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.
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
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.
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.
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).
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.
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(805) 497-4411 E-mail John@TrapaniCPA.com
It All Adds Up For You
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