Tax Relief for Hurricane Rita Victims
GO Zone Act - Rita and Wilma
Tax Relief for Hurricane Katrina Victims
GO Zone Act - Katrina
Tax Relief for Hurricane Wilma Victims
Tax Relief for Hurricane Rita Victims
IRS extends filing time for Hurricane Rita victims.
In response to Rita, the IRS has announced tax relief for individuals
affected by the hurricane. Taxpayers in the core disaster areas now have
until Feb. 28, 2006, to file all tax returns, pay taxes, and make any
deposits due. Any interest, late-filing or late-paying fees or deposit
penalties are waived if the original or extended deadline falls on or
after Sept. 23, 2005.
Taxpayers in covered disaster areas have been granted the same extension
for filing income tax returns, tax payments and estimated taxes. This
relief does not apply to information returns, or employment or excise
tax deposits. However, penalties and interest might be waived for a reasonable
cause. This relief includes the second filing extension to October 17
for individual taxpayers, the October 31 deadline for filing quarterly
employment and excise tax returns, and employment and excise deposits
due on or before Feb. 28, 2006. Other time-sensitive acts, such as filing
Form 5500, are extended to Feb. 28, 2006 as well.
Disaster Area Locations - Rita Victims
Core Disaster Areas. The hardest-hit areas are considered to be core
disaster areas. Taxpayers in these Texas counties and Louisiana parishes do not need to note anything on their tax returns to receive the extensions and other relief. It will be automatically applied.
Nine Texas Counties: Chambers, Galveston, Hardin, Jasper, Jefferson, Liberty, Newton, Orange and Tyler
23 Louisiana Parishes: Acadia, Allen, Ascension, Beauregard, Calcasieu, Cameron, Evangeline, Iberia, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Plaquemines, Sabine, St. Landry, St. Martin, St. Mary, St. Tammany, Terrebonne, Vermilion, Vernon and West Baton RougeCovered Disaster Areas. All other areas of Texas and Louisiana are considered covered disaster areas and qualify for tax relief. Taxpayers needing to claim relief in the covered disaster areas should identify themselves by marking "Hurricane Rita" in red ink at the top of their tax forms (except for Form 5500, where filers should check Box D in Part 1 and attach a statement).
Disaster Area Maps
The IRS has published disaster area maps outlining covered and core disaster areas for both Hurricanes Katrina and Rita. See where each level of assistance falls in the affected states.
See which level of tax relief you may qualify to receive.
Depending on where you live and how hard your home or business was hit
by Hurricanes Katrina or Rita, you could qualify for more tax relief.
Taxpayers outside of the core disaster area, but still in the covered
disaster area, may be ineligible for certain forms of tax relief, or eligible
for tax relief only if certain conditions are met. The Federal Emergency
Management Agency (FEMA) has declared three different levels of assistance
according to the type of disaster area.
Level One - Individual Assistance - Otherwise known as the "core disaster area," this level of assistance qualifies for the most tax relief. Aid in this area goes toward individuals and households.
Level Two - Public Assistance - Aid in this area will go to public and some non-profit companies and toward replacement of damaged public facilities. Public assistance areas make up the rest of the "covered disaster areas." Individuals and businesses in these areas usually qualify for some tax relief.
Level Three - Hazard Mitigation Assistance - In these areas, FEMA works toward reducing future loss to public and private property. This is not a part of the covered disaster area and is not eligible for tax relief.
Other Relief Information:
The IRS will waive fees and expedite requests for copies of tax returns
(Form 4506) or requests for transcripts (Form 4506-T).
The IRS has suspended compliance activities in affected areas until Feb.
28, 2006.
If you receive IRS notices during this time, call the IRS toll-free disaster
hotline at 1-866-562-5227 for help.
Casualty loss reminder. Affected taxpayers may claim a casualty loss on their current- or prior-year returns. See IRS Publication 547 for details.
GO Zone Act of 2005 - Hurricanes Rita and Wilma
Provisions
See how the GO Zone Act of 2005 affects your taxes.
Earned Income Tax Credit (EITC) and Additional Child Tax Credit
If you are a low-income family in the Rita or Wilma disaster area, you
may elect to use your 2004 earned income to calculate your 2005 additional
child tax credit and earned income tax credit. To qualify, your 2005 earned
income must be less than your 2004 earned income.
Retirement Plan Provisions
The following Katrina-relief pension provisions have been extended to
Hurricanes Rita and Wilma victims:
- Penalty-free distributions for withdrawals after the date of the respective hurricane and before 2007.
- Taxable distributions may be spread over three years.
- Repayment of outstanding loan amounts may be delayed up to one year.
- 100 percent of the pension plan balance up to $100,000 may be taken as a loan.
- Qualified distributions for home purchases made after Feb. 28, 2005 and before Sept. 24, 2005 for Rita victims or Oct. 24, 2005 for Wilma victims may be re-contributed on or before Feb. 28, 2006. The re-contribution is treated as a rollover.
- To be eligible, you must have had a principal residence in the Rita or Wilma disaster area and suffered economic loss due to the hurricane.
Casualty Losses
The $100 floor and 10 percent of adjusted gross income limitation do not
apply to personal casualty losses related to Hurricanes Rita and Wilma.
Taxpayer and Dependency Status
The IRS has the authority to adjust rules so displaced individuals will
not lose earned income tax credit and other tax benefits.
Bonus Depreciation
Bonus depreciation was not extended for Rita and Wilma victims. However,
the IRS has authority to allow prior-law bonus depreciation for property
that was manufactured or placed in service in the Rita or Wilma GO zones
when the ability to meet the Dec. 31, 2005 deadline was not met due to
the hurricane. Keep in mind that the extension cannot go past Dec. 31,
2006.
Tax Relief for Hurricane Katrina Victims
The IRS has announced expansion in its tax relief offerings for Hurricane
Katrina victims.
For those taxpayers affected by the catastrophic damage of Katrina, there
is a little relief in sight - tax relief that is. Taxpayers, including
relief workers, in affected areas will have until Feb. 28, 2006, to file
tax returns and submit tax payments. In addition, the IRS will waive any
late filing or late payment penalties that would otherwise apply. This
relief includes the September 15 due date for estimated taxes and for
calendar-year corporate returns with automatic extensions, individuals
who received a second extension to October 17, and October 31 quarterly
employment and excise tax returns. Taxpayers submitting such forms should
mark, in red, "Hurricane Katrina, August 2005" at the top of
their tax forms. Other details:
Disaster Area Locations - Katrina Victims
Core Disaster Areas. The hardest-hit areas are considered to be core disaster areas. Taxpayers in these areas do not need to note anything on their tax returns to receive the extensions and other relief. It will be automatically applied.
10 Alabama Counties: Baldwin, Choctaw, Clarke, Greene, Hale, Mobile, Pickens, Sumter, Tuscaloosa and Washington
31 Louisiana Parishes: Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Pointe Coupee, Plaquemines, St. Bernard, St. Charles, St. Helena, St. James, St. John, St. Mary, St. Martin, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge and West Feliciana
47 Mississippi Counties: Adams, Amite, Attala, Claiborne, Choctow, Clarke, Copiah, Covington, Franklin, Forrest, George, Greene, Hancock, Harrison, Hinds, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston and YazooCovered Disaster Areas. The following areas are considered covered disaster areas and qualify for tax relief. Taxpayers needing to claim relief in the covered disaster areas should identify themselves by marking "Hurricane Katrina" in red ink at the top of their tax forms (except for Form 5500, where filers should check Box D in Part 1 and attach a statement).
12 Alabama Counties: Bibb, Colbert, Cullman, Jefferson, Lamar, Lauderdale, Marengo, Marion, Monroe, Perry, Wilcox and Winston
33 Louisiana Parishes: Allen, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Caldwell, Catahoula, Claiborne, Concordia, Desoto, East Carroll, Evangeline, Franklin, Grant, Jackson, LaSalle, Lincoln, Madison, Morehouse, Natchitoches, Ouachita, Rapides, Red River, Richland, Sabine, St. Landry, Tensas, Union, Vernon, Webster, West Carroll and Winn 35 Mississippi Counties: Alcorn, Benton, Bolivar, Calhoun, Carroll, Chickasaw, Clay, Coahoma, DeSoto, Grenada, Holmes, Humphreys, Issaquena, Itawamba, Lafayette, Leflore, Lee, Marshall, Monroe, Montgomery, Panola, Pontotoc, Prentiss, Quitman, Sharkey, Sunflower, Tallahatchie, Tate, Tippah, Tishomingo, Tunica, Union, Washington, Webster and Yalobusha 11 Florida Counties: Monroe, Broward, Miami-Dade, Bay, Collier, Escambia, Franklin, Gulf, Okaloosa, Santa Rosa and WaltonNote: Regions of the disaster area that were hit harder than others may qualify for more tax relief. Learn more about the different levels of disaster areas and how they affect your tax relief.
Affected Taxpayers - Hurricane Katrina
Individuals who live in the area, businesses located in the area, tax
records located in the area and relief workers.
Alabama
Florida
Louisiana
Mississippi
Other Relief Information:
- The IRS will waive fees and expedite requests for copies of tax returns (Form 4506) or requests for transcripts (Form 4506-T).
- The IRS has suspended compliance activities in designated areas for 60 days. If you receive IRS notices during this time, call the IRS toll-free disaster hotline at 1-866-562-5227 for help.
- The IRS implemented a dyed diesel fuel penalty waiver for fuel purchased for highway use in light of the hurricane causing a shortage in clear diesel fuel. This penalty relief period ends Oct. 25. Please note that any dyed diesel fuel held by retailers on Oct. 25 can be used on the highway after that date, but is subject to a tax of 24.4 cents per gallon. Also, dyed fuel received after Oct. 25 may be sold for non-exempt highway use without penalty if the dye is added only at the refinery to meet Environmental Protection Agency (EPA) standards instead of the terminal to meet IRS standards. This is only to the extent permitted by EPA rules.
- The deadline for minimum funding contributions by employee benefit plans has been extended to October 31.
- Low-income housing restrictions for housing provided to victims have been waived.
- For participating employers, employees may forgo vacation, sick or personal leave in exchange for cash payments to qualified charities providing relief to Hurricane Katrina victims through 2006. Employees may deduct the donation and employees do not have to include the cash payments in income.
- Retirement plans may make loans and hardship distributions to affected employees.
Casualty loss reminder. Affected taxpayers may claim a casualty loss on their current- or prior-year returns. See IRS Publication 547 for details.
GO Zone Act of 2005 - Katrina Core Disaster Area
Provisions
Were you or your business affected by Hurricane Katrina? See which tax
advantages you're qualified to receive.
Hope and Lifetime Learning Credits
Hope and Lifetime Learning credits are doubled for eligible students in
the GO Zone through the end of 2006. You are considered an eligible student
if you are enrolled and paying tuition. The Hope credit is equal to 100
percent of the first $2,000 and 50 percent for the second $2,000 for a
maximum credit of $3,000. The Lifetime Learning credit is equal to 40
percent of the first $10,000 of expenses. Plus, the definition of qualified
education expenses is expanded to include room and board. The expanded
credit applies to tax years beginning in 2005 and 2006.
Bonus Depreciation
Fifty percent bonus depreciation may be elected for GO Zone property1
placed in service and substantially used in the GO Zone through 2007 (2008
for residential and nonresidential real property). Eligible property includes
nonresidential real property, residential rental property, and personal
property used in an active trade or business that is eligible for MACRS
depreciation. The property must be new and you had to acquire it on or
after Aug. 28, 2005. Recapture rules apply to property that does not qualify
as GO Zone property.1
If you acquired any portion of the property with tax-exempt bond financing,
it does not qualify. Bonus depreciation is allowed for AMT.
Please note: Bonus depreciation does not apply to qualified
revitalization buildings for which your elect one-half of any qualified
revitalization expenditures chargeable to capital account (IRC section
1400I(a)(1)), or to amortize 100 percent of such expenditures over 120
months (IRC section 1400I(a)(2)). A "qualified revitalization building"
generally means any building (and its structural components) that you
have placed in service or rehabilitated in a renewal community for which
the building's original use begins with you.
Section 179
An increased section 179 deduction applies to eligible GO Zone property1
established in the GO Zone after Aug. 27, 2005 and before Jan. 1, 2008.
Up to $200,000 of eligible property may be expensed. The phase-out threshold
starts at $1 million of property placed in service. Recapture applies
if the property ceases to be qualified as section 179 GO Zone property.1
Employee Retention Credit
The KETRA Employee Retention Credit has been modified to allow the credit
to be claimed without regard to the size of the employer. Prior to the
amendment, only businesses with an average of 200 or fewer employees could
claim the credit. Keep in mind that the period for qualifying for the
credit was not changed.
NOL Carryback
Net operating losses (NOLs) attributable to investment in the GO Zone
may be carried back five years (10 years in the case of certain public
utility property). An eligible NOL is limited to the lesser of:
- The NOL incurred for the year minus any NOL eligible for 10-year carryback, or
- The amount of your GO Zone net operating loss, which includes:
- The GO Zone casualty loss deduction, which does not include any losses related to excluded business activities.1 Also, a GO Zone casualty loss means an uncompensated section 1231 loss (property used in business) due to Hurricane Katrina.
- Eligible moving expense deduction. Eligible moving expenses are those incurred if you had to move from your principal residence that was in the GO Zone before Aug. 28, 2005, and if your principal place of employment after the hurricane is in the GO Zone.
- The deduction for temporary housing expenses paid after Aug. 27, 2005 and before Jan. 1, 2008 to temporarily house any employee whose principal place of employment is in the GO Zone.
- Deductions for depreciation or amortization of qualified GO Zone property1 regardless of the date placed in service
- Any repair expense deduction, including debris removal, related to Hurricane Katrina damage to a property located in the GO Zone. These expenses must be paid after Aug. 27, 2005, and before Jan. 1, 2008.
The carryback or carryover of a qualified NOL amount is not subject to
the 90 percent AMT NOL limitation.
Please Note: An election to forego the five-year carryback
is irrevocable.
Demolition and Clean Up Costs
For business or income-producing property located in the GO Zone, up to
50 percent of clean-up costs incurred on or after Aug. 28, 2005 and before
Jan. 1, 2008 are deductible. Qualified expenses include demolition of
and debris removal from real property if you hold it as a capital asset
in a trade, business or for investment. The deduction for environmental
remediation costs under IRC section 198 is extended for GO Zone expenses
through 2007.
Timber Incentives
The reforestation expense allowance has increased from $10,000 to $20,000
for qualified small timber activities. Eligible expenses must be incurred
after the respective hurricane and before Jan. 1, 2008. NOLs incurred
in the timber activity after the date of the hurricane and before 2007
may be carried back five years.
The timber owner must have owned timber property located in the Katrina,
Rita, or Wilma GO Zones on the respective hurricane dates. Small timber
activity qualifies if you own 500 acres or less of timber property at
any time during the year. Relatives are treated as one taxpayer.
Temporary Housing
Individuals, who resided in and were employed by a qualified employer
in the GO Zone on Aug. 28, 2005, and who continue to be employed in the
GO Zone, may exclude from taxable income up to $600 of employer-provided
housing per month. Employer-provided housing that would otherwise be taxable
is subject to employment taxes even though it is excluded from income
tax under this provision.
Employers may claim a 30 percent credit on the excluded amount.
New Market Tax Credit (NMTC)
The IRC section 45D new markets credit has expanded to include qualified
community development entities (CDEs) in the GO Zone. A qualified CDE
must have the recovery and redevelopment of the GO Zone as a significant
purpose. The NMTC provides a credit of up to 39 percent over seven years.
Tax Relief for Hurricane Wilma Victims
IRS releases filing extension for Hurricane Wilma victims.
Tax deadlines for those affected by Hurricane Wilma have now been extended.
Affected taxpayers now have until Feb. 28, 2006 to file returns, pay taxes
and perform other time-sensitive acts, such as filing Form 5550. This
extension applies to most tax returns or payments with an original or
extended due date falling on or after Oct. 23, 2005. The new Feb. 28,
2006 deadline includes the Oct. 31 deadline for filing quarterly employment
and excise tax returns, the Dec. 15 deadline for corporate estimated tax
payments, and the Jan. 15 due date for individual estimated tax payments.
Please note: the relief does not apply to information
returns or employment or excise tax deposits. However, penalties and interest
may be waived for reasonable cause. The IRS will remove penalties for
failure to make timely employment and excise tax deposits due before Nov.
4, 2005, as long as deposits are made by that date.
Disaster Area Locations
Core Disaster Areas. The hardest-hit areas are considered to be core disaster areas. Taxpayers in these Florida counties do not need to note anything on their tax returns to receive the extensions and other relief. Unless you are not using the address located in the core disaster area, it will be automatically applied.
Three Florida Counties: Collier, Lee and MonroeCovered Disaster Areas. The other 17 counties affected by Hurricane Wilma are considered covered disaster areas and qualify for tax relief. Taxpayers needing to claim relief in the covered disaster areas should identify themselves by marking "Hurricane Wilma" in red ink at the top of their tax forms (except for Form 5500, where filers should check Box D in Part 1 and attach a statement).
17 Florida Counties: Brevard, Broward, Charlotte, DeSoto, Glades, Hardee, Hendry, Highlands, Indian River, Martin, Miami-Dade, Okeechobee, Osceola, Palm Beach, Polk, St. Lucie, and Sarasota Learn more about the different levels of disaster areas and how they affect your tax relief.
Affected Taxpayers
Qualified taxpayers include those living in the disaster areas, those
outside the disaster areas whose tax records are located in the areas,
businesses located in the disaster area, and relief workers. Individuals
visiting the disaster areas that were killed or injured due to the hurricane
also qualify for relief.
Other Relief Information:
- The IRS will waive fees and expedite requests for copies of tax returns (Form 4506) or requests for transcripts (Form 4506-T).
- The IRS has suspended compliance activities in affected areas until Feb. 28, 2006. Suspension of compliance activities is automatic for affected taxpayers in the core disaster area and as requested outside the core area. If you receive IRS notices during this time, call the IRS toll-free disaster hotline at 1-866-562-5227 for help.
- The dyed diesel fuel penalty waiver is extended to Nov. 10, 2005. (The penalty was previously extended to Oct. 25, 2005 because of Hurricane Katrina.)
Casualty loss reminder. Affected taxpayers may claim a casualty loss on their current- or prior-year returns. See IRS Publication 547 for details.