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Sandy victims get special IRS treatment

By Kay Bell ·
Tuesday, November 6, 2012
Posted: 1 pm ET

Attention Superstorm Sandy victims: The Internal Revenue Service is offering you special tax consideration when it comes to impending federal tax deadlines and money you might get to help you recover.

Since the IRS is all about collection, let's look first at its decision to keep its hands off some storm-related money.

The IRS says that anyone in a Supserstorm Sandy-designated relief area who gets qualified disaster relief payments from their employers or any other source doesn't have to count that money as taxable income.

Qualified disaster relief payments, according to the IRS, are amounts paid:

  • To or for the benefit of a person in order to pay reasonable and necessary personal, family, living or funeral expenses incurred as a result of a qualified disaster.
  • To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation or replacement is attributable to a qualified disaster.

In both cases, these qualified disaster relief payments must cover expenses that are not otherwise taken care of by insurance or some other resource. Basically, it's survival money that the person cannot otherwise get. And it's only right that the IRS says such hardship funds aren't taxable.

In addition, the IRS announced that the designation of Supserstorm Sandy as a qualified disaster means that employer-sponsored private foundations may provide disaster relief to their employees who are victims without any adverse effects to the nonprofits' tax-exempt status.

Deadline extensions

Now to the deadlines that the IRS usually is so strict about enforcing.

The tax agency originally announced that folks who were facing end-of-October tax deadlines -- this primarily was businesses that had to get in federal payroll and excise tax payments -- would have until Nov. 7 to do that.

Then the IRS took a long hard look at the damage and decided folks who are still without power -- or in many cases, a place to live -- needed more time to meet their tax obligations.

So late last week, the IRS announced that is postponing further a various tax filing and payment deadlines until Feb. 1, 2013.

The postponed deadlines include those for fourth quarter individual estimated tax payments that normally would be due Jan. 15, 2013. Also postponed are the deadlines for business payroll and excise tax returns and accompanying payments for the third and fourth quarters, normally due Oct. 31, the day after Sandy hit, and Jan. 31, 2013.

The postponement also applies to tax-exempt organizations that were or are facing Form 990 filing deadlines.

Only in disaster declaration areas

Remember, both the relief payments and extended deadlines apply only to folks in areas officially designated by as disaster areas. So far, that means folks in:

  • Connecticut counties: Fairfield, Middlesex, New Haven, and New London Counties and the Mashantucket Pequot Tribal Nation and Mohegan Tribal Nation located within New London County.
  • New Jersey counties: Atlantic, Bergen, Cape May, Essex, Hudson, Middlesex, Monmouth, Ocean, Somerset and Union.
  • New York counties: Bronx, Kings, Nassau, New York, Queens, Richmond, Rockland, Suffolk and Westchester.

If you don't live in those counties but your area was hard hit, there's a good chance it will eventually make the IRS relief list as Uncle Sam gets additional damage assessments from Federal Emergency Management Agency, or FEMA.

State taxes, too

Finally, don't forget about your state taxes.

Tax departments in states that were hard hit by Sandy also are offering their residents some special tax considerations.

New Jersey and Connecticut quickly followed the originally IRS announcement and gave their residents until Nov. 7 to meet any tax deadlines they might have missed because of Sandy.

New York's filing deadline extension date is through Nov. 14.

But since the IRS has extended its filing and payment due date into next year, it's possible the states might, too. So check with your state tax office to make sure.

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