Don't Mess With Taxes

Photo by Lachlan Ross

Procrastinating taxpayers are rushing to file their returns this Tax Day 2023. Some, however, have extra time.

Unfortunately for them, the reason for the delayed filing deadline is not one any of us want. They live or have businesses in areas that were declared major disaster areas.

Indiana residents are the latest to join this later Tax Day club. Today, the Internal Revenue Service announced that Hoosier storm victims now have until July 31 to file various federal individual and business tax returns and make tax payments.

Yeah, I know getting the word out that Tax Day isn't Tax Day isn't optimal. But remember, the IRS has to wait for the Federal Emergency Management Agency (FEMA) to act. Then, as is protocol, the IRS provides corresponding tax relief.

In the Indiana case, the IRS move comes after FEMA's disaster declaration DR-4704-IN in the wake of tornadoes, severe storms, and straight-line winds that struck parts of the Midwest state on March 31 and April 1.

Now, per the FEMA and IRS moves, individuals and households who live in or have a business in Allen, Benton, Clinton, Grant, Howard, Johnson, Lake, Monroe, Morgan, Owen, Sullivan, and White counties have 15 more weeks to handle a variety of tax tasks.

If FEMA adds more counties later, those areas will receive the same tax consideration as announced today.

Later deadlines to file, contribute: For individuals, the main effect is the filing of 2022 tax year returns and paying any due tax by July 31. The new deadline also applies to estimated tax payments usually due today, April 18, and the second 2023 estimated payment due June 15.

Affected Indiana taxpayers also have until the end of July to make tax year 2022 contributions to their IRAs and health savings accounts (HSA).

More on Indiana tax relief and how it applies to affected taxpayers, including businesses, can be found in the IRS announcement. You also can find more at IRS.gov's Disaster Assistance and Emergency Relief for Individuals and Businesses page.

State deadline unclear: Most states that follow the IRS tax calendar, which is most states, also adjust their state deadlines to align with disaster-related federal delays. That's because in most states, those and often more-local filings are closely connected to the taxpayers' federal filing data.

Indiana tax officials have not yet announced any extension for state returns. Again, the IRS just made the announcement today, so this isn't unusual. A state extension could come in the next few days.

But if you're in one of the federal July 31 counties and want to push your Indiana filing, too, you can make sure you won't face any state issues by filing an Indiana tax return extension by midnight tonight, April 18.

Other disaster delayed states: Indiana is the eighth state where some residents now have an extended 2023 tax filing deadline due to major disaster declarations.

They are —

• May 15 for New York severe storm victims;
• July 31 for severe storm and tornado victims in Arkansas; Mississippi; Tennessee; and now Indiana filers; and
• Oct. 16 for filers in disaster areas in California, Alabama and Georgia.

Disaster tax deductions: Federal tax law also provides filers in those eight states who've endured a major disaster the option to claim any uninsured losses as a tax deduction. They also get to decide which tax year to use to make the claims.

I've discussed this choice in my all-too-frequent disaster declaration posts. Just chill, Mother Nature, please! You can find more about disaster claim filings in my post Considerations in making a major disaster tax claim.

But I do want to reiterate here the tax year choice. Taxpayers in all but New York whose 2022 return deadlines have been extended due to major disasters can claim them on that filing or next year when they file their 2023 returns. Empire State taxpayers must compare 2021 and 2022 tax years, since that major disaster occurred over last year's Christmas holiday period.

Whichever tax years are involved, run the two years' numbers carefully. All tax and financial factors need to be examined, such as your current and prior year's tax bracket, and any other deductions you may be able to claim in either year. Obviously, you want to use the tax year that produces the better tax results.

Finally, you also might find the following posts on recovering from disasters of interest:

• Picking up the pieces after a disaster
• 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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