DEADLINE FOR DISASTER FILINGS TAX FILING DEADLINES

DEADLINE FOR DISASTER FILINGS TAX FILING DEADLINES

People who experienced a Federal Disaster during the year have an important deadline to remember. By April 15 of next yar the Tax Code provides an option for those who experience a disaster and determine that they have incurred a loss as a result of the disaster.

The law allows people who have experienced a physical catastrophic event during the year that has been declared a Federal Disaster Area and who have a deductible loss may take the loss deduction on the tax return for the year of the loss or they may actually claim the loss in the tax year preceding the year it actual occurred (as if the loss actually occurred in the preceding year).

For current year disasters to deduct the loss on the prior year’s return, that return must be filed no later than April 15 of the year following the year of the loss.

For 2011 losses that are declared Federal Disasters, that means that the loss can be claimed on either the 2011 tax return that would be filed in the normal manner or it can be claim on a tax return for 2010. For losses that occur near the end of the year that does not give taxpayers a lot of time to make that decision and evaluate the information and make rational tax decisions. There are no extensions for this decision.

For losses incurred in 2011, hopefully the insurance proceeds will be sufficient to get the insured people back to their pre-event status without having to claim any losses on a tax return. Often there is no insurance or the insurance is not adequate to cover the loss. The insurance settlement process affects the ability to claim a loss. There may not be a tax loss that can be claimed. The facts must be assembled and analyzed in time to make and implement a decision before April 15 of the following year. The tax advice and analysis process should be started immediately. This could result in accelerating tax financial assistance.

In any case, the decision should be under the control of the taxpayer and not simply the result of the passage of time that closes doors of opportunity.