IRS Extends Tax and Penalty Relief to Victims of Hurricane Florence

(Parker Tax Publishing September 2018)

The IRS announced that Hurricane Florence victims in parts of North Carolina and elsewhere have until January 31, 2019, to file certain individual and business tax returns and make certain tax payments. The IRS is also waiving penalties relating to certain payroll and excise tax deposits, as well as penalties relating to certain sales of dyed diesel fuel. IR-2018-187; IR-2018-189.

The IRS has extended various tax deadlines and waived certain penalties for taxpayers affected by Hurricane Florence. The extension of deadlines applies to taxpayers in any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently, this only includes parts of North Carolina, but taxpayers in localities added later to the disaster area, including those in other states, will automatically receive the same filing and payment relief. The current list of eligible localities is available on the disaster relief page on IRS.gov.

Observation: The Tax Cuts and Jobs Act of 2017 generally limits the deduction for personal casualty losses for tax years 2018-2025 to only those deductions attributable to a federally declared disaster as defined in Code Sec. 165(i)(5). Individuals and businesses in a federally declared disaster area, such as areas affected by Hurricane Florence, who suffer uninsured or unreimbursed disaster-related losses can choose to claim those losses on either the return for the year the loss occurred (in this instance, the 2018 return normally filed next year), or the return for the prior year (i.e., 2017).

The tax relief postpones various tax filing and payment deadlines that occurred starting on September 7, 2018. As a result, affected individuals and businesses will have until January 31, 2019, to file returns and pay any taxes that were originally due during this period. This includes quarterly estimated income tax payments due on September 17, 2018, and the quarterly payroll and excise tax returns normally due on September 30, 2018. Businesses with extensions also have this additional time including, among others, calendar-year partnerships whose 2017 extensions run out on September 17, 2018. Taxpayers who had a valid extension to file their 2017 return due to run out on October 15, 2018, will also have more time to file.

In addition, the IRS said, penalties on payroll and excise tax deposits due on or after September 7, 2018, and before September 24, 2018, will be abated as long as the deposits are made by September 24, 2018.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the IRS is advising that the taxpayer call the number on the notice to have the penalty abated.

In response to shortages of undyed diesel fuel caused by Hurricane Florence, the IRS said that it will not impose a penalty when dyed diesel fuel is sold for use or used on the highway in the State of North Carolina. This relief is effective as of September 17, 2018, and, consistent with the Environmental Protection Agency (EPA) waiver for North Carolina regarding the use of Non-Road Diesel Locomotive and Marine Fuel, this relief will remain in effect through September 28, 2018.

This penalty relief is available to any person that sells or uses dyed fuel for highway use. In the case of the operator of the vehicle in which the dyed fuel is used, the relief is available only if the operator or the person selling the fuel pays the tax of 24.4 cents per gallon that is normally applied to diesel fuel for highway use. The IRS will not impose penalties for failure to make semimonthly deposits of this tax.

Compliance Tip: In addition, the IRS said it will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

For a discussion of the deductibility of disaster area losses, see Parker Tax ¶84,545. For a discussion of IRS disaster relief in general, see Parker Tax ¶79,300.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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