Don't Mess With Taxes

UPDATE, Aug. 15, 2023: Mississippi residents now join the Oct. 16 deadline club. The IRS announced this new due date, as well as other tax relief for individuals and business owners in parts of the Magnolia State that were hit June 14-19 by severe storms, straight-line winds, and tornadoes.

Photo by Kelly Sikkema on Unsplash

Enough already, Mother Nature! We're not even through two full months of 2023, and you have been in a particularly foul mood too much of this time. 

The latest disastrous outbursts are leaving thousands across the country dealing with blizzards, high winds, and tornadoes. And the devastating weather system is still moving east.

Meantime, folks who endured major disasters in January — which now cover most of California and parts of Alabama and Georgia — are still pare still picking up the pieces.

That's why the Internal Revenue Service has decided to give these affected taxpayers more time — until Oct. 16 — to take care of multiple tax responsibilities that understandably are not top of mind right now.

Five more months to take care of taxes: Previously, IRS granted a tax extension until May 15, instead of this year's April 18 Tax Day, for individuals and owners of businesses in much of California hit by storms that produced mudslides and flooding. The same mid-May delay was granted to Alabama and Georgia residents and business owners who last month endured severed storms and tornadoes.

Now these taxpayers have five extra months — again, until Oct. 16 — to meet various tax filing and payment deadlines, including those for most calendar-year 2022 individual and business returns.

The key tax task for the affected Alabama, California, and Georgia individual taxpayers is the filing of their 2022 tax returns. They now have until the new mid-October deadline to submit those forms and any due tax.

Since their filing tax deadline is pushed back, these taxpayers also have until the new October due date to make 2022 tax year contributions to IRAs (Roth or regular) and health savings accounts.

In addition, the extended deadline also means estimated tax relief. The disaster area taxpayers can make estimated tax payments originally due on Jan. 17 for the fourth quarter of 2022, as well as the 2023 tax year 1040-ES amounts normally due on April 18, June 15, and Sept. 15, in October.

The IRS announcement notes that disaster-affected estimated tax filers can include these four estimated tax amounts with their 2022 returns that they file on or before Oct. 16.

The new October deadline also applies to —

• Farmers who choose to forgo making estimated tax payments and normally file their returns by March 1;
• Various business returns, normally due on March 15 and April 18; and
• Tax-exempt organization returns, normally due on May 15.

Designated relief areas: Since the January disasters were first declared, Federal Emergency Management Agency (FEMA) has added to the designated areas. The IRS relief follows these additions.

FEMA has designated 41 California counties for various disaster relief from damages sustained from Jan 8 through Jan 31. They are shown in the FEMA map below. If you're reading on a smaller device, the Golden State counties, which also get IRS tax relief, are listed after the map image.

Eligible disaster relief in parts of Alabama hit by severe storms, straight-line winds, and tornadoes on Jan. 12 applies to the counties shown on the map below. The 13 Yellowhammer State counties where the IRS has extended tax relief are listed below the image.

The areas in Georgia for which FEMA issued disaster declarations for damages on Jan. 12 from severe storms, straight-line winds, and tornadoes are shown on the agency's map below. The nine Peach State counties where IRS is granting tax relief are listed below the map.

The IRS automatically provides filing and penalty relief to any taxpayer whose IRS address of record is in the disaster area. So you don't have to contact the agency to get the relief.

Other tax relief options: Federal tax law also provides those who've endured a major disaster the option to claim any uninsured losses as a tax deduction. You also get to decide on the tax year you use to make the claims.

This additional coverage is discussed in my original January posts on the relief granted California, Alabama and Georgia taxpayers, May 15 is now Tax Day for California flooding victims, and Alabama, Georgia residents in tornadoes' paths now have until May 15 to file taxes.

But I do want to reiterate that when it comes to determining whether to count your losses on your 2022 return you now have until Oct. 16 to file, or wait and claim the damages on your 2023 filing next year, run the numbers carefully so that you use the tax year that produces the better tax results.

Claiming disaster losses as itemized deductions on the prior year filing could get you tax refund money this year that you can use toward repairs. Or you might get a bigger refund if you wait and claim it on the return for the year in which the damages actually occurred.

In either case, all tax and financial factors need to be examined, such as your current and last year's tax bracket, and any other deductions you may be able to claim in either year.

Making the filing year decision will take some time and added calculations, but the difference could be substantial. So don't rush it. And get some professional tax help if you need it.

You also might find these items of interest:

• Considerations in making a major disaster tax claim
• IRS and other government resources can help you deal with a natural disaster
• Storm Warnings: Preparing for, recovering from, and helping those affected by natural disasters

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