NATP – Tax Relief for Victims of Hurricane Harvey
Extended filing and payment deadlines
Hurricane Harvey victims in parts of Texas have until January 31, 2018, to file certain individual and business tax returns and make certain tax payments, the IRS announced in IR-2017-135.
This includes an additional filing extension for taxpayers with valid extensions that run out on October 16, and businesses with extensions that run out on September 15. This includes the September 15, 2017 and January 16, 2018deadlines for making quarterly estimated tax payments. The IRS noted, however, that because individual tax payments related to 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, 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 falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.
In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866.562.5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.
Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016). See Publication 547 for details.
The Internal Revenue Service granted additional relief to victims of Hurricane Harvey on Wednesday by allowing 401(k)s and other employer-sponsored retirement plans to give loans and hardship distributions to aid them without incurring penalties.
The IRS said 401(k) plan participants, along with employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans, can be eligible for the streamlined loan procedures and liberalized hardship distribution rules. While IRA participants are barred from taking out loans, they’re also eligible to receive distributions under the looser procedures.
Retirement plans can provide relief to employees and some members of their families who live or work in disaster area localities affected by Hurricane Harvey and designated for individual assistance by the Federal Emergency Management Agency. Currently, parts of Texas qualify for individual assistance, but the storm is spreading Wednesday to parts of Louisiana as well, and those areas may also eventually qualify. For a complete list of eligible counties, visit https://www.fema.gov/disasters. To qualify for this relief, hardship withdrawals must be made by Jan. 31, 2018.
Under the IRS relief, a retirement plan can allow a victim of Hurricane Harvey to take a hardship distribution or borrow up to the specified statutory limits from a storm victim’s retirement plan. Someone who lives outside the disaster area can also take out a retirement plan loan or hardship distribution if they want to use the money to help a son, daughter, parent, grandparent or other dependent who lived or worked in the disaster area.
More details are available in Announcement 2017-11 on the relief to victims of Hurricane Harvey, which caused damage to parts of Texas. It permits easier access to victims’ funds held in workplace retirement plans and in IRAs, for the period beginning Aug. 23, 2017, and ending Jan. 31, 2018. Additional information about other tax relief related to Hurricane Harvey can be found on the IRS disaster relief page.