March
25, 2014, the IRS Issued Special Relief to Colorado Taxpayers Who Experienced
the September 2013 Floods
It is important to note that
while Colorado residents experienced several federally declared disasters in
2013, the Notice that the IRS issued today only affects those taxpayers who
were affected by the September floods. None of the other disasters are covered
by this announcement.
In the February 11-13th meetings that I
spoke at in Color1ado, I stated that there were no extensions on the filing
date of April 15, 2014 for amended returns to claim the 2013 loss on a 2012
return. Extensions are granted on an individual basis. The IRS is using a
special Code Section 7508A that allows the Secretary of the Treasury to invoke
delays in filing deadlines. That is what is being done in this Notice.
BE CAREFUL!!!
THIS DEADLINE DELAY FOR FILING AN AMENDED RETURN FOR 2012 TO
CLAIM THE 2013 LOSS DOES NOT CHANGE THE FACT THAT A RETURN FOR 2013 IS STILL
DUE AND THAT RETURN MAY BE EXTENDED BY FILING AN AUTOMATIC EXTENSION
APPLICATION FOR 2013.
ADDITIONALLY, AS I ALWAYS CAUTION "DON'T RUSH TO
DEDUCT! AND PLEASE READ THE POST BY THAT TITLE.
Additional
Help for Taxpayers Recovering From a Catastrophic Loss
An organization with over twenty years
experience assisting people who experience catastrophic event, United
Policyholders (UP) offers many useful programs. If you need additional
assistance and have not seen the UP website, here is a link:
For a general link to the UP website
use this link: http://www.uphelp.org/
Here is the complete post from the IRS
website:
IRS
Gives Colorado Flood Victims More Time To Decide When To Claim Losses
IR-2014-35, March 25, 2014
WASHINGTON — The Internal Revenue
Service today provided taxpayers an extension until Oct. 15, 2014, to decide
when to claim disaster losses arising from last September’s
flooding.
The extension means that eligible
individuals and businesses will now have until Oct. 15 to decide whether to
claim these losses on either their 2012 or 2013 returns. Without this
extension, these taxpayers would have had to make this choice by the original
due date for the 2013 return, usually April 15.
Depending upon various income factors,
claiming losses on a 2012 return versus a 2013 return could result in greater
tax savings for some taxpayers. The extra time is available, regardless of
whether a taxpayer requests a tax-filing extension for either year.
Eligible taxpayers are those who
suffered uninsured or unreimbursed losses resulting from severe storms, flooding,
landslides and mudslides in the 20 federally-designated disaster area counties
from Sept. 11 to Sept. 30, 2013. The disaster area counties are Adams,
Arapahoe, Boulder, Broomfield, Clear Creek, Crowley, Denver, El Paso, Fremont,
Gilpin, Jefferson, Lake, Larimer, Lincoln, Logan, Morgan, Pueblo, Sedgwick,
Washington and Weld.
Though taxpayers who miss the new Oct.
15 cut-off will lose the option of claiming their losses for 2012, they will
still be able to claim them on an original or amended 2013 return. Further
details are in Notice 2014-20, posted today on IRS.gov and also
scheduled to be in Internal Revenue Bulletin 2014-15, dated April 7, 2014.
Below is the full text of Notice
2014-20.
The underlined and bolded text have
been added by John Trapani, CPA.
Postponement of Deadline for Making an Election to Deduct
for the Preceding Taxable Year Losses Attributable to Colorado Severe Storms,
Flooding, Landslides, and Mudslides
Notice
2014-20
PURPOSE
This Notice postpones until October 15,
2014, the deadline to make an election under § 165(i) of the Internal Revenue
Code to deduct in the preceding taxable year losses attributable to damage from
severe storms, flooding, landslides, and mudslides sustained in a federally declared
disaster area in Colorado. This postponement is granted under
§ 7508A.
BACKGROUND
From September 11 through September 30, 2013, severe storms,
flooding, landslides, and mudslides in Colorado (Colorado major flooding event)
caused significant damage. The President of the United States issued
major disaster and emergency declarations under the authority of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. §§ 5121-5206
(Stafford Act), for certain areas in Colorado. The Federal Emergency
Management Agency (FEMA) determined certain areas within Colorado to be
eligible for Public Assistance or Public Assistance and Individual Assistance
under the Stafford Act.
Section 165(i) provides that if a taxpayer sustains a loss
attributable to a federally declared disaster occurring in a disaster area, the
taxpayer may elect to deduct that loss on the taxpayer's return for the taxable
year immediately preceding the taxable year in which the disaster
occurred. For purposes of § 165(i), a federally declared disaster is a
disaster determined by the President to warrant assistance by the Federal
Government under the Stafford Act (including a disaster for which the President
issues a major disaster declaration or an emergency declaration), and a
disaster area is the area so determined to be eligible for such
assistance. See § 165(h)(3)(C) and 42 U.S.C. § 5122.
Section 1.165-11(e) of the Income Tax Regulations requires a
taxpayer to make the § 165(i) election by filing a return, an amended return,
or a refund claim on or before the later of: (1) the due date of the
taxpayer's income tax return (determined without regard to any extension of
time for filing the return) for the taxable year in which the disaster actually
occurred; or (2) the due date of the taxpayer's income tax return (determined
with regard to any extension of time for filing the return) for the immediately
preceding taxable year. Section 1.165-11(e) provides that the return or
claim should specify the date or dates of the disaster that gave rise to the
loss, and the city, town, county, and State in which the property that was
damaged or destroyed was located at the time of the disaster. In general,
the election is irrevocable 90 days after the taxpayer makes the election.
Section 7508A provides the Secretary of the Treasury with
authority to postpone the time for performing certain acts under the internal
revenue laws for up to one year for a taxpayer affected by a federally declared
disaster. Section 301.7508A-1(c)(1) of the Regulations on Procedure and
Administration lists several specific acts performed by taxpayers for which §
7508A relief may apply, and § 301.7508A-1(c)(1)(vii) authorizes the IRS and
Treasury Department to specify additional acts. Section 301.7508A-1(d)(1)
describes several types of affected taxpayers eligible for relief under §
7508A. Section 301.7508A-1(d)(1)(ix) authorizes the IRS to determine that
any other person is affected by a federally declared disaster and therefore
eligible for relief. Under § 301.7508A-1(d)(2), the area of a federally
declared disaster for which the IRS has determined that the postponement of one
or more deadlines applies is referred to as a covered disaster area.
AFFECTED
TAXPAYERS FOR WHICH THE SECTION 165(i) DEADLINE IS POSTPONED
Under the authority of § 7508A and §§ 301.7508A-1(c)(1)(vii)
and 301.7508A-1(d)(1)(ix), the IRS has determined that the areas that FEMA has
determined to be eligible for Public Assistance or Public Assistance and
Individual Assistance pursuant to the major disaster and emergency declarations
issued in response to the Colorado major flooding event are covered disaster
areas. A list of those areas is available at the Federal Emergency
Management Agency (FEMA) website at www.fema.gov/disaster.
Under the authority of § 301.7508A-1(d)(1)(ix), a taxpayer
is an affected taxpayer to which the postponement of the deadline for making
the § 165(i) election applies if: (1) the taxpayer sustained a loss
attributable to the Colorado major flooding event; (2) the loss occurred in a
covered disaster area for the Colorado major flooding event (regardless
of whether the taxpayer’s principal residence or principal place of business is
in one of the covered disaster areas); and (3) the deadline for the taxpayer to
make a § 165(i) election for that loss, but for this notice, would be before
October 15, 2014.
Affected taxpayers for purposes of this notice are not
affected taxpayers for purposes of other relief provided by the IRS unless the
taxpayer separately qualifies as an affected taxpayer under other guidance
issued by the IRS.
GRANT
OF RELIEF
Under the authority of § 7508A, the IRS grants affected
taxpayers, as defined above, a postponement to October 15, 2014, to make an
election under § 165(i) for losses attributable to the Colorado major flooding
event.
To assist the IRS in identifying affected taxpayers to
ensure that they receive this postponement of the deadline to make the § 165(i)
election, affected taxpayers should include a reference to this notice, Notice
2014-20, with their return, amended return, or refund claim on which they are
making a postponed § 165(i) election pursuant to this notice. The return
or claim should also include the other information requested in § 1.165-11(e).
This notice is limited to making an election under § 165(i)
and does not affect the application of any other section of the Code or the
regulations.
DRAFTING
INFORMATION
The principal author of this notice is Daniel A.
Cassano of the Office of Associate
Chief Counsel (Income Tax & Accounting). For further information regarding this
notice contact Mr. Cassano on (202)
317-7011
(202) 317-7011 (not a toll-free call).
(202) 317-7011 (not a toll-free call).
JOHN TRAPANI assists both
taxpayers directly and advises taxpayers’ tax professionals.
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.
© 2014, John Trapani, CPA,
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 E-mail John@TrapaniCPA.com
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Website: www.TrapaniCPA.com
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Blog:
www.AccountantForDisasteRrecovery.com
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It All Adds Up For You
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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
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