Tax Help After Natural Disasters

Tax deadlines are stressful enough in the best of times. When disaster strikes in your region, tax payment and filing deadlines can add additional stress to a situation that is already emotionally and financially draining.

According to the National Centers for Environmental Information, the United States alone has sustained 355 natural disasters since 1980, and overall damages have exceeded $2.54 trillion (Consumer Price Index-adjusted to 2023). At an average of more than eight events per year, it is likely that you or someone in your network has firsthand experience with the aftermath of a natural disaster.

Such disasters encompass many forms, including hurricanes, tornadoes, floods, earthquakes, wildfires, and winter storms. It is definitely possible—especially late in the tax filing season—for a natural disaster to inhibit your ability to access your supporting tax documents or file your tax return in a timely manner. Fortunately, the Internal Revenue Service (IRS) offers tax relief to taxpayers affected by natural disasters.

What Must Happen for You to Qualify for Tax Relief?

Before the IRS can offer any tax relief to taxpayers affected by a natural disaster, the Federal Emergency Management Agency (FEMA) must issue a major disaster declaration as instructed by the president of the United States.

When FEMA identifies an area for its Individual Assistance program, the IRS will authorize tax relief to the same area. The casualty loss deduction, which may allow you to receive an accelerated tax refund, is available only if you live in a federally declared disaster area.

To qualify as an affected taxpayer for tax filing and payment extensions, you do not have to be located in a federally declared disaster area. Affected taxpayers include individuals, business entities or sole proprietorships, and shareholders of an S corporation with tax records located in a FEMA-covered disaster area.

What Forms of Tax Relief Exist?

Several different forms of tax relief may be available to you after a natural disaster. The most common are extensions on the deadlines to file and pay your taxes. You may also qualify for the casualty loss tax deduction. Additionally, the U.S. Small Business Administration (SBA) may offer financial help in the form of disaster loans or grants.

Tax Filing and Payment Extensions

If your address on record with the IRS is in an area that qualifies for disaster tax relief, you will automatically receive extra time to file your tax return and pay any final tax payments.

Casualty Loss Deduction

If you are located in a federally declared disaster area, you may qualify for the casualty loss deduction. This deduction is available to taxpayers who have damaged or lost property as a result of the natural disaster. You can claim it on your current-year or prior-year tax return.

If you claim it on your prior-year return, you will see a refund faster. If you have already filed that return, then you should file a Form 1040-X, Amended U.S. Individual Income Tax Return to amend it.

Disaster Loans and Grants

The SBA may offer financial help to business owners, private nonprofits, homeowners, and renters in a declared disaster area. To qualify, you must have filed all required tax returns. The SBA website offers a search feature to identify currently declared disasters. Disasters can be declared by the president of the United States or the U.S. secretary of agriculture to qualify for assistance.

Natural Disasters That Qualify for Tax Relief

Natural disasters in 2022 that qualified for tax relief and the states impacted include:

• Severe winter storm in New York
• Severe storm and flooding in Illinois
• Hurricane Nicole in multiple states
• Hurricane Ian in North Carolina, South Carolina, and Florida
• Storm and flooding in Alaska
• Hurricane Fiona in Puerto Rico
• Severe storms in Missouri
• Severe storms and flooding in Montana

Natural disasters so far in 2023 that qualify for tax relief and the states impacted include:

• Severe winter storms, straight-line winds, flooding, landslides, and mudslides in California
• Severe storms, flooding, and tornadoes in Florida
• Severe storms, straight-line winds, and tornadoes in Oklahoma and Tennessee
• Severe winter storm in New York

The IRS website has a disaster assistance page where victims of recent natural disasters can find details about the types of tax help available to them. You can easily search all disaster-related tax relief offered in the last five years.

Other Relevant Tax Items Post-Natural Disaster

You may need to obtain a tax transcript to support your disaster claims. You can get one by using the Get Transcript Online tool on the IRS website, calling the IRS at (800) 908-9946, or filling out IRS Form 4506-T, Request for Transcript of Tax Return.

If you need to relocate as a result of the natural disaster, be sure to update your address with the IRS. One way to do that is to file Form 8822, Change of Address. Alternatively, you can send a written statement or update the IRS verbally over the telephone. Be aware that if you use the phone, you will need to have certain identifying information on hand:

• Full name
• New address
• Old address
• Date of birth
• Social Security number

The Bottom Line

If the IRS qualifies the area where you—or your tax professional—are located, you may qualify for tax relief. Extension of the deadlines to file and pay your taxes generally comes automatically. You may also be eligible for the casualty loss tax deduction, if you suffered losses, or for disaster loans or grants from the SBA.

Be sure to acquire the necessary papers, such as a tax transcript or change of address form. Check the IRS website for information on available tax help and whether the natural disaster you have experienced is on its list.