Don't Mess With Taxes

A Cole, Oklahoma, home destroyed by the EF3 tornado that went through McClain County on April 19, 2023. The National Weather Service estimated winds at 152 miles per hour. (Photo by U.S. National Oceanic and Atmospheric Administration via Wikipedia Commons)

The Oklahoma City area seems to be a tornado magnet.

I'm aware of this unwanted meteorological frequency not just because of my weather fixation and its tax connection, but also because my brother lived in OKC back in 1999 when an EF5 twister destroyed much of the state capital's southern suburbs. Back then, my parents were in Western Oklahoma, which also got its share of tornadoes.

Even though my family is no longer in the Sooner State, friends are, so I flinch whenever severe weather goes through that area. Which is a lot, as evidenced by perusing the ol' blog's special Natural Disasters: Recovering from disasters page.

Latest OKC area twister disaster: Today, that page gets a new item to reflect the Federal Emergency Management Agency (FEMA) declaration and subsequent Internal Revenue Service announcement of special tax treatment for those in the path of the deadly severe storms, straight-line winds, and tornadoes that hit central Oklahoma on April 19 and 20.

Specifically, that's residents and business owners in McClain and Pottawatomie counties. For historical storm tracking purposes, the counties are south and southeast, respectively, of Oklahoma City.

Later deadline for some filings, payments: As is the usual case in such disaster declarations, the IRS postpones certain tax-filing and tax-payment deadlines. The folks in McClain and Pottawatomie counties now have until Aug. 31 to meet certain deadlines, both filing and payment, that fell or will fall on or after April 19 and before the new end-of-August deadline.

That means affected taxpayers who make estimated tax payments won't have to submit the June 15 amount for the second payment period of 2023 until Aug. 31.

In addition, quarterly payroll and excise tax returns normally due on May 1 and July 31 are postponed until Aug. 31.

The IRS says it will abate penalties on payroll and excise tax deposits due on or after April 19 and before May 4 as long as the tax deposits are made by May 4.

As for other penalties, the IRS notes that if an affected taxpayer receives a late-filing or late-payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date within the postponement period, the taxpayer should call the telephone number on the notice to have the IRS abate the penalty.

Help beyond disaster declaration boundaries: Long-time readers know that the IRS automatically identifies taxpayers located in the covered disaster area and applies filing and payment relief.

However, major disasters can cause problems for folks beyond the actual geographic areas they strike. For example, some taxpayers in other counties may be affected because they use tax services or have tax documents in the disaster area.

In these cases, taxpayers who reside or have a business located outside the covered disaster area should call the IRS disaster toll-free hotline (866) 562-5227 to request the same tax relief afforded those in the disaster declaration counties.

Potential tax deductions and timing: In addition to the deadline extensions and penalty relief considerations, 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 which tax year to use to make the claims. You can choose the year it happened, which would be claims on your 2023 return filed next year. Or you can claim it in the prior 2022 tax year.

Oklahomans who got an extension to file their 2022 taxes can claim uninsured storm and tornado damages on that return when they file by Oct. 16. Those who filed by April 18 can amend their 2022 return if they want to claim their losses for that tax year.

Whichever year is used, put the disaster designation "Oklahoma, severe storms, straight-line winds and tornadoes" in bold letters at the top of the form. Also include the FEMA disaster declaration number FEMA-4706-DR on any return. This will alert the IRS to give it expedited treatment.

You can find more about disaster claim filings in my post Considerations in making a major disaster tax claim.

I do, however, want to reiterate that you need to run both tax year 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 better tax results.

A tax expert can help you decipher all the numbers and dates and how they affect your tax bill in each year. Things can get confusing, and you've got enough on your table just dealing with disaster damage.

IRS disaster delay authority: Finally, about tax numbers. Usually, I would select the extended filing date as the ol' blog's regular weekend By the Numbers figure.

This Saturday, though, I'm going with Treas. Reg. §301.7508A-1(d)(2).

The IRS always cites this provision in its disaster relief announcements. It's what allows the tax agency to recognize FEMA-declared localities that are entitled to special tax relief.

You also might find these items of interest:

• Picking up the pieces after a major disaster
• Estimated taxes: Why, when, and how to pay them
• Tax Day 2023 is later for major disaster victims in 7 states (April 28, 2023, post)

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