South Louisiana Flooding – Tax Deadlines Extended, Deducting Casualty Losses
31 August 2016
In the wake of damaging storms which caused extensive flooding in South Louisiana beginning August 11th, President Obama signed a declaration of disaster on August 14th. While the initial declaration only covered the parishes of East Baton Rouge, Livingston, St. Helena, and Tangipahoa, by August 17th, the number of parishes whose residents are eligible for relief increased to 20, having added the parishes of Acadia, Ascension, Avoyelles, East Feliciana, Evangeline, Iberia, Iberville, Jefferson Davis, Lafayette, Pointe Coupee, St. Landry, St. Martin, for St. Tammany, Vermilion, Washington, and West Feliciana to the original four.
In addition to providing options for direct fiscal relief, the declaration of disaster provides for the following:
1. Tax Filing, Payment Deadlines Extended
The President’s disaster declaration allows the IRS to postpone filing and payment deadlines for those with residences or businesses within the 20 parishes specified; the agency has done so, as follows (see IRS Notice LA 2016-20):
• Income tax returns for 2015 for individuals (Form 1040), partnerships (Form 1065), corporations (Forms 1120 and 1120S), trusts (Form 1041), exempt organizations (Form 990) for which either appropriate extensions have been filed, or which have a natural due date occurring between August 11, 2016 and January 17, 2017, are automatically extended until January 17, 2017.
• Estimated tax payments which would have fallen due between August 11, 2016 and January 17, 2017, are now payable by January 17, 2017.
• Excise and payroll taxes which would have been payable between August 11, 2016 and January 17, 2017, are now due by January 17, 2017.
Call Rigby Financial Group to be sure you know what filing and payment deadlines you may have to meet.
2. Tax Deductions for Casualty Losses
In the normal course of events, casualty losses are deductible for the tax year in which the loss occurs, subject to the limitation that, in order to be deductible, such losses must exceed 10% of the taxpayer’s adjusted gross income (AGI).
A declaration of disaster by a sitting president changes this, so that a taxpayer suffering casualty losses in 2016 may, if s/he wishes, deduct these losses on his/her 2015 income tax return instead of the 2016 return. However, the factors determining whether this is the best strategy for you are numerous and complex. “Contact us”:\contact to develop a plan tailored to help you make the wisest decisions on how to obtain relief in your unique situation.
We further expect Louisiana’s Congressional Representatives to put forth a bill proposing a waiver of the “10% of AGI” limitation. Enactment of such a bill would by no means be an unprecedented step; however, no bill touching upon this issue is before Congress at present, and we cannot predict whether, if and when presented, such a bill would pass or be defeated.
If you have casualty losses due to the August flooding, we recommend (as does the IRS) that you document your losses:
• If your home or business suffered damage, garner your best evidence of its fair market value immediately prior to the storm and/or flood damage. Such evidence might be a recent, up-to-date appraisal, or documentation of current sales of comparable premises.
• Have appraisal made of the property in its post-damage condition
Call us for help in making sure your loss is properly documented for your maximum benefit.
The above are the most salient, but by no means all, of the possible ways you may be affected by the President’s disaster declaration. We will keep you apprised of any future developments regarding tax issues pertinent to the recent floods as they arise.
Don’t wait until January! Call us to determine your best strategy to minimize losses, and take the best advantage of the assistance available.
The above represents general advice. When it comes to tax planning, one size does not fit all. Rigby Financial Group provides highly individualized, specifically tailored tax plans for individuals and businesses. Please contact us for advice and assistance in creating a specialized plan that suits your unique situation.
The information presented here is not specific to any individual’s personal circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.