 1. Some Michigan storm victims could find that claiming this year's damages on their 2020 taxes could produce a quicker and larger refund that could help with repairs and other recovery efforts.

Or you can wait to claim any allowable losses when you file your 2021 tax return next year.

Run the numbers for both tax years and choose the filing date that gives you the best result. Remember, too, that you must itemize to claim the personal property losses from a major disaster that aren't covered by insurance or other reimbursements.

That means filing Form 1040 Schedule A, along with Form 4684, Casualties and Thefts. You can read more about this process in my post on considerations in making a major disaster tax claim.

The IRS asks taxpayers making the loss claims on their 2020 return to note that at the top of their Form 1040. Add the phrase "Michigan Severe Storms, Flooding, and Tornadoes" in bold letters at the top of the form.

If you need to get prior tax info to complete your disaster-related filing, the IRS will waive its usual fees for such copies. To get the fee break, use the same Michigan disaster phrase on the Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, that you submit to the IRS for the data.

And whatever tax year you choose to claim your disaster losses, the IRS also requests you include the FEMA disaster declaration number on your return. For the Michigan situation, that's FEMA 4607-DR.

You also might find these items of interest:

• Atlantic hurricane season starts early for 7th straight year
• State disaster declarations could trigger quicker IRS tax relief under House bill
• Storm Warnings: A multi-page collection of blog posts on preparing for, recovering from, and helping those dealing with natural disasters

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