| NEW YORK
NEW YORK Nov 8 The hard-hit victims of
superstorm Sandy have received donations of blankets, cleaning
supplies and diapers. Now there may be more aid flowing their
way: tax help.
Taking some lessons from the hardship faced by the thousands
of people displaced by Hurricane Katrina in 2005, the U.S.
Internal Revenue Service and the Treasury Department have come
up with ways to ease the upcoming tax burden.
Some businesses and certain other taxpayers in hard-hit
areas have extra time to file returns and pay taxes. Some can
deduct certain losses not covered by insurance. Even good
Samaritans who donate cash and goods can get some relief.
"Anything to get cash to (taxpayers) sooner rather than
later is a godsend," said Paul Gevertzman, partner at accounting
firm Anchin, Block & Anchin. "This is a difficult time and cash
flow will be a problem."
The IRS is continuing to announce initiatives and posting
updates on its website,
"We are monitoring the situation closely to resolve
potential tax administration issues as they are identified," the
agency says on that site. Other locations eligible for tax aid
may be added in coming days based on additional damage
assessments by the Federal Emergency Management Agency (FEMA).
In the aftermath of Hurricane Katrina, Congress provided
additional tax breaks that went beyond what the IRS can do on
its own. It's uncertain whether legislators will fold similar
provisions into a larger year-end tax bill.
"Keep your eyes open," said Mariana Moghadam, a tax director
at accounting firm EisnerAmper. Moghadam certainly will be
looking. Her Montville, New Jersey, home was hit by a tree and
If you've been hurt by Sandy or helped those who were, here
are ways the tax system may be able to help you.
TIME IS MONEY
For starters, you have some breathing room.
Individuals and businesses in Connecticut, New Jersey and
New York rushing to meet tax filing or payment deadlines that
fall between late October and January 15 have until February 1,
2013. The IRS automatically provides this relief to any taxpayer
in states where there are declared disaster areas, and you do
not need to contact them. Penalties are waived.
Taxpayers outside disaster areas also get the extension if
their books, records or tax professionals are in the areas
affected by Hurricane Sandy.
Does your home or business have damage not covered by
insurance? You might be able file an amendment to your 2011
taxes, claiming a loss. This disaster declaration enables you to
treat the losses as if they happened last year. This can help
reduce last year's income and may give you quicker access to tax
refunds. It will benefit some people in certain tax brackets.
Check with an accountant.
The IRS's disaster resource guide will walk you through the
Take note, though. Accountants said you aren't allowed to
deduct out-of-pocket expenses for things like replacement
diapers and emergency hotel rooms.
Even better than a deduction for most taxpayers is tax-free
income. Disaster relief payments for rebuilding homes and
businesses are typically not subject to income taxes.
People giving aid and shelter to Sandy victims will get some
tax help, too.
The IRS and Treasury are allowing tax credits for owners of
qualified low-income housing who opened their doors to victims
of Sandy, even if the victims are not in a low-income bracket.
Workers anywhere can donate vacation or sick time or
personal leave in exchange for employer cash payments to
qualified, tax-exempt organizations helping victims, if their
company has such a program. This donated leave will not be
included in employee wages and employers can deduct the amount
of the cash payment.
Volunteers affiliated with an IRS-recognized government or
philanthropic organization who helped distribute supplies in
disaster areas are eligible for the Feb. 1 extension to file
taxes and make payments, the IRS has said. Volunteers for
so-called 501(c)3 charities also will be able to deduct their
transportation costs, including 14 cents per mile for distances
they drove in their cars.
If you want to make a cash donation and receive a tax
benefit, be sure you only give to a qualified 501(c)3
organization and get a receipt.
How about donations of clothing, blankets and cleaning
supplies? There's a chance you can deduct the fair market value
of things dropped off at qualified organizations, such as most
religious and fraternal groups and nonprofit volunteer fire
"Many of these measures are designed to speed up cash flow,"
said Gevertzman. The IRS "is trying to be a little more