In a recent announcement, the Internal Revenue Service (IRS) has offered essential tax relief to individuals and businesses impacted by Idalia across South Carolina. These measures aim to provide much-needed financial assistance during these challenging times. Here’s a detailed breakdown of the IRS’s latest update:
Tax Relief Eligibility:
The IRS is extending tax relief to any area that FEMA designates as being affected by the disaster. Notably, all 46 counties in South Carolina are currently eligible for this relief. Individuals and businesses residing or operating in these designated areas can benefit from the tax relief measures.
Filing and Payment Relief:
The IRS’s tax relief primarily focuses on postponing various tax filing and payment deadlines that fall within the period from August 29, 2023, through February 15, 2024, which we will refer to as the “postponement period.”
Here are some key points to consider:
1. Extended Deadlines: Affected individuals and businesses now have until February 15, 2024, to file their returns and settle any taxes that were originally due during the postponement period.
2. Specific Examples: The extended deadline applies to various scenarios, including individuals who had valid extensions to file their 2022 returns, which were initially due on October 16, 2023. However, please note that tax payments related to these 2022 returns, originally due on April 18, 2023, are not eligible for this relief.
3. Quarterly Payments: If you’re responsible for quarterly estimated income tax payments typically due on September 15, 2023, and January 16, 2024, you now have until February 15, 2024, to fulfill these obligations.
4. Businesses Affected: The relief also encompasses quarterly payroll and excise tax returns that would typically be due on October 31, 2023, and January 31, 2024. Additionally, calendar-year partnerships and S corporations with 2022 extensions expiring on September 15, 2023, as well as calendar-year corporations with 2022 extensions ending on October 16, 2023, now have until February 15, 2024, to meet their tax obligations.
5. Penalty Abatement: If you were unable to make payroll and excise tax deposits due on or after August 29, 2023, but before September 13, 2023, the IRS will abate penalties provided that these deposits are submitted by September 13, 2023.
Automatic Filing and Penalty Relief:
The IRS is automatically granting filing and penalty relief to any taxpayer whose IRS address of record is located within the disaster area. There’s no need for these taxpayers to contact the IRS to obtain this relief.
However, unique situations may arise. For instance, if an affected taxpayer relocated to the disaster area after filing their return and does not have an IRS address of record in the disaster area, they might receive a late filing or late payment penalty notice from the IRS for the postponement period. In such cases, it’s advisable to contact the IRS using the number provided on the notice to request penalty abatement.
Moreover, for taxpayers living outside the disaster area but requiring records located within the affected area to meet a deadline during the postponement period, it’s crucial to contact the IRS at 866-562-5227. This also applies to workers aiding relief activities affiliated with recognized government or philanthropic organizations.
Additional Tax Relief:
Individuals and businesses in federally declared disaster areas suffering from uninsured or unreimbursed disaster-related losses have the flexibility to claim these losses on either their return for the year the loss occurred (2023) or the prior year (2022). Taxpayers have up to six months after the due date of their federal income tax return for the disaster year (regardless of extensions) to make this election. Ensure that you include the FEMA declaration number, “DR-3597-EM,” on any return claiming a loss. Further details are available in Publication 547, Casualties, Disasters, and Thefts.
Qualified disaster relief payments are typically excluded from gross income, allowing affected taxpayers to exclude amounts received from a government agency for essential expenses, home repair, or content replacement. For comprehensive information, consult Publication 525, Taxable and Nontaxable Income.
Additional relief provisions may apply to taxpayers participating in retirement plans or individual retirement arrangements (IRAs). This could include special disaster distributions exempt from the additional 10% early distribution tax and the option to spread the income over three years. Specific plan or IRA rules and guidance should be followed.
Future Relief and Coordinated Response:
The IRS has indicated that additional disaster relief may be forthcoming. This tax relief is part of a coordinated federal response to address the damage inflicted by the Idalia disaster. Local damage assessments by FEMA have guided the implementation of these measures.
For further information on disaster recovery, visit DisasterAssistance.gov.
The IRS’s tax relief measures are designed to provide support and assistance to individuals and businesses affected by Idalia in South Carolina. These measures offer extended deadlines and penalty relief, providing much-needed financial flexibility during these challenging times. Stay updated on any future relief announcements and remember to consult the IRS’s disaster relief page for the latest information on eligible localities and qualifying actions.