The South Carolina Association of CPAs wants our members to be aware that we monitor news and weather forecasts for projected hurricanes and other natural disasters for their possible effects on SCACPA functions and emergency preparedness.
SCACPA recognizes that natural disasters have the potential to significantly impact many different areas of South Carolina, and we are always reaching out to legislators, the SC DOR and the IRS about tax relief as needed.
After mandatory evacuations are ordered by the South Carolina governor, SCACPA reaches out to the SC DOR and the Governor’s Office to communicate the need for tax filing deadline extensions. We then share these alerts via our blog and social media once decisions are announced.
SCACPA will always err on the side of caution when it comes to preparations for any disruptions. Stay informed via SCACPA social media for developments.
THE IMPORTANCE OF A FEDERALLY DECLARED DISASTER AREA
Taxpayers who are seeking relief by the IRS must first be in a locale designated as a covered disaster area that is federally declared. Areas can retroactively be designated as a covered disaster area, and SCACPA has previously worked to get areas eligible in the wake of Hurricanes Matthew and Irma.
Under Code Sec. 165(i)(5), “Federally Declared Disaster” means any disaster determined by the President of the United States to warrant assistance by the Federal government. The IRS will include within the scope of its relief any area designated by the Federal Emergency Management Agency (FEMA).
Certain casualty loss deductions offered directly under Code Sec. 165 are available irrespective of designation as a disaster area by the IRS.
WHAT IS AN AFFECTED TAXPAYER?
(Go to www.irs.gov for more details)
A taxpayer does not have to be located in a Federally Declared Disaster Area to be an “affected taxpayer.” Taxpayers are “affected” if records necessary to meet a filing or payment deadline postponed during the relief period are located in a covered disaster area.
An affected taxpayer can be:
- An individual
- Any business entity or sole proprietor
- Any shareholder in an S Corporation
DISASTER RELIEF CAN APPLY IF THE TAX PREPARER IS IN A DISASTER AREA BUT THE CLIENT IS NOT
Disaster relief applies to tax preparers who are unable to file returns or make payments on behalf of the client because of the disaster. Therefore, if you are a taxpayer outside of the disaster area, you may qualify for relief if:
- your preparer is in the disaster area, and
- the preparer is unable to file or pay on your behalf.
If the affected partnership or S Corp cannot provide you the records necessary to file your return, you are an affected taxpayer. Your filing and payment deadlines are postponed until the end of the postponement period just like the affected partnership or S Corp.
FEMA’S INDIVIDUAL ASSISTANCE VS. PUBLIC ASSISTANCE
The Stafford Act provides for two types of disaster declarations: Emergency Declarations and Major Disaster Declarations. Both declaration types authorize the President to provide supplemental federal disaster assistance.
Emergency Declarations: The President can declare an emergency for any instance when the President determines federal assistance is needed. Emergency Declarations supplement State and local or Indian tribal government efforts in providing emergency services, such as the protection of lives, property, public health, and safety, or to lessen or avert the threat of a catastrophe in any part of the United States.
Major Disaster Declarations: The President can declare a major disaster for any natural event, such as hurricane, tornados, storms or high waters, that the President determines has caused damage of such severity that it is beyond the combined capabilities of state and local governments to respond. A major disaster declaration provides a wide range of federal assistance programs for individuals and public infrastructure.
The Governor of the affected State must submit the request to the President through the appropriate Regional Administrator within 30 days of the occurrence of the incident.
Assistance Available Under Major Disaster Declarations: Not all programs are activated for every disaster. The determination of which programs are authorized is based on the types of assistance specified in the Governor’s request and the needs identified during the joint PDA and subsequent PDAs. FEMA disaster assistance programs are as follows:
Individual Assistance – Assistance to individuals and households, which may include the Individuals and Households Program, Disaster Case Management, Disaster Unemployment Assistance and Disaster Legal Services.
Public Assistance – Assistance to State, Tribal, and local governments and certain private nonprofit organizations for emergency work and the repair or replacement of disaster-damaged facilities, which may include debris removal, emergency protective measures, roads and bridges, utilities, water control facilities, buildings and equipment.
The IRS advises that individuals and businesses in Federally Declared Disaster Areas can get faster refunds by claiming disaster losses on their tax return for the prior year, and this can be done by filing an amended return.
The IRS does not grant extra time to file returns and pay taxes in every disaster.
Click here for an IRS overview of Tax Relief for Presidentially Declared Disaster Areas.
To request the postponement for filing or payment, you must:
- Call the Disaster Assistance Hotline at 866.562.5227
- Explain that your necessary records are located in a covered disaster area
- Provide the FEMA Disaster Number of the county where your tax preparer is located
HAVE A PLAN BEFORE DISASTER STRIKES:
- Document your valuables before the disaster occurs. Create lists, videos, or use pictures to ensure you have a complete IRS Publication 584 can help taxpayers compile a room-by-room list of belongings.
- Your IT infrastructure systems and on-site services site will likely fail during the disaster making them unavailable. When possible, utilize online or cloud-based services to hold your data and ensure ongoing communications.
- Build a plan for temporary office space or remote working solutions to aid in your recovery efforts.