What to Know if You’ve Been Affected By a Federally Declared Disaster

By snapme | February 20, 2025 |

Each year, disasters affect hundreds of thousands of people and businesses. These disasters can upend every aspect of an affected individual’s life, including damage to, or destruction of, their home, business, and critical documents. To assist taxpayers, the president may declare the event a federal disaster, which allows the federal government to help affected taxpayers under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. Once this declaration has been made, the IRS will often provide these taxpayers with certain relief, most commonly by exercising its authority under IRC § 7508A to postpone certain tax deadlines, including filing and payment deadlines.

Sadly, devastating wildfires swept through my community in Southern California this past month, destroying homes, schools, businesses, and entire neighborhoods. My heart goes out to all those affected by these tragedies, especially the families that lost so much. And I am profoundly grateful for the tireless efforts of our first responders, whose bravery made a significant impact. I am confident that the community will rebuild, stronger than ever, and support each other on the road to recovery but I recognize it may be a long journey and these impacted individuals need our support.

Determining Eligibility for Relief

For taxpayers with an address of record in the disaster area, the IRS automatically provides filing and penalty relief. Taxpayers without an address of record in the disaster area can self-identify as qualifying for disaster relief by calling the IRS disaster hotline at 866-562-5227. This includes taxpayers who recently moved to the disaster area, have records necessary to meet tax deadlines inside the disaster area, and workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization. For preparers in a disaster area with clients located outside the disaster area, the preparer can submit bulk requests for disaster relief following the procedures on IRS.gov.

Taxpayers can check for disaster declarations and available relief by state or year. Recent disaster declarations and IRS-provided relief include:

If a disaster-affected taxpayer receives a late-filing or late-payment penalty notice for the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

What Resources and Relief are Available

When a filing or payment deadline is postponed under IRC § 7508A as a result of a federally declared disaster, the Treasury Secretary is authorized to “disregard” for up to one year certain acts a taxpayer is required to undertake under the Internal Revenue Code.

Filing and Payment Relief

Following a disaster declaration, the IRS can postpone various tax filing and payment deadlines. This includes the filing and payment dates for Forms 1040, estimated tax payments, quarterly payroll taxes, and partnership returns.

For example, in response to Hurricane Helene, the IRS postponed various tax filing and payment deadlines that occurred beginning on September 22, 2024 (Alabama), September 23, 2024 (Florida), September 24, 2024 (Georgia), September 25, 2024 (North Carolina, South Carolina and Virginia), and September 26, 2024 (Tennessee). The postponement periods end on May 1, 2025, so qualifying individuals and businesses have until May 1, 2025 to file returns and pay any taxes that were originally due during the postponement period. This includes, but is not limited to:

  • Individuals or businesses with a 2024 return normally due during March or April 2025;
  • Individuals, businesses, or tax-exempt organizations that had a valid extension to file their 2023 federal return. Note: Payment due dates are not postponed because the extension did not extend the time to pay;
  • 2024 quarterly estimated income tax payments normally due on January 15, 2025;
  • 2025 estimated tax payments normally due on April 15, 2025; and
  • Quarterly payroll and excise tax returns normally due on October 31, 2024, January 31, 2025, and April 30, 2025.

Tax-Free Disaster Payments

Generally, taxpayers may exclude qualified disaster relief payments from gross income. This means taxpayers likely can exclude amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. For further information, see IRS Publication 525, Taxable and Nontaxable Income.

Retirement Plan Distributions

Disaster-affected taxpayers may qualify for relief related to accessing retirement plan or individual retirement arrangement (IRA) accounts. For example, a taxpayer may qualify to take a disaster distribution without paying the additional ten percent early distribution tax and spread the resulting income over three years. Disaster-affected taxpayers may also qualify to take a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

Casualty Loss Deductions

When a federally declared disaster damages or destroys property, taxpayers may qualify to deduct a casualty loss on their tax return for uninsured or unreimbursed disaster-related losses. This can provide much-needed relief for individuals or businesses who may struggle financially as a result of the disaster and can help taxpayers with the financial burden of having to repair or replace damaged property.

The taxpayer may deduct the disaster-related loss in the year the loss occurred or in the prior year. However, the taxpayer can only deduct the loss in the prior year if the disaster occurred in an area warranting public or individual assistance (or both). Disaster-specific guidance will generally specify if the taxpayer has the option to deduct the loss in the prior year. Providing the ability to deduct the loss in the prior year allows taxpayers to obtain the tax benefits as soon as they can determine the amount of uninsured or unreimbursed disaster-related loss. When taxpayers want to claim the loss in the year prior to the disaster but they have already filed a return, they will need to file an amended return for that year claiming the loss. The taxpayer must make this election within six months from the due date of the tax return (without extensions) for the year in which the federally declared disaster occurred.

For more information on the deductibility of casualty losses and electing to deduct in the prior year, see IRS Publication 547, Casualties, Disasters, and Thefts.

Other Resources

  • Disaster hotline: If taxpayers have disaster-related tax questions, they can call the IRS disaster hotline at 866-562-5227. Taxpayers can also call to this number to self-identify for disaster relief.
  • Free tax transcripts: Taxpayers who need tax records can get free transcripts using Get Transcript on IRS.gov, calling 800-908-9946, or submitting Form 4506-T, Request for Transcript of Tax Return.
  • Free copy of tax return: Taxpayers in a disaster area can get a free, expedited copy of their return using Form 4506, Request for Copy of Tax Return. On Form 4506, taxpayers should note that it is a disaster-related request and list the location and type of disaster event.
  • Address change: Taxpayers can notify the IRS of an address change using Form 8822, Change of Address.

The Disaster Lookback Trap

Assisting taxpayers in a difficult time is a welcome relief, but as I discussed in my September 10, 2024 blog post, Need for a Legislative Fix to Eliminate the Disaster Lookback Trap for Refund Claims, I am concerned that three years from now taxpayers and practitioners will be surprised to learn that refund claims may be disallowed under the lookback period required by the Internal Revenue Code because the lookback period does not include postponements. However, as I suggested most recently in my 2025 Purple Book, this is an area Congress can fix to prevent the unintended consequences of statute-barred refunds for taxpayers impacted by disasters. As I discuss in my January 30, 2025, blog, Senate Finance Committee Chairman Crapo and Ranking Member Wyden Release Discussion Draft of “Taxpayer Assistance and Service Act”, Congress released a discussion draft of the Taxpayer Assistance and Service (“TAS”) Act that includes a fix for this issue.

Conclusion

Experiencing a disaster is a difficult and emotional experience for individuals, families, and businesses.
By understanding the options for tax-related relief and available resources, individuals and business owners can make informed decisions about their filing and payment obligations, finances, and tax liabilities. Those impacted may not be able to replace what has been lost, but there is a variety of available assistance to help ease some of the challenges as you move forward.

Resources

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