But, what about loss of income, expenses, and/or property damage which insurers consider “not covered?”
Business owners had to determine how and whether to pay team members unable to work during evacuations. Many team members had children to supervise during their week-long (in many cases) absence from home. Many also had to deal with their own damages and insurance claims. For some businesses, the city-wide power outage curtailed employees’ access to servers. Many businesses faced some team members being fully able to work, while others could not work at all.
We strongly recommend that businesses have a written policy in place, as part of their Policies & Procedures, to alleviate employees’ concerns during catastrophic events. There are many compensation models in use to address this; some businesses may pay a blanket of one week (5 business days), others may require employees to make use of their allocated paid time off. Which model is the best fit for you, your business, and your team, depends on your unique circumstances.
However, your team’s salaries and/or wages remain tax deductible, just as they are when there’s no catastrophic event involved. This is true no matter what type of business tax return you file. The employer’s share of payroll taxes also represents a tax deduction.
Business owners may also have to deal with insurance reimbursements insufficient to cover loss of income and/or all necessary repairs to hurricane-damaged property. Even if you are well-covered, there’s always the deductible, which decreases your reimbursement. If the deductible is high, though, never fear – unreimbursed damages to business property are also tax deductible on your business income tax return.
You can elect to deduct Hurricane Ida-related unreimbursed losses on either an amended 2020 or your 2021 business tax return. Make this a deeply-informed decision, based on your business’ circumstances, financial status, and 2021 projections. Consult with your CPA – we cannot recommend this step too strongly. S/he is well-versed in the ins and outs of your business, and can help guide you toward your best option. Whether you are amending a 2020 return or claiming your losses on your 2021 return, make sure to reference the FEMA-assigned disaster declaration number for Hurricane Ida on your tax return – for Louisiana, this is 4611.
Document your losses, with photos and/or video of all physical property damage, as well as a narrative or chronology of damages and other losses.
Retain receipts for all repairs you make, whether they are reimbursed or not. These should be considered part of your business records.
Yet again, I recommend strongly that you consult with us before making any tax or financial decisions in Ida’s wake. My direct line is 504-586-3051.
Getting the right decisions implemented effectively is far better than getting something done immediately, which may in hindsight prove to have been less than an optimal decision.
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Until next time –