Affected by a Natural Disaster? Learn About Possible Tax Benefits

When a significant event occurs, like a natural disaster that affects many people, the Internal Revenue Service (“IRS”) issues tax relief, usually in the form of deadline extensions. Nature can be destructive and often comes without warning, changing many lives nationwide.

With many events happening in recent years, like COVID-19 and its effects, we need to understand the IRS’s response. Last year, Hurricane Helene hit the Southeast hard. Wildfires in California also destroyed homes in Los Angeles County. It is important to know how these events affect people beyond the damage caused.

Who and What Qualifies?

First and foremost, the IRS does not issue tax relief for every disaster. It considers the location, severity, and likelihood of these disasters.

For example, hurricanes hit Florida every year, so they are not going to issue tax relief for things like a category two hurricane since the state is accustomed to and prepared for when those happen. But if a state like Kansas which has never had a hurricane and does not have the infrastructure for one, gets hit by one. The disaster could have some prominent impacts.

There’s no standard amount of time provided for these extensions, either. The states and various Florida and West Virginia counties affected by Hurricane Helene were given until May 1, 2025, to file and pay their income taxes, while Los Angeles County was given until October 15, 2025. These extensions are not just provided for disasters you hear about on national news; they can also be provided for localized events.

The IRS gave extended deadlines for victims of straight-line winds in Kentucky, postponing various deadlines to November 3, 2025. The victims of severe storms and flooding in Chaves County, New Mexico, have extended deadlines of May 1, 2025.

Sometimes, these extensions occur nationwide. When COVID caused havoc in March 2020, the IRS gave everyone an automatic extension for their tax returns until October 15, 2020. When it comes to how much time the IRS presents, it really depends on each and every disaster.

The IRS releases all of its extensions under the “News” section of its website under “Tax relief in disaster situations.” They list each extension by year and news releases from newest to oldest and provide an option to get information on a specific state. It can take time for new extensions to be released following a natural disaster.

Getting Specific: Not Always State Wide

For the California wildfires, the IRS took about three days to release the extension deadline relief, and it could take longer for other situations. West Virginia didn’t receive postponed deadlines until December 17, 2024, almost three months following being hit by Post-Tropical Storm Helene.

Any disaster relief provided by the IRS does stack, meaning that those taxpayers who received relief for Hurricane Debby in Florida who were also in the disaster area for Hurricane Helene are no longer required to meet the original extension from the Hurricane Debby relief.

For specific counties receiving disaster relief, the IRS lists those within the new articles they release on its website. For example, with California, while the headline states, “California wildfire victims qualify for tax relief; various deadlines postponed to Oct. 15,” the article itself only lists Los Angeles County taxpayers.

For those affected by Hurricane Helene in Florida, the article lists the twenty counties receiving relief. It also clarifies that for areas of the state that received Debby-related relief but not Helene-related relief, the deadlines remain February 3, 2025.

Taxpayers in disaster areas who live or have a business outside those areas can call the IRS hotline. This hotline helps them request tax relief. The IRS determines who is eligible for tax relief based on the last return filed by that individual or business.

For anyone who just recently moved to that area prior to the disaster, they would also need to call that disaster hotline number to discuss receiving the extension. In addition, all relief workers associated with a recognized government or philanthropic organization assisting the affected areas also receive applicable extensions. Any individual who was killed or injured as a result of a disaster while visiting covered disaster relief areas is entitled to disaster relief, as well.

Businesses and Individuals?

Many extensions for individuals also apply to businesses, but not always. It is important to read the articles. This will help you confirm if the relief is for individuals, companies, or both. These articles will also list the various deadline extensions for things like quarterly estimated income tax payments, quarterly payroll tax returns, and quarterly excise tax returns that businesses have to file.

If a company operates outside of the disaster area but has records necessary to meet a deadline located in the affected area, the IRS provides a number to call to receive the postponed deadline. And just because there are extensions on filings does not mean there are extensions on payments.

People affected by Hurricane Helene who filed an extension on their 2023 tax returns now have until May 1, 2025, to file. However, their payments were still due. These payments had to be made when the original extension was filed.

Another thing to consider is that while the IRS provides this relief, anyone who files or pays late could still receive a letter with late filing or late payment penalties. It is recommended that if an individual or business does not need to take advantage of the extension, they should file by the initial deadline. Fighting with the IRS could be more of a headache than it is worth.

However, suppose a penalty is received, and someone falls within an approved disaster area. In that case, just call the number on the notice. Explain to an IRS representative that the fees are wrong. Be sure to mention the specific article number from the IRS website.

The IRS provides a few other benefits for those in covered disaster relief areas. These can also be found within each tax relief article on the IRS website, typically listed under “Casualty losses” and “Other relief.” The types of relief will vary between disasters.

For California, affected taxpayers could claim disaster-related casualty losses on their federal income tax return for either their 2024 or 2025 returns and deduct personal property losses that weren’t covered by insurance or other reimbursements. Checking back on updates regularly is also a good way to keep updated on any changes or additional relief that may be provided. For California, the article does state that “The IRS may provide additional disaster relief in the future.”

This article isn’t meant to provide an explanation of what’s happening with the different disasters that have occurred throughout the United States, but rather to inform about the different relief options provided during those uncertain times. Many of our clients mention hearing about extensions provided for disaster relief in their areas around tax time every year. We take the time to explain what we feel will be beneficial and what could potentially be harmful in the long run.

If you are more of a visual learner and need to watch someone walk you through these scenarios instead of reading about them, please check out our youtube video Affected by a Natural Disaster? Learn About the Possible Tax Benefits  with James to give you a first hand recap.If you are still determining which plan works best for you or need additional help or have any questions, Waterford Business Solutions is happy to help. Feel free to call us at 864-351-0852 or email us at Info@WaterfordBusiness.com.