The IRS' tax relief for tornado-stricken Tennessee residents and business owners is welcome. But that's just one part of picking up the pieces after a major disaster. Keep reading after the Volunteer State tax specifics for tips that all of us can use to recover, financially and physically, if we ever must cope with a catastrophe.
Tennessee is the latest state to receive federal tax relief in the wake of recent tornadoes and straight-line winds. The Volunteer State joins its neighbor Mississippi in now having until July 31 to fulfill various tax filing and payment responsibilities.
The widespread, and deadly, storm outbreak that started in March 31 and ravaged parts of Tennessee produced 175 tornado warnings on the last day of March, and another 51 alerts on April 1. At one point, the National Weather Service counted 20 simultaneous active tornado warnings.
The outbreak led to the Federal Emergency Management Agency (FEMA) declaring a major disaster for several counties. The Internal Revenue Service followed, announcing today tax relief for individual and business taxpayers in Cannon, Hardeman, Hardin, Haywood, Lewis, Macon, McNairy, Rutherford, Tipton, and Wayne counties.
If FEMA subsequently decides to add other areas to the disaster area, residents and business owners there will also qualify for the same relief. You can periodically check the disaster-eligible localities at IRS.gov's Tax Relief in Disaster Situations page.
Later deadline: Those who qualify for the tax relief will have various tax filing and payment deadlines that occurred starting on March 31 postponed until July 31.
This includes 2022 individual income tax returns and various business returns that are due on April 18. Due to the extended deadline, eligible taxpayers will have until July 31 to make 2022 contributions to their IRAs and health savings accounts.
The July 31 deadline also applies to the quarterly estimated tax payments, due this year on April 18 and June 15.
For businesses, the July 31 deadline applies to the quarterly payroll and excise tax returns normally due on April 30. Penalties on payroll and excise tax deposits due on or after March 31 and before April 18 will be abated as long as the tax deposits are made by April 18.
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. And you get to decide which tax year to use to make the claims.
I discuss this option in the all-too-frequent disaster declarations. 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. Affected Tennessee taxpayers who can claim losses as an itemized tax deduction need to carefully determine whether to count their tornado disaster losses on their 2023 returns they'll file next year, or on their 2022 taxes that they now have until July 31 to file.
Ask for more time: Run the 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.
Making the filing year decision will take some time and added calculations, but the difference could be substantial. So don't rush it.
Get an extension to file if you need. That will give you until Oct. 16 this year (the usual 10/15 date is on Sunday) to file your 2022 return. The IRS notes that Mississippi taxpayers can get an extension electronically by using Free File or IRS Direct Pay. If disaster-delayed filers don't seek an electronic extension by April 18, they'll have to request the extension by filing a paper Form 4868 by their new July 31 deadline.
Finally, regardless of which tax year you use, when you file any disaster-related tax form, include the official declaration number, which is DR-4701-TN. This notation will let the IRS know to give the filing expedited treatment.
Picking up the pieces after a disaster: The extra time to take care of tax tasks is welcome by Tennessee residents dealing with their disaster's aftermath. However, the road to recovery, financial and otherwise, will take much longer. It's also likely to be a very bumpy route.
As they, and any of us who might one day face a disaster, begin the process, here are some things to consider.
Insurance: If you have insurance on your property, contacting your agent should be one of your first steps. In addition to claims on your physical losses, find out if your policy will pay for temporary shelter, clothing, and other items.
Work: Touch base with your boss. Let the office know your situation. Also find out if you can keep getting your paycheck and health insurance, and for how long. If you need to make an emergency withdrawal from a 401(k) plan to help tide you over, find out how to start that process. And if your workplace was also damaged, find out the expected time frame of when you will be able or expected to return.
Money: Did you lose credit, debit, or ATM cards during the disaster? Let your bank or other issuer know as soon as possible. Ditto if you still use paper checks and those also were lost. You can find the contact information on the financial account statements, but if those also were destroyed, you can search for the main number online or, if you downloaded it, use the bank/card phone app. You also can check out Bankrate's CreditCards.com story that has contact details for major credit card issuers.
Creditors: Contact your landlord. If your residence was damaged, you obviously need to let the owner know and find out about repair plans. If your home wasn't damaged, but your job has been disrupted, you need to let your landlord know and discuss possible payment arrangements until your paychecks resume.
If you own your home, and you won't be getting a regular income for a while, let your mortgage holder know. Find out whether the lender will work with you to help you avoid foreclosure.
As for loans and credit card balances, find out if the lenders will defer your payments, extend payment grace periods, waive late fees, raise your credit limit, and/or postpone collection or repossession actions. Also check into possible extended repayment plans. You also need to have similar conversations with your utility providers.
If you've lost your financial records and need help identifying your creditors, get a free credit report from AnnualCreditReport.com.
Legal documents: You'll need to replace any legal documents that have been damaged or lost. This includes your identity cards, such as a driver's license, Social Security card, or military ID; vehicle titles; birth certificates; and other documents, such as contracts or divorce and custody decrees.
This list from the Federal Trade Commission offers a guide of where to go for what documents:
- Deeds and recorded real estate documents — County’s Recorder of Deeds
- Mortgages and other credit — Lender or financial company
- Leases — Landlord or financial company
- Insurance policies — Insurance company/agent
- Wills — Your attorney
- Checks/Savings documents/Investment materials — Bank, credit union, investment company, or your broker
- Car Title/Driver's License — Secretary of State or Department of Motor Vehicles
- Birth Certificate — Vital Statistics Office from county where you were born
- Social Security Card — local Social Security Administration Office
- Tax Returns — Internal Revenue Service
- Other important documents, such as legal judgments — Your attorney or the presiding court
As for ID cards, the rules for replacing government-issued documents vary. Many require you to show an official document, like your birth certificate, to prove your identity or citizenship. USA.gov has a special page on how to replace lost or stolen vital documents.
Finally, you also might find the following ol' blog posts on recovering from disasters of interest:
- Mississippi tornado victims get July 31 tax deadline
- Tips on rebuilding tax and other records lost in 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