IRS Tax Help for Disaster Victims

The National Oceanic and Atmospheric Administration (NOAA) reported 12 natural disasters in 2011 that each caused more than $1 billion in damages, ranging from Hurricane Irene, to severe wildfires, tornadoes and flooding. As the victims of these disasters rebuild their lives from utter destruction, this tax season many are receiving IRS tax help.

USA Today’s article Tax Relief Possible for Losses in Natural Disasters reports the good news that taxpayers affected by local events not deemed “federally declared disasters”, could still be eligible to take a casualty deduction for losses exceeding what was already reimbursed by insurance. This means that more people will be able to put their financial lives back together sooner. If you were affected by a natural disaster in 2011, sorting through the sea of paperwork may be one of your biggest challenges. Here are some important points to know:

Tax Help with Claiming Disaster Losses

There are special IRS tax law provisions for taxpayers and businesses so they can recover financially from a disaster’s impact by granting additional time to file returns and pay taxes. Affected taxpayers in a Federal Disaster Area can receive tax help by claiming disaster-related casualty losses on their federal income tax return either in the tax year the casualty occurred or the immediate preceding tax year.

The IRS stipulates the following:

Losses from natural disasters are to be treated like other casualty losses or theft on your income tax. Accidental breakage or losses as a result of normal wear and tear are not deductible.
You will need to file a claim with your insurance company in a timely manner before attempting to deduct the loss. Filing these claims establishes the worth of the property and damage extent.
Only property losses not covered by insurance are deductible and qualify for relief on your federal income tax. To take these losses, taxpayers must do the following:
- Subtract $100 for each casualty event.
- Subtract ten percent of their adjusted gross income from their total casualty losses for the year.
Taxpayers must file Form 4684 and itemize deductions, and Schedule A with their tax return.
If financial records were destroyed in the disaster, IRS help is available by requesting copies of prior year tax returns. Extensions are often granted to people in federally declared disaster areas, both for filing and payment of any taxes due.

Seeking tax relief by claiming the loss on an original or amended return for 2010, may yield an earlier refund, possibly helping with immediate financial needs. On the other hand, waiting to claim the loss on a 2011 return, however, could result in a greater tax saving. A tax expert such as a certified tax relief specialist or tax attorney is qualified and should be consulted to make informed decisions if facing this situation.

IRS Tax Problems Should Be Avoided

Preparing for a disaster before it happens means avoiding IRS tax problems in the first place. Photo documenting your property and using electronic recordkeeping to safeguard important documents away from the property, can provide piece of mind and immediate assistance if disaster were to strike.

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