United States

California disaster relief includes retirement accounts

Certain deadlines are postponed

TAX ALERT  | 

On October 13, the IRS published IR-2017-172 and updated announcement CA-2017-06, which provides tax relief in the form of postponed deadlines to taxpayers that were impacted by the recent outbreak of wildfires. Currently, the IRS is providing relief to individuals and businesses located in nine California counties: Butte, Lake, Mendocino, Napa, Nevada, Sonoma, Yuba, Orange and Solano. The grant of relief is automatic for taxpayers with a principal address (personal or business) inside the disaster area. Taxpayers located outside of the disaster area but whose records are located in the disaster area or who are otherwise affected by the disaster may also qualify for relief.  The IRS instructs such taxpayers to contact the IRS at 866.562.5227 to obtain tax relief.  The IRS is closely monitoring the disaster and may be adding to the list of the affected counties.

The most widely utilized postponements relate to filing certain tax returns and making tax payments. The regulations also postpone the deadlines for some acts relating to retirement accounts.

Under the revenue code, a taxpayer may be allowed a deduction for a contribution to a qualified retirement account in the preceding tax year so long as the contribution is made no later than the tax return filing deadline (including extensions, if a valid extension was filed) for that year. Because the taxpayer’s tax return due date may be postponed under the disaster relief, so may be the deadline for making a contribution and receiving the corresponding deduction.The tax relief deadline postponement allows for

·         Individual deductions for qualified retirement contributions to individual retirement accounts (IRAs) and

·         Business deductions for employer sponsored qualified plans 

A taxpayer is also treated as making a timely distribution of excess contributions from an IRA or re-characterizing contributions made to Roth IRAs so long as the taxpayer acts by the date on or before the taxpayer’s tax return is due (again, including extensions if a valid extension was filed).

Lastly, the 60-day roll over period beginning on the day of the receipt of payment for making a rollover to another qualified plan, certain annuity plans and IRAs, is postponed.

This relief can only be relied upon for items that would otherwise have been timely on or after Oct. 8, 2017. Other late filings will not be protected.

For all cases, whether it is a contribution, distribution, re-characterization or rollover, the deadline is postponed until Jan. 31, 2018, for taxpayers affected by the California wildfires.

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