Sandy, Disasters and Taxes
With April 15th on the horizon, the Internal Revenue Service (IRS) has issued guidelines for taxpayers now filing for losses, expenses and even insurance payments due to the storm, many for the first time.
In their 2012 Instructions for Form 4684, the IRS details how individuals should handle losses due to casualty, theft, disaster and even bank and credit union failure so far as their Federal incomes taxes go.
The document, as well as any updates, is available at www.irs.gov/form4684.
According to the IRS a loss due to disaster “is a loss that occurred in an area determined by the President of the United States to warrant federal disaster assistance. It includes a major disaster or emergency declaration.”
A list of all qualifying areas is available at the Federal Emergency Management Agency (FEMA) website www.fema.gov.
The IRS states, “If you have a casualty loss from a disaster that occurred in (such) an area...you can elect to deduct the loss.”
This election would be made when filing for your 2012 return and must be filed by April 15th or by any extension date. Instructions on how to file are included in the IRS document.
For example, individuals would also include any reimbursement amounts they have received or have reasonable expectation of receiving from state or federal programs to restore their property.
For homeowners there is a deduction for homes made unsafe by Sandy.
According to the IRS, if the “state or local government ordered you to tear it down or move it because it was no longer safe to use as a home because of the disaster, the loss in value because it is no longer safe is treated as a disaster loss. The order for you to tear down or move the home must have been issued within 120 days after the area was officially declared a disaster area.”
Such loses will be figured based on the fair market value of your home before you had to tear it down or move it.
There are also special tax code instructions for homeowners and renters handling insurance loses and pay outs for home, property and contents damage caused by the storm.
Rockaway and Broad Channel residents will want to update their tax preparer on any special Sandy circumstances before they file.
More information can be found at www.irs.gov.