When Disaster Strikes

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    Kristie Adams, CPA

    With the clean-up already in process, many people in the Dayton area may be thinking of ways to recover from the costs associated with what Mother Nature delivered on May 27, 2019. Insurance proceeds may not have covered your entire loss from the string of tornados that passed though Ohio. Individuals who reside or have a business in Auglaize, Darke, Greene, Hocking, Mercer, Mahoning, Miami, Montgomery, Perry, and Pickaway counties may recover some of their expenses through tax relief.

    The disaster declaration issued by the Federal Emergency Management Agency allows the Internal Revenue Service to give relief to those affected taxpayers. For instance, the quarterly estimated tax payments due on June 17 and September 16, 2019 will be allowed additional time to file and pay by September 30, 2019. Additionally, penalties on federal payroll tax deposits due between May 27 and June 11, 2019 will be abated, if the deposits were made by June 11, 2019.

    In addition to the extended filing and payment options, the IRS allows taxpayers certain deductions when filing their income tax returns. Affected taxpayers in a federally declared disaster area can claim a casualty loss on their federal income tax return in the year the event occurred or in the prior year. Casualty losses are generally deductible in the year the loss occurred. However, if you have a casualty loss from a federally declared disaster, you can choose to treat it as having occurred in the previous year. Deciding to amend your 2018 return could result in a lower tax rate for that year and allow you to receive your refund faster than having to wait to file your taxes for 2019.

    Amount of Casualty Loss

      The lesser of:
        • The fair market value (FMV) of the property immediately before the casualty, minus the
           FMV immediately after the casualty; or
        • The adjusted basis for determining the loss on the sale or disposition of that property.

    However, if business or investment property was totally destroyed, and its FMV immediately before the casualty is less than its adjusted basis, the amount of the loss is equal to the property’s adjusted basis.

    If your property is covered by insurance, you must file a timely insurance claim for any losses. Any insurance or other reimbursements must be considered when calculating your loss.

    Your casualty loss is allowed as an itemized deduction on Schedule A if it exceeds $100 and net total losses exceed 10% of your adjusted gross income.

    If you have a disaster-related loss, or if you have received a late filing or late penalty notice from the IRS that could qualify for abatement under these guidelines, contact a member of our team to help you navigate through these complex rules.