DISASTER TAX RELIEF
When a disaster strikes, taxes are not your first concern. But as
the post-event realities hit you, the realization comes into your list of
things that must be deal with:
There will be income tax reporting consequences of the event.
Depending on financial recovery possibilities such as insurance and
other sources of compensation you may have:
A tax deductible casualty
loss or
The event may have
turned into what the Tax Code calls an Involuntary Conversion because the
insurance proceeds exceed the “cost basis” of the property damaged or destroyed.
In either case this blog is dedicated to providing taxpayers and
tax professionals with assistance in the process of recovery with information
on complying with their income tax reporting responsibilities that arise out of
these tragic situations.
One of the most difficult and yet the most basic aspect of the tax
consequences of dealing with the tax responsibilities arising out of a disaster
is this simple concept:
Unlike most income tax laws, the Tax Code sections applicable to
disasters are structured to assist taxpayers in their recovery process.
This concept is often difficult to grasp as it is opposite from
what we know as the Tax Code’s basic reason to exist,
Generating revenue to run the
government.
But It is true in these cases. The Code is structured to get
taxpayers back to their pre-loss condition as well as the Code can accomplish
that. Another way to look at it is that the Code is structured to get out of
way of the recovery. The Tax Code is not structured to be a replacement for
insurance. But to the extent that the Tax Code would otherwise add to the
taxpayer’s difficulties without these Code sections, it has been written to
remove those impacts. The only thing that the Code requires is following the
rules set forth to take advantage of the beneficial Code sections.
HOW THIS BLOG HELPS
IN THE PROCESS
Specific issues are discussed in this blog as a result of
situations that I have dealt with on clients for over twenty years. Some of the
most interesting situations that I have been able to work on is “fixing”
mistakes made by other tax professional. Other issues come to light from search
questions and comments left by readers of this blog. In the tabs under the PROCESS OF RECOVERY tab there is a
step-by-step discussion of the major aspects of the income tax recovery
process.
As a tax professional who has dedicated years to this area of
practice I am available to assist individual taxpayers in the process of
recovery as well as assisting other tax professionals as they work to catch up
with the needs of their clients who are recovering from a disaster.
Most people who are “forced” to deal with a disaster have no prior
experience in the process; that includes their tax professionals. But the dollar
amounts that are involved can be some of the biggest amounts taxpayers will see
reported on their returns. As a taxpayer who is dealing with this process you
deserve an outcome that you can rely on and sleep soundly at night.
I am also available to speak to groups of people who have recently
experienced a disaster as I have done after several disaster events over the
past twenty years.
As someone who has actually experienced a major loss first hand,
watching a family home of eighteen years turned into an insurance claim, I
understand what you are going through.
Does the IRS always follow the Tax Code? They are supposed to.
Congress passed the various sections of the Code and Presidents signed them
into law. That has happened over a period of 100 years. Numerous members of
Congress have had their shot at tinkering with the Tax Code. Problems do arise.
Sometimes (maybe too often) the Code is not written as clear as it should be.
In some instances the IRS simply makes mistakes.
Testimony to the possibility of disagreement is the long list of
tax returns that end up in a federal courtroom. Taxpayers don’t always loose in
court, they don’t always win. The best protection is having the return prepared
by a tax professional who understands the technical details of your situation
and what needs to be included in the presentation of your facts in a tax
return.
This blog,
“AccountantForDisasterRecovery.com” has been addressing taxpayer income tax
issues related to catastrophic losses for five years
All rights to reproduce or quote
any part of the chapter in any other publication are reserved by the author.
Republication rights limited by the publisher of the book in which this chapter
appears also apply.
JOHN
TRAPANI
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Certified
Public Accountant
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2975
E. Hillcrest Drive #403
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Thousand
Oaks, CA 91362
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(805)
497-4411
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Contact us through our website at:
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Blog:
www.AccountantForDisasteRrecovery.com
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It All Adds Up For You
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This material was contributed by John
Trapani. A Certified Public Accountant who has assisted taxpayers since 1976 in
analyzing and reporting transactions of the type covered in this material.
Internal Revenue Service Circular 230 Disclosure
This
is a general discussion of tax law. The application of the law to specific
facts may involve aspects that are not identical to the situations presented in
this material. Relying on this material does not qualify as tax advice for
purpose of mounting a defense of a tax position with the taxing authorities
The
analysis of the tax consequences of any event is based on tax laws in effect at
the time of the event.
This
material was completed on the date of the posting
© 2013, John Trapani, CPA,
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