We're heading into peak Atlantic hurricane season, which means much of the United States could face disastrous circumstances like those already being dealt with coast-to-coast.
In major disasters, various types of tax relief are available, including claiming storm-related losses as an itemized deduction.
One of the key considerations here is determining whether to make the tax claim in the year the disaster occurred or the prior tax year.
For a 2021 disaster, that means waiting until next year to file for tax-related loss relief. Or it means filing an amended 2020 tax return, if earlier this year you sent that return to the Internal Revenue Service.
The decision depends, as you've already guessed, on many things. You've got to evaluate your past and current financial and tax circumstances, then run the numbers to determine which tax year filing will provide you with a better disaster loss deduction.
To do that, you'll need your previous filing information. But if that tax documentation was among the property that was lost in the disaster, then you've got some added work to do.
The IRS can help with this, too.
Copies of complete tax returns: You can use Form 4506, Request for Copy of Tax Return to order a copy of your tax return.
This is a copy of the 1040 form and accompanying material you sent to the IRS. Generally, there is a $50 fee for requesting each copy of a tax return.
However, if your main home, principal place of business, or tax records are located in a federally declared disaster area, the IRS will waive the fee.
To get the no-cost copies, you must write the name of the disaster across the top of the Form 4506. For example, in the case of the just-declared major disaster in the Volunteer State, you would note "Tennessee Severe Storm and Flooding" on your tax copy request.
A quick tax clarification about this disaster. While the deadly Tennessee flooding has been deemed by President Joe Biden as a disaster deserving federal assistance, and it's made the Federal Emergency Management Agency (FEMA) list as 4609-DR-TN, the IRS has yet to announce any official tax relief, such as postponed deadlines. As soon as that happens, I'll let you know with an update here (and probably a separate blog post).
Tax transcript should work: In some cases, you might not need your full tax return copy. A transcript, which is free of charge, will suffice.
You also can request transcripts via your smartphone with the IRS2Go mobile app.
If you prefer to use your phone as, well, a phone, you can order transcripts by calling toll-free (800) 908-9946 and following the prompts.
Or you can mail (or fax) the IRS Form 4506-T, Request for Transcripts of a Tax Return, to the appropriate IRS Campus found in the form's instructions.
Again, in seeking a transcript, note the disaster so that the IRS will expedite the sending of the information. Additional assistance also is available at the IRS' toll-free Disaster Hotline at (866) 562-5227.
Other records for claims: Even in disaster situations, the IRS is all about documentation. So whenever you file your major disaster loss claim, make sure you have the records to support your deduction.
You don't have to attach them to the original or amended tax return. But you will need them or other satisfactory supporting evidence if the IRS questions your claim.
If your deduction claim records also were destroyed or lost, then you'll need to reconstruct them. My post on reconstructing records after a natural disaster has tips on IRS acceptable ways to do this.
I hope you don't ever have to file a disaster claim or rebuild your tax or other records to do so. But just in case, I also hope this information helps.
You also might find these disaster-related items of interest:
- The importance of keeping good tax records
- A pre-disaster inventory can pay off when filing insurance or tax claims
- Home basis, not market value, key amount in calculating disaster loss tax claim
- Storm Warnings: Preparing for, recovering from & helping those affected by natural disasters