• Federal Tax Return Filing and Payment Relief
  • September 14, 2016 | Authors: Jonathan R. Katz; B. Trevor Wilson
  • Law Firms: Jones Walker LLP - New Orleans Office; Jones Walker LLP - Baton Rouge Office
  • On August 14, 2016, President Obama declared several parishes in southern Louisiana major disaster areas because of the severe storms and flooding that occurred. These parishes included Acadia, Ascension, Avoyelles, East Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville, Jefferson Davis, Lafayette, Livingston, Pointe Coupee, St. Helena, St. James, St. Landry, St. Martin, St. Tammany, Tangipahoa, Vermilion, Washington, West Baton Rouge, and West Feliciana.

    If your principal residence is located in one of these parishes or your business’ principal place of business is located in one of these parishes, the designation of these parishes as a federally declared disaster area provides you with certain federal tax relief. This federal tax relief includes not only the suspension of certain deadlines to file tax returns or pay taxes, but also the ability to claim casualty losses incurred in the flooding on 2015 tax returns.

    Tax Return Filing and Payment Relief

    The due date for certain federal tax returns, which have an original or extended due date on or after August 11, 2016, and on or before January 17, 2017, is postponed. You are not required to file these returns until January 17, 2017. The returns to which this postponed due date applies are individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns. However, the postponed due date does not apply to filing information returns in the W-2, 1098, and 1099 series or to Forms 1042-S or 8027.

    The postponed due date also applies to federal tax payments due on or after August 11, 2016, and on or before January 17, 2017, including estimated tax payments. You are not required to make these tax payments until January 17, 2017. The postponed due date does not apply to employment or excise tax deposits. However, the IRS will abate penalties for failure to make employment or excise tax deposits timely if the deposits were due on or after August 11, 2016, and before August 26, 2016, and the deposits were made by August 26, 2016.

    To qualify for this tax return filing and payment relief, you should write “Louisiana, Severe Storms and Flooding” at the top of any forms you file with the IRS on which you are claiming the relief.

    Casualty Loss Relief

    Under the relief, you may elect to deduct on your 2015 tax return casualty losses that you incurred as a result of the storms and flooding. To obtain this relief, you should file an amended tax return for 2015 claiming the casualty loss, write “Louisiana, Severe Storms and Flooding” at the top of the return, include a statement with the return that the taxpayer is electing to claim the casualty loss in 2015, and specify the date on which the damage was incurred and the location of the property that was damaged. This relief could allow you to obtain a tax refund for 2015 as a result of the loss, instead of waiting until you file your 2016 tax return to claim the loss.

    The amount of a casualty loss generally is the loss in fair market value of the property suffered as a result of the casualty, or the amount that you paid for the property if less. However, if you have insurance on the property, you must timely file an insurance claim for the damage, and your loss is allowed as a casualty loss only to the extent it is not reimbursed by insurance. Further, you may claim a casualty loss as an itemized deduction and reduce taxable income only to the extent the casualty loss (after reduction for any insurance reimbursement) exceeds 10 percent of your adjusted gross income for the year claimed, or exceeds $100 if greater.

    As a result of being able to claim a casualty as an itemized deduction only to the extent it exceeds 10 percent of your adjusted gross income, you and your tax advisor should compare your adjusted gross income for 2015 to your expected adjusted gross income for 2016 to determine the year in which it would be most advantageous to claim the casualty loss. For example, if you plan to take a distribution or withdrawal in 2016 from your 401(k) plan or traditional IRA that is includible in your taxable income, you may be entitled to claim a larger casualty loss deduction by claiming the casualty loss on your 2015 tax return rather than claiming the casualty loss on your 2016 tax return.

    Conclusion

    The federal tax relief suspending deadlines to file tax returns or pay taxes and providing the ability to claim casualty losses incurred in the flooding on 2015 tax returns is made available to all federally declared disaster areas, including the flooding that occurred in north Louisiana earlier this year. Additional relief, such as the broad relief that was provided after Hurricanes Katrina and Rita, must be approved by Congress and signed into law by the president.