IRS grants relief to tax-exempt organizations hit by Hurricanes Irma and Harvey

The Internal Revenue Service is giving tax-exempt organizations in the parts of Texas, Florida, Puerto Rico and the U.S. Virgin Islands affected by Hurricanes Harvey and Irma more time to file their returns.

The relief applies to tax-exempt organizations in the Hurricane Harvey and Hurricane Irma disaster areas that have a filing due date after the hurricane hit and before Jan. 31, 2018.

In recent days, the IRS also offered an extension on the time to file and make payments to businesses and individuals in the parts of Florida, Puerto Rico and the U.S. Virgin Islands hit by Hurricane Irma, extending the relief to additional Florida counties on Wednesday (see IRS provides relief for Hurricane Irma victims and IRS offers tax filing relief to Hurricane Irma victims in Florida and Puerto Rico). The complete list of counties and most up to date information is available at irs.gov/hurricaneirma.

Daniel Acker/Bloomberg

The IRS is giving tax-exempt organizations until Jan. 31, 2018 to file, and it said the relief applies to both the original and extended due dates in this period. The start date of the relief varies by area. In Texas, it’s Aug. 23, 2017. In Florida, it’s Sept. 4, 2017. And in Puerto Rico and the Virgin Islands, it’s Sept. 5, 2017.

Each year most tax-exempt organizations are supposed to file an information return, such as Forms 990, 990-PF, 990-EZ, 990-T and 990-N., the IRS noted. The usual due date for 990 returns is the 15th day of the fifth month after the close of the organization’s accounting period. If it runs on a calendar-year basis, the due date is May 15, for example. Organizations can use Form 8868 to ask for an extension of six more months to file. An organization that runs on a calendar-year basis would then have until Nov. 15 to file.

To reconstruct lost records, organizations can ask for copies of them from the IRS using Form 4506-A. If a tax-exempt organization uses a payroll service, the payroll provider can request records. If they don’t, federal and state agencies may be able to supply records. Checks from the bank or employees’ pay stubs can help as well. For donation records, organizations can use bank records or other electronic files, the IRS noted. IRS.gov has a record reconstruction page with more advice on replacing lost records.

For more information, including a current list of all the counties and other localities that are eligible for IRS relief, check out the Help for Hurricane Harvey Victims, Help for Hurricane Irma Victims, Tax Relief in Disaster Situations and Around the Nation pages on IRS.gov.

The IRS noted it is watching matters closely to resolve tax administration issues that arise. For the latest news, check the Disaster Situations pages on IRS.gov, as the IRS frequently updates its disaster relief information, particularly in the wake of Hurricanes Irma and Harvey.

Michael LoGiudice, a managing director at the accounting firm CBIZ MHM, recommends pre-planning as a way to deal with disasters like the recent hurricanes. “One of the key things that is important in recovery is pre-planning,” he said. “I’ll give you an example with one of my clients after Hurricane Katrina. We had been involved with them in getting a disaster plan in place. Part of the disaster plan is we simulated what would happen if their casino barge in Biloxi, Mississippi was completely obliterated. Nobody ever thought that would happen, but we planned this. What we did was we put in place contracts with various contractors, like salvage companies. The most important contract was with a barge crane company that they would rent us the crane at X dollars an hour or day, and we had that contract in place. When Hurricane Katrina happened, the unthinkable happened, and every casino barge in Biloxi, Mississippi, was put out of business. But ours was the first one to get a barge crane to help put it back in business, and as a result, we were back in business a month before anybody else because we had set up contracts with salvage and disaster companies in advance of the hurricane hitting.”

LoGiudice recommends accountants and their clients work with the insurance companies. “In terms of recovery one of the most important things is to partner with your insurance company,” he said. “You want to involve your insurance company and treat them as the partner they are. They need to be involved with your recovery efforts.”

He also recommends buying business interruption coverage that will pay for loss of profits.

Leave-based Donation Programs

The IRS also announced Thursday additional relief to support leave-based donation programs to help victims of Hurricane and Tropical Storm Irma, in line with similar relief the IRS recently granted to Hurricane and Tropical Storm Harvey victims.

Under leave-based donation programs, employees can forgo their vacation, sick or personal leave in exchange for cash payments the employer makes, before Jan. 1, 2019, to charitable organizations providing relief for the victims of this disaster.

Under the IRS’s special relief, the donated leave won’t be included in employees’ income or wages of the employees. They will then be allowed to deduct the cash payments as business expenses.

The relief is similar to the kind provided by the IRS after Hurricane Katrina in 2005, Hurricane Sandy in 2012, the Ebola outbreak in West Africa in 2014, and last year following Hurricane Matthew and severe flooding in Louisiana. More details are spelled out in Notice 2017-52, posted Thursday on the IRS’s website.