The H&R Block blog offers several tips for tax preparers to help clients recover from the devastation of Hurricane Sandy.
"With an estimated 60 million Americans who were in the path of Hurricane Sandy, that means one in five Americans could be facing some sort of recovery from this storm," wrote blogger Teresa Clark. "For some, it could be things like catching up on missed days of work and school, while others start the tremendous task of recovery from loss of life of those they love, as are many in the Caribbean. Somewhere between is the task of recovering from property loss."
Though aimed primarily at consumers, the blog also offers tips for preparers to bear in mind:
• Casualty loss and tax assistance: If your client sustained material loss or damage from the storm in a place determined to be federally declared disaster area, they could be eligible for tax relief from the IRS for casualty losses and financial assistance from FEMA. The IRS defines a casualty loss as the "result from the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake ... ."
Clark noted that the earlier insurance claims are filed, the sooner the reimbursement process can begin and homes can be restored -- but it's important to remember that property losses not covered by insurance are often tax-deductible, but insurance reimbursement information is needed to accurately calculate a casualty loss claimed on a tax return. Among the expenses that can be deducted are homeowner's and renter's deductibles on any claims made that were disaster-related, and clients may be able to defer taxes on any gain from insurance proceeds by replacing damaged property with similar property. Casualty losses incurred in federal disaster areas can be claimed as itemized tax deductions on the current year's tax return or on an original or amended tax return for the previous year.
Generally, the following taxpayers are eligible to claim a casualty loss resulting from a federally declared disaster: individuals who live in the covered disaster area; relief workers assisting government agencies in recovery efforts; those who have a main place of business in the covered disaster area; and those who have books and records in the disaster area that are needed to complete tax returns.
The IRS identifies affected taxpayers located in the disaster area and automatically applies filing and payment relief. Affected taxpayers outside the disaster area can request tax relief from the IRS by calling (866) 562-5227.
• IRS records: Affected clients may need to reconstruct tax records lost in the disaster to apply for a disaster loan or grant. According to Clark, it isn't easy for many people to quickly get copies of past years' tax returns and it is especially difficult for those recovering from losing many of their possessions. The IRS will waive the usual fees and expedite requests for a copy of a tax return or for a transcript of a return by contacting the IRS at (800) 829-1040.
• Donations: Clients' financial contributions to organizations like the American Red Cross are tax-deductible when claimed as itemized deductions, Clark pointed out. For charitable donations to be tax-deductible, they must be made to qualified, tax-exempt organizations (IRS-approved nonprofit religious, educational or charitable groups). Make sure clients have receipts for contributions. For example, if a client makes a donation from a smart phone, be sure they save the phone bill as proof of the donation.
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