Don't Mess With Taxes

Image: BoulderCounty.org

It looks like New Tax Year 2022 is going to be like 2021 in at least one regard. The usual April Tax Day is postponed for some filers.

The reason also is the same as last year. Late-year major natural disasters.

The devastating, but thankfully not deadly (although two people are still missing), end-of-2021 wildfires in Colorado have joined this unwanted list. The Internal Revenue Service today announced that Boulder Country residents whose homes and/or businesses were in the path of this past weekend's wildfires will have until May 16 to file various returns and make tax payments.

The IRS action, per its usual procedures, follows the disaster declaration issued by the Federal Emergency Management Agency. FEMA, as its typically referred to, so far has designated only Boulder County as the disaster area due to the wildfires that erupted on Dec. 30, 2021.

However, the IRS notes that if FEMA subsequently expands the wildfire disaster area, the tax agency will provide the same relief to those taxpayers.

Affected Colorado filers also should check with their state and local tax departments about any changes to those deadlines. 

Individual extensions: If you're a regular reader of the ol' blog, thanks. You also know the distressing drill.

IRS tax relief is available for the qualifying Colorado taxpayers who have various tax filing and payment deadlines that occurred on the Dec. 30 wildfire starting disaster date.

This means that May 16, instead of this year's April 18 Tax Day, is the due date for the filing of 2021 individual federal returns and paying any owed tax.

Combined estimated tax payments: The May 16 deadline also applies to quarterly estimated income tax payments due for others this year on Jan. 18 and April 18. The IRS says estimated tax filers can skip making the fourth quarter payment due on Tuesday, Jan. 18, and instead include it with the 2021 return they file, on or before May 16.

Note, however, that if you do this, you could face paying Uncle Sam a larger than usual amount. The delayed May payment could include the 2021 final estimated tax amount, the first 2022 estimated tax payment that's due on Tax Day, and any tax owed with your 2021 tax return. Run the numbers so that you won't be surprised, and can come up with payment plans.

IRA extension, too: The new May deadline also affects Boulder County taxpayers planning to make an individual retirement arrangement contribution and have it apply to the prior tax year.

This option to make a next year contribution applies to both traditional IRA and Roth accounts.

Now the Colorado wildfire victims can put money into their IRAs for 2021 as late as May 16.

Business tax extension: The May deadline extension also applies to various 2021 business returns normally due on March 15 and April 18.

In addition, businesses' quarterly payroll and excise tax returns normally due this year on Jan. 31 and May 2 now can be postponed until May 16. The IRS says penalties on payroll and excise tax deposits due on or after Dec. 30 and before Jan. 14 will be abated as long as the deposits are made by Jan. 14.

And farmers who choose to forgo making estimated tax payments and normally file their returns by March 1 will now have until May 16 to file their 2021 return and pay any tax due.

Claiming disaster losses: In the Colorado wildfire situations, affected taxpayers also have the option of claiming any eligible disaster-related casualty losses on their federal income tax return for either the year in which the event occurred (2021), or the prior year (2020).

You can find more on this option in IRS Publication 547. You also can check out my post on what to consider when making a major disaster tax claim. And the IRS maintains a special page with updates of disaster eligible localities where you can track the latest relief and additions.

If you do make disaster loss claims, the IRS asks you to note the FEMA disaster designation area and official declaration number in bold letters at the top of the form. This will alert IRS processing agents of the special concerns.

Boulder County, Colorado, taxpayers should include the phrase "Colorado wildfires" and the FEMA disaster declaration number DR-4633-AR.

Other May 16 disaster deadlines: This wildfire deadline delay follows a spate of similar tax relief for other major disasters.

Hurricane Ida, an outbreak of early December tornadoes, and other catastrophic weather in 2021 prompted FEMA to designate affected locales that also are eligible for special federal government help, including tax relief. You can find more about these disasters by browsing, what else, the ol' blogs' Disaster category. 

And May 16, 2022, is the go-to tax date for not just Colorado wildfire victims, but also some Kentucky, Illinois and Tennessee taxpayers who were in tornado paths, as certain Arkansas individual and business taxpayers also hit by twisters and severe storms.

I wish I could say this this first disaster-related tax relief announcement is the last, but we all know that Mother Nature has a tendency to throw horrific fits. The best advice is to stay ready, regardless of what type of disaster is common for your area, and, of course, stay safe.

And if worse comes to worst, take advantage of all available help and relief, including from Uncle Sam and the IRS.

You also might find these items of interest:

• IRS and other government resources can help you deal with a natural disaster
• Hurricane season officially ends today, but stay prepared for year-round disasters
• Storm Warnings: Preparing for, recovering from & helping those affected by natural disasters

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