The IRS is extending tax relief to areas designated by the Federal Emergency Management Agency (FEMA) as disaster zones. This includes individuals and households residing or operating businesses in the affected Hawaii counties.

In a recent announcement, the Internal Revenue Service (IRS) has unveiled an expansive tax relief initiative aimed at assisting victims of the devastating wildfires in Maui and Hawaii counties. This tax relief is designed to provide affected individuals and businesses with crucial support during their recovery process. Here’s a breakdown of the relief measures and extended deadlines that taxpayers need to be aware of:

Tax Relief for Wildfire-Affected Areas

The IRS is extending tax relief to areas designated by the Federal Emergency Management Agency (FEMA) as disaster zones. This includes individuals and households residing or operating businesses in the affected Hawaii counties. To stay updated on the list of eligible areas, you can refer to the disaster relief page on IRS.gov.

Filing and Payment Extensions

The tax relief measures effectively postpone various tax filing and payment deadlines that fell within the period from August 8, 2023, through February 15, 2024. This extension grants affected individuals and businesses until February 15, 2024, to file their tax returns and settle any taxes originally due during this period.

To illustrate, the new deadline of February 15, 2024, applies to:

1. Individuals who had a valid extension to file their 2022 returns, which were initially due to expire on October 16, 2023. However, it’s important to note that tax payments associated with these 2022 returns, due on April 18, 2023, are not eligible for this relief.
2. Quarterly estimated income tax payments that were originally scheduled for September 15, 2023, and January 16, 2024.
3. Quarterly payroll and excise tax returns that would typically be due on October 31, 2023, and January 31, 2024.
4. Calendar-year partnerships, S corporations, and corporations, with extensions expiring on September 15, 2023, and October 16, 2023, respectively.
5. Calendar-year tax-exempt organizations with extensions due to expire on November 15, 2023.

Moreover, penalties for the failure to make payroll and excise tax deposits between August 8, 2023, and September 7, 2023, will be waived if the deposits are made by September 7, 2023.

For a comprehensive list of other eligible returns, payments, and tax-related actions covered by the relief measures, visit the Disaster Assistance and Emergency Relief for Individuals and Businesses page.

Automatic Relief for Eligible Taxpayers

Taxpayers with an IRS address of record located in the disaster area will receive automatic filing and penalty relief. No action is needed from these taxpayers to access the relief measures.

In cases where an affected taxpayer lacks an IRS address of record within the disaster area, they may still receive penalty notices for late filing or late payments during the postponement period. In such unique circumstances, taxpayers should contact the IRS using the number provided on the notice to request penalty abatement.

Additional Tax Relief Measures

Beyond filing extensions, the IRS is providing options for disaster-related losses and qualified disaster relief payments:

1. Individuals and businesses facing uninsured or unreimbursed disaster-related losses can choose to claim these losses on either the current year’s return (2023) or the prior year’s return (2022), with an extended timeline of up to six months after the disaster year’s federal income tax return due date.
2. Qualified disaster relief payments are generally excluded from gross income, offering affected taxpayers the opportunity to exclude government agency payments for necessary expenses, repairs, or replacements from their income.

Furthermore, taxpayers participating in retirement plans or individual retirement arrangements (IRAs) could be eligible for additional relief, including special disaster distributions and hardship withdrawals. Detailed guidance for these options is available from specific plan administrators and IRAs.

In conclusion, the IRS’s expansive tax relief measures provide essential breathing room for those affected by the Hawaii wildfires. These extended deadlines and special provisions can greatly alleviate the financial burden on individuals and businesses as they work towards recovery. Stay informed and take advantage of the relief options that best suit your circumstances. For more detailed information, consult the official IRS resources or reach out to one of our tax advisors.

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