Guidance for relief from certain tax filings, deposits and penalties has been issued to those affected by the recent CA wildfires and IA derecho.
The IRS granted postponement of certain deadlines under its sec. 7508A authority for those individuals and businesses located in areas affected by a federally declared disaster. The current qualifying areas include:
- Linn County, Iowa
- Lake, Monterey, Napa, San Mateo, Santa Cruz, Solano, Sonoma and Yolo counties in California
Taxpayers in locations that may be added later will also be qualified for the relief. The IRS stated that relief will be afforded automatically to added areas. The current list can be found at the IRS disaster relief site.
The general relief applies to original or extended tax filing and payment deadlines beginning on or after Aug.10, 2020 (for Iowa) and Aug. 14, 2020 (for California) and ending before Dec. 15, 2020. A deadline falling between these dates is postponed to Dec. 15, 2020. In the case of individuals, this means that a 2019 return originally due July 15, 2020, but extended to Oct.15, 2020, is now due Dec. 15, 2020. Note that this relief would not extend payment of tax due by July 15, 2020, only the filing. But a quarterly estimated tax payment due Sept. 15, 2020, would qualify for the postponement for taxpayers in the affected areas.
The relief specifically includes excise and payroll tax filings, deposits, and penalties. Form 720, Quarterly Federal Excise Tax return normally due on Nov. 2, 2020, would qualify for the postponement. In addition, penalties on semi-monthly excise tax and payroll tax deposits due on or after Aug.10, 2020 and before Aug. 25, 2020, will be automatically abated as long as the deposits are made by Aug. 25, 2020, for Iowa. The same relief applies in California for deposits due on or after Aug. 15, 2020 and before Aug. 31, 2020, if made by Aug. 31, 2020.
Although penalties will be automatically abated, the IRS advises taxpayers who receive penalty notices and who otherwise qualify, should call the number on the notice to request abatement.
On Aug. 26, 2020, the IRS supplemented the above postponement relief for covered areas in Iowa and California. Specifically, the IRS clarified that the postponement relief included any other time sensitive acts as enumerated in Rev. Proc. 2018-57. In addition, the IRS advised that taxpayers contacted for a collection or exam matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration. The supplemental guidance also reiterated that although a person or business may not be located within a covered area, if the business records necessary to comply with a time sensitive act is located within the covered area, the person or business may also be afforded relief.
The Alcohol Tobacco Tax and Trade Bureau (TTB) issued reminders on Aug. 20, 2020, and Aug. 27, 2020, reminding affected excise tax industry members and taxpayers of its existing guidance related to natural disasters. Businesses (retailers, wholesalers, importers, export warehouse proprietors, and manufacturers of beverage alcohol and tobacco products) may file claims with the TTB for the payment (refund or allowance of credit) of Federal excise taxes paid on beverage alcohol or tobacco products lost, rendered unmarketable, or condemned by a duly authorized official under various circumstances, including where the President has declared a major disaster.
Some of the issues that may apply to affected industry members or taxpayers include:
- Filing claims for taxes on losses
- Waivers of excise tax penalties
- Reporting on damaged and unmarketable products
TTB procedures provide that business affected by a natural disaster should contact the National Revenue Center.
Washington National Tax Observations
The IRS and TTB guidance will be welcome relief to those affected by the recent wildfires and derecho.
It is expected that the agencies will issue similar guidance to taxpayers affected by today’s Hurricane Laura in the next few days.