Disaster can strike anywhere at any time. In 2013, the Federal Emergency Management Agency (FEMA) has issued 62 major disaster declarations affecting virtually every area of the country. Tax obligations often fall by the wayside when an individual or business is trying to recover from a disaster. Fortunately, the tax law provides some relief.
Deadline extensions. Under current rules, the IRS has authority to extend tax deadlines in the wake of a federally declared disaster. The law authorizes the extension of “any act” for a period of up to one year. Moreover, the law specifically provides that late filing penalties and interest on underpayments may be waived or abated. In the past, the IRS concluded that the law did not permit the waiver of interest charges.
Tax deadlines that may be postponed include:
- Filing returns
- Paying tax
- Making IRA contributions
- Completing IRA or plan rollovers
- Filing a refund or credit claim
- Filing a Tax Court petition or a suit for a refund
In addition, an IRS Revenue Procedure contains a lengthy list of other tax actions that can be put on hold [Rev. Proc2007-56]. These deadline extensions do not apply automatically, however. IRS announces the length and scope of any postponements for each disaster. (See http://www.irs.gov/uac/Tax-Relief-in-Disaster-Situations for the most recent disaster-related deadline extensions).
Bear in mind, that disaster postponements are not limited to individuals and businesses physically located in affected areas. An individual or business whose records are located in a disaster area can also qualify for a deadline extension.
How You Can Help. Where the IRS has granted a postponement of time to file returns and make payments in response to a federally declared disaster, practitioners located in the covered disaster area who maintain records necessary to meet a filing or payment deadline for taxpayers located outside the disaster area may elect to contact the IRS to identify such clients.
A practitioner may contact the IRS at 1-866-562-5227 Alternatively, a practitioner who maintains the records of ten or more clients located outside the disaster area, can submit a bulk request for relief by send the IRS a CD with identifying information for the affected clients. (For information on how to submit a bulk request see www.irs.gov/Tax-Professionals/Bulk- Requests-from-Practitioners-for-Disaster-Relief.)
Lost tax records. Clients located in a disaster area may have lost tax records and other important tax information. While in some cases you may have copies of some of the documents a client needs, but in other cases clients will need to obtain copies through the IRS. The IRS normally charges for a copy of a prior year’s return. However, the IRS will waive the usual fees and expedite requests for copies of previously filed returns for taxpayers affected by a disaster. In addition, the IRS will provide W-2 or Form 1099 data, expedite current year return processing, expedite issuance of replacement checks, delay notices, waive penalties, or delay collection or examination matters on an as needed basis. Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacted them so that the IRS can consider appropriate relief.
How You Can Help. You can assist your clients in reconstructing their tax records otherwise dealing with the IRS. However, it will generally be necessary for a client to complete and sign form 2848, Power of Attorney and Declaration of Representative, to authorize you to act on his or her behalf.