Relief for Hurricane Victims

In the wake of Hurricanes Harvey, Irma, and Maria, the IRS has provided a number of relief measures to help affected individuals (News Release IR-2017-160).

Filing and payment extensions. Those in designated disaster areas have until January 31, 2018, to complete tax obligations that had been due between the date of the hurricane and the end of January 2018. For example, 2016 individual income tax returns that had been on extension to October 16, 2017, can be timely filed by January 31, 2018, but interest (and possibly late penalty penalties) will be due on the tax not paid by April 18, 2017.  Estimated taxes due on September 15, 2017, as well as on January 16, 2018, can be timely paid by January 31, 2018.

Qualified retirement plan hardship distributions and loans. The IRS has made it easier for plans to offer participants the option of taking hardship distributions and/or loans. For example, plans that had not been offering loans can do so immediately and then amend the terms of the plan to provide for the loans. However, plan participants should be aware that the rules for distributions and loans have not changed. Distributions are taxable (and subject to a 10% penalty for those under age 59½). Once taken, they cannot be re-contributed to the plan. Loans must be repaid in level amounts over a period of not more than five years (longer if used to buy a home) and have a reasonable rate of interest.

Leave-based donation programs. Employers located anywhere in the U.S. can enable employees to help hurricane victims by donating their unused vacation, sick, and personal days to a leave-based donation plan set up by the company. Employees aren’t taxed on their contribution to the plan, and employers can claim a business expense deduction, provided the employer makes a cash donation to a tax-exempt organization providing hurricane relief. The donation must be made before January 1, 2019.

Note: There has been proposed legislation to provide additional relief (e.g., permitting re-contributions of hardship distributions; enabling non-itemizers to deduct casualty losses). However, the House has voted down one measure. If anything else transpires, it will be reported here.