DISASTER TAX RELIEF BILL INTO LAW

NSTPNatural Diaster

President Trump on September 29 signed the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (HR 3823). In a Statement of Administration Policy, the White House explained that HR 3823 would “provide targeted tax relief for taxpayers impacted by  Hurricanes Harvey, Irma and Maria. In addition to supporting these tax relief measures, the administration will submit further requests to the Congress for supplemental funding in the near future, and looks forward to working with Congress to enact these recovery measures into law.” Disaster Tax Relief Among other things, the measure will: (1) eliminate the current requirement that uncompensated personal casualty losses exceed 10 percent of adjusted gross income to qualify for deduction; (2) eliminate the current requirement that taxpayers itemize deductions to access this tax relief; (3) provide an exception to the 10-percent early retirement plan withdrawal penalty for qualified hurricane relief distributions; (4) allow for the re-contribution of retirement plan withdrawals for home purchases cancelled due to eligible disasters; (5) provide flexibility for loans from retirement plans for qualified hurricane relief; (6) temporarily suspend limitations on charitable contribution deductions associated with qualified hurricane relief made before December 31, 2017; (7) provide a tax credit for 40 percent … Read More

2017 HURRICANE RELIEF: IRS PROVIDES SAFE HARBOR METHODS FOR DETERMINING NONBUSINESS CASUALTY LOSSES – REV PROC 2018-08

NSTPNatural Diaster

In Revenue Procedure 2018-08, IRS has provided safe harbor methods that individual taxpayers may use in determining the amount of their casualty and theft losses for their personal-use residential real property and personal belongings. For a safe harbor under which individuals may use one or more cost indexes to determine the amount of loss to their homes as a result of Hurricane and Tropical Storm Harvey, Hurricane Irma and Hurricane Maria. New safe harbors for determining the amount of losses: IRS has become aware that taxpayers often have difficulty determining the amount of their losses under the methods provided in Reg. § 1.165-7(a)(2), which has resulted in time-consuming and expensive litigation. In order to provide certainty to both taxpayers and IRS, the Revenue Procedure provides safe harbor methods that individuals may use under Reg. § 1.165-7(a)(2) to measure the decrease in the FMV of their personal-use residential real property following a casualty and to determine the pre-casualty or theft FMV of personal belongings. Qualifying to use the safe harbors: An individual who has suffered a casualty loss to the individual’s personal-use residential real property may use one of the first three safe harbor methods described in “Personal-use residential real property safe harbor … Read More

2017 HURRICANE RELIEF: IRS PROVIDES SAFE HARBOR FOR DETERMINING CASUALTY LOSS TO A HOME – REV PROC 2018-9

NSTPNatural Diaster

In Revenue Procedure 2018-9, IRS has provided a safe harbor method under which individuals may use one or more cost indexes to determine the amount of loss to their homes as a result of Hurricane and Tropical Storm Harvey, Hurricane Irma and Hurricane Maria (2017 Hurricanes). An individual with a U.S. income tax filing requirement who suffered a casualty loss to the individual’s personal-use residential real property located in the “2017 Disaster Area” as a result of the 2017 Hurricanes may use the safe harbor method provided in Rev Proc 2018-9 (the “Cost Indexes Safe Harbor Method”) in determining the amount of the individual’s casualty loss under Code Sec. 165. The term “2017 Disaster Area” means the entire states of Texas, Louisiana, Florida, Georgia, and South Carolina, the Commonwealth of Puerto Rico, and the territory of the U.S. Virgin Islands. Rev Proc 2018-9 applies to bona fide residents of Puerto Rico and the U.S. Virgin Islands only where these individuals otherwise have a U.S. income tax filing requirement. For purpose of Rev Proc 2018-9, personal-use residential real property is real property, including improvements (such as buildings and ornamental trees and shrubbery), that is owned by the individual who suffered a … Read More

CALIFORNIA WILDFIRES RELIEF: IRS PROVIDES GUIDANCE ON LEAVE-SHARING PROGRAMS

NSTPInternal Revenue Service (IRS), Natural Diaster

Notice 2017-70, 2017-48 IRB The  IRS has announced that employees will not be taxed when they forgo vacation, sick, or personal leave in exchange for employer contributions of amounts to charitable organizations providing relief to victims of the California wildfires that began on October 8, 2017 (the 2017 California Wildfires), and employers may deduct the amounts as business expenses. Leave-based donations:  Some employers have set up or may be considering setting up programs where employees can donate their vacation, sick or personal leave in exchange for the employer making cash payments to qualified tax-exempt organizations that provide relief for the victims of the 2017 California Wildfires. In the past, under similar circumstances, IRS has provided guidance for such donations. See, for example, Notice 2016-69, 2016-48 IRB 832, which provided guidance with respect to leave-based donation programs to aid victims of Hurricane Matthew, and, more recently, Notice 2017-48, 2017-39 IRB, which provided guidance with respect to leave-based donation programs to aid victims of Hurricane Harvey, and Notice 2017-62, 2017-44 IRB, which provided guidance with respect to leave-based donation programs to aid victims of Hurricane Maria. 2017 California Wildfires relief: In Notice 2017-70, IRS has announced that it will not assert that cash payments … Read More

IRS PROVIDES TAX RELIEF TO RESIDENTS OF PUERTO RICO AND THE VIRGIN ISLANDS

NSTPInternal Revenue Service (IRS), Tax Relief

The Internal Revenue Service has issued guidance to provide relief to residents of Puerto Rico and the U.S. Virgin Islands who were evacuated or could not return because of Hurricane Irma or Hurricane Maria.  The relief extends the usual 14-day absence period to 117 days (beginning September 6, 2017 and ending December 31, 2017) for the presence test for residency under the tax rules.  Further, an individual who is absent from either U.S. territory on any day during this 117-day period will be treated as leaving or being unable to return to the relevant U.S. territory as a result of Hurricane Irma and Hurricane Maria on such day. There are several exceptions to the general 183-day presence test that require an individual to be in the location where he or she claims residence for 183 days during the tax year.  Usually, residents could include up to 14 days in the 183-day period because of a declared disaster. However, because of the unprecedented and catastrophic damage caused by Hurricane Irma and Hurricane Maria to Puerto Rico and the U.S. Virgin Islands, the Federal Emergency Management Agency has issued Notices of a Presidential declaration of a major disaster for both territories and … Read More

Tips for Individuals Who Need to Reconstruct Records After a Disaster

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Taxpayers who are victims of a disaster might need to reconstruct records to prove their loss. Doing this may be essential for tax purposes, getting federal assistance, or insurance reimbursement. Here are 12 things taxpayers can do to help reconstruct their records after a disaster: Taxpayers can get free tax return transcripts by using the Get Transcript tool on IRS.gov, or use their smartphone with the IRS2Go mobile phone app. They can also call 800-908-9946 to order them by phone. To establish the extent of the damage, taxpayers should take photographs or videos as soon after the disaster as possible. Taxpayers can contact the title company, escrow company, or bank that handled the purchase of their home to get copies of appropriate documents. Home owners should review their insurance policy as the policy usually lists the value of a building to establish a base figure for replacement. Taxpayers who made improvements to their home should contact the contractors who did the work to see if records are available. If possible, the home owner should get statements from the contractors to verify the work and cost. They can also get written accounts from friends and relatives who saw the house before and after any improvements. … Read More