IRS Announces Tax Relief for Victims of the Latest California Wildfires

This week, the IRS announced that victims of the California Wildfires that began on Aug. 14, now have until Dec. 15, 2020 to file various individual and business tax returns and make certain tax payments.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 14, 2020. As a result, affected individuals and businesses will have until Dec. 15, 2020, to file returns and pay any taxes that were originally due during this period. These include:

• 2019 Extended Individual Tax Returns: An additional filing extension is granted to individual taxpayers who filed valid 2019 tax extensions with an Oct. 15, 2020, tax deadline. The IRS noted, however, that because tax payments related to these 2019 returns were due on Jul. 15, 2020, those payments are not eligible for this relief.
• 2020 Quarterly Estimated Tax Payments: 2020 3rd quarterly estimated tax deadline of Sept. 15, 2020, is extended until Dec. 15, 2020.
• Quarterly Payroll and Excise Tax Returns: Quarterly payroll and excise tax returns that are due Oct. 31, 2020, are also extended until Dec.15, 2020.

Calendar-year tax-exempt organizations whose extensions were to run out on Nov. 15, 2020, also qualify for the extra time.

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Lake, Monterey, Napa, San Mateo, Santa Cruz, Solano, Sonoma and Yolo counties in California, but taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Taxpayers do not need to contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area, but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes firefighters and workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals or businesses who suffered uninsured or unreimbursed disaster-related casualty losses can choose to claim them on either the tax return for the year the loss occurred (in this instance, the 2020 return filed in 2021), or the loss can be deducted on the tax return for the prior year (2019). That means if you were on an extension for 2019 you may be able to claim your casualty losses on your 2019 extended tax return. Be sure to write the FEMA declaration number – 4558 − for California on any return claiming a loss.  

The tax relief is part of a coordinated federal response to the damage caused by these wildfires and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Check back with the blog for more updates on disaster relief.