Tax Relief in Disaster Situations

Many times when a disaster such as flooding, hurricane, earthquake or terrorist attack occurs, the IRS will offer tax relief to those affected. The IRS keeps an updated list of areas in which disaster tax relief is available on its website. The IRS also publicizes the areas in which disaster tax relief is available through its newsletters and associated government websites.

The benefits provided by the IRS in disaster situations include:

� Additional time to file tax returns

� Additional time to pay taxes

� Quicker issuing of refunds

Deducting Disaster Losses

Anybody who suffered a loss in a "casualty" (damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual) can make deductions for the losses suffered, even if the IRS is not offering disaster tax relief in the area. Losses can be deducted for disasters, including:

� Earthquakes

� Floods

� Vandalism

� Volcanic eruptions

� Terrorist attacks

� Shipwrecks

� Hurricanes, tornadoes and other storms

� Car accident (deductible only if it was not caused by your negligence or error)

There are also nondeductible losses that you cannot claim for a deduction. A loss is only deductible if it was unexpected and caused by factors that were beyond your control. Other losses such as accidental breaking of valuables, a fire set intentionally or a car accident caused by willful negligence are nondeductible.

Calculating and Reporting Losses

To claim a deduction, you must first determine the amount of loss suffered. The fair market value (FMV) before the loss and the FMV after the loss must be calculated. Information about insurance and other reimbursements must also be determined. A casualty loss is reported using Form 4684 Casualties and Thefts. A separate Form 4684 must be filed for each casualty or disaster situation.

There are limits to the deductions you can claim depending on what was affected and who suffered the loss. A loss on employee property, i.e. a property used for providing services as an employee, can be reduced by 2% of your adjusted gross income. If your property is for personal use, then it is subject to the $100 and 10% rule where after determining the loss, you reduce the loss by $100. After you have reduced the $100, you need to reduce the total losses on personal-use property by 10% of your adjusted gross income.

If an area hit by a disaster is a federally declared a disaster area, even if you have already filed the return for that year, you may file an amended return to claim losses you suffered due to the disaster. However, if a disaster hit area is not a federally declared disaster area, you can only deduct the losses in the year in which the disaster happened.

Getting Help When Disaster Strikes

When a disaster strikes, the IRS understands that taxes are not necessarily a priority for those affected and will typically postpone the return filing deadline. IRS Taxpayer Assistance Centers are available nation-wide for guidance on which deductions you can claim and what benefits the IRS is offering to those affected by the disaster. The Taxpayer Assistance Center locator on the IRS website ( will help you to find the Taxpayer Assistance Center in your local area.

Low income taxpayers can get information and help from Low Income Taxpayer Clinics (LITCs). Individuals or families who have difficulty in understanding English can also use these centers to gain a better understanding of their tax obligations, tax benefits, and rights and responsibilities in their native language.

In a disaster situation, many government agencies give loans to help businesses and families to recover faster. provides immediate and essential disaster assistance and information. The site helps you to:

� Learn what assistance is available from the 17 government agencies.

� Reduce the number of forms you have to fill out.

� Check the progress of your applications online.

� Apply for help from Federal Emergency Management Agency online.

� Learn about Small Business Administration loans using an online application.

� Find the federal disaster recovery centers near your location.

� Get assistance from the Department of State if you are living away from home while a disaster strikes.

� Locate important resources in your community that can help you recover quickly.

Preparation and the use of the available resources can help reduce the impact of a disaster situation. You should keep the phone numbers, email addresses and website urls of reliable assistance services in a safe place so that you have access to help when you need it.

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