Taxpayers who have been affected by the wildfires blanketing parts of Texas may qualify for federal tax relief, as President Obama has declared Bastrop County and parts of the Texas hill country to be a federal disaster area.

The announcement requires the IRS to postpone certain deadlines for taxpayers who live or have businesses in the disaster area, noted the Texas Society of CPAs. Deadlines falling on or after Aug. 30 and on or before Oct. 31 have been postponed to Oct. 31.

In addition to individuals, the tax relief also applies to corporations and other businesses that previously obtained an extension until Sept. 15 to file their 2010 returns, along with individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter, normally due Sept. 15. 

The IRS is also waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 30 and on or before Sept. 14, 2011, as long as the deposits were made by Sept. 14, 2011.

The TSCPA noted that the IRS will automatically identify taxpayers who are in the covered disaster area and apply automatic filing and payment relief. Affected taxpayers who reside or have businesses outside the covered disaster area must call the IRS disaster hotline at 1-(866) 562-5227 to request tax relief.
Affected taxpayers in federally declared disaster areas also have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year, the TSCPA noted.

Claiming the loss on an original or amended return for last year will give the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals claiming the disaster loss on last year’s return should put the Disaster Designation “Texas/Wildfires” at the top of the form so the IRS can expedite the processing of the refund.

For more information, visit https://www.irs.gov/publications/p976.

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